What’s in a power bill?

Katina Curtis
(Australian Associated Press)

Power bills are going up – as much as 20 per cent in some states. But why?

Your household power bill is mostly made up of two components: the cost of the actual electricity and the cost of getting it to you. Between 40-50 per cent is the cost buying electricity on the wholesale market, plus the retailer’s other costs and profit margin (which is as much as 13 per cent in Victoria).

Another 40-55 per cent of the bill is for transmission and distribution – or the price of building, upgrading and maintaining the physical poles and wires that make up the electricity network – with this cost lowest in compact Canberra and highest in Tasmania.

There’s also a small portion – 10 per cent or less in Tasmania, NSW, Victoria and South Australia, and 13-14 per cent in the ACT and Queensland – for green schemes such as feed-in tariffs.

Much of the rise in power bills between about 2007 and 2013 was caused by higher transmission and distribution costs.

But now, regulators and analysts say the market price of energy is the main driver of higher bills.

And that rising market price is caused almost entirely by high gas prices, ANU energy expert Hugh Saddler has found.

Retailers frequently offer customers a wide range of deals and discounts to sign up but once those end – typically after a year or two – customers are moved onto the more-expensive default plan, often without being told that’s happened.

The energy regulator recently estimated households could save up to $1000 a year by switching retailers and even $400 by moving to the best offer from their existing supplier.

But switching can be a long and difficult process, with different plans difficult to compare.

The federal government has tried to make it easier with its “Energy made easy” website, but the prime minister has threatened retailers with tougher regulations if they don’t become more transparent and give customers better information about prices.

It’s also ending the limited merits review, which is used by power companies to get higher increases in bills than that set by an independent arbitrator.


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