The Real Culprits Behind Australia’s Sky-high Electricity Prices 

High Electricity Prices – Australia

Green energy is being currently blamed for the very high electricity prices being paid by Australians with the Clean Energy Target (CET) coming into sharp focus of critics. As the Australian government grapples on how to moderate prices in the energy sector, an Australian Competition and Consumer Commission report clearly puts the blame on the large Australian electricity companies which maintain a tight oligopolistic hold over the company’s electricity sector.

Despite Australia’s market being deregulated in both the wholesale and retail parts of the supply chain, the “Big Three” electricity companies AGL, Origin Energy and Energy Australia have managed to keep prices high. As these companies push the high costs of infrastructure buildups into customer bills, the energy prices will remain high over the coming years. Lack of an optimized network has resulted in high bills as well as the lack of competition in the retail sector forcing most households to buy expensive electricity from a few suppliers which keep the price high.

“It said the big power generators – AGL, Origin and EnergyAustralia – continued to hold large retail market shares in most regions, and control in excess of 60% of generation capacity in New South Wales, South Australia and Victoria “making it difficult for smaller retailers to compete”.

Despite Australia having high rates of rooftop solar penetration, they keep paying high bills as electricity prices from the grid remain one of the highest in the world. The electricity bills have risen by an incredible 63% over the last decade which is much higher than inflation rates. With wholesale power production costs collapsing all over the world, this reflects the broken nature of the electricity markets and as well as poor decision making and planning by the regulators and decision makers.

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Also, read why Net Energy Demand For Australian Utilities Could be Zero in a Decade

Excessively high bills mean that more than 35,000 South Australian households cannot afford to pay their electricity bills and owe the nation’s highest average debt of $876. The system is broken but it is too complex for narrow-minded politicians to reform it. It is similar to the USA healthcare system which has one of the highest costs but gives poor outcomes. Similarly, Australia has very high energy costs but leads to poor outcomes as seen in the recent electricity outage.

A complete breakup of these Big Three into separate generation and retail arms might be a small solution to mitigate some of the power industry problems.

The Big Three electricity retailers are charging as much as triple the rate for power in deregulated markets compared with the ACT, costing consumers hundreds of dollars a year, according to a study by energy economist Bruce Mountain.