For some, the shift could mean higher prices overall, especially for those who don’t consume much energy.
That’s causing confusion, given many were expecting power prices to fall after the Australian Energy Regulator’s recent decision on what is known as the “default market offer”, a regulated safety net and benchmark for comparing electricity prices.
“We’ve seen some companies – not all, far from it – choose to increase their fixed supply costs while reducing their per-kilowatt hour costs,” the energy minister, Chris Bowen, said on Wednesday. He has asked the regulator and the Australian Competition and Consumer Commission (ACCC) to investigate.
Are energy prices going up or down?
In May, the Australian Energy Regulator determined prices would fall by up to 10% for most households and small businesses on the default market offer.
In changes that come into effect from July, households on standing electricity plans in New South Wales and south-east Queensland can expect to see prices fall between 3.4% and 10.7% compared with last year, according to the regulator’s final offer for 2026-27. South Australian households on a flat rate can expect an increase of 1.4%.
Bowen has regularly heralded the outcome. “Energy prices are coming down, and that’s a good thing,” he said again on Wednesday.
But while anyone can opt to be put on a standing offer, the vast majority – about 90% of households and 85% of small businesses – are on other types of plans, market offers with rates and charges set by retailers, where there’s no obligation to pass on price cuts.
A spokesperson for the AER says while retailers are required to offer certain products, like the default offer and solar sharer, they can otherwise determine the structure of power plans, including fixed and variable rates.
Erin Turner, chief executive of the Consumer Policy Research Centre, says that means customers who are not on standing offers “could very well see your prices go up”.
Increases in the daily supply charge – the fixed component of the bill – can be challenging, she says. “There’s very little you can do about it – you can’t use less energy [and] installing solar won’t change it.”
What causes power prices to fluctuate?
Various factors influence the price of electricity. A typical bill reflects the cost of generating power (wholesale costs), transmitting it through power lines (network costs), environmental policies, retailer administration costs and profit margins. There’s also increasing complexity on the consumer side – solar, batteries and electric vehicles, and demand-shifting throughout the day.
Still, the AEC says wholesale and network costs are the main drivers of power prices, and together make up most of the total bill.
The large entry of batteries into the grid, along with solar and increased output from wind, contributed to the expected fall in prices for those on standing electricity plans, despite uncertainty created by conflict in the Middle East.
Why is the energy market so hard to navigate?
Nationwide, retailers have about 145,500 different electricity plans available, according to the ACCC, and customers looking to switch might be offered more than 120 different options. Adding to the complexity, the rules for retailers differ by state and territory.
In general terms, those that shop around stand to benefit. A quarter of customers are on their retailer’s best deal, according to the ACCC. About one in five customers switch plans in a given year, the ACCC says, with savings of between $100 and $250 a year compared to the default price.
However, a substantial share of customers – about 2.5 million people, or 36.5%, according to the ACCC – actually pay more than the safety net.
The Australian Energy Council (AEC), which represents energy companies, says: “In the competitive retail market, retailers determine their own prices and product structures.
“When setting market offers, retailers consider a range of factors including network costs, wholesale energy and hedging costs, commercial objectives, competitor pricing and the regulated benchmark.”
Besides standing offers, retailers can set their own market prices and tariff structures. Some will be cheaper than the safety net, others similar, and some may even be more expensive – depending on usage and tariff structure.
Prof Bruce Mountain, director of the Victorian Energy Policy Centre, says, there are many innovative and thoughtful retailers with plans allowing customers to actively participate in the market – shifting their use and generation of electricity with solar and batteries.
But part of the issue, he says, is that many people grew up with electricity as a government monopoly and didn’t expect to have to shop around.
The creation of the energy market made buying electricity more like other things – cars, insurance, banking. “But not everyone is interested in that,” he says, which is why the default offer exists.
How can consumers save money on their electricity bills?
The main option available is to change plans.
Both the federal and Victorian governments provide comparison sites designed to help people compare plans and find the best deal for their circumstances.
People can change their energy plan at any time, but a lot of retailers offer new plans from 1 July, making it a good time to check what is available. Getting a fair price for energy requires “constant vigilance” from consumers, Turner says.
“If you haven’t switched in a while, you’re likely paying more than you should,” Turner says. “You cannot trust that your energy provider is treating you with respect and giving you a good deal.”
Mountain says retailers can “change the prices as they see fit, and customers are free to ditch them and go somewhere else”.
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