Why Electricity Prices are Rising

October 4, 2018

 

If you’ve seen your utility bills lately, you may be asking yourself why is electricity so expensive? Why does it always seem that electricity prices are on the rise? To answer those questions and to give you an insight into the energy industry, EZswitch investigates.

 

Electricity Price Increases – Why Are Charges On the Rise?

There are, in fact, several reasons as to why electricity is becoming more expensive. First and foremost, prices are on the rise because it’s costing energy companies more and more to generate and distribute the electricity. Why is this? Primarily, it’s because gas prices have increased. Gas is what runs power plants, and therefore if it costs more money to run them, the energy companies have to find a way to recoup some of their expenditure. Invariably, this shows up as an electricity price rise on our utility bills.

Secondly, a handful of old, inefficient coal power stations have recently closed in South Australia and Victoria. This means there is less electricity supply in the market. As such, demand is now starting to outweigh supply. So, until the energy companies can find new sources of energy to produce more electricity, the consumer must pay more for their power.    

Source: Michael Schwarzenberger

Another reason why electricity prices are increasing is that it costs energy companies hundreds of thousands of dollars to maintain and build new parts for our national energy grid. Australia has one of the largest electricity networks in the world, so you can imagine that making sure it works effectively is a laborious and costly job. According to the Australian Renewable Energy Agency, this is the biggest contributor to rising electricity prices.

 

Other reasons why electricity is so expensive include:

  • increased charges by energy retailers for winning and billing customers;
  • the export of gas which then reduces the amount available for local companies, making it more expensive;
  • there’s not enough competition in electricity generation to help reduce prices; and
  • over-complicated consumer information makes it hard for customers to understand the options they have for reducing their bills.

 

So What Does this Mean for Consumers?

Source: Public Domain Pictures

 

In the short term, it means that energy price hikes are, unfortunately, inescapable. Even Australia’s largest energy retailer AGL had to increase their prices this year by about 9.5 percent¹. Therefore, we have to manage our electricity consumption better, especially during ‘peak demand’ times. So turn off appliances when they’re not needed. Start doing laundry late at night when electricity is at its cheapest. Consider installing solar panels, use LED light bulbs and invest in air-con and heating systems which you can operate remotely, so if you accidentally leave any on, you can turn them off from your mobile phone, therefore saving on electricity costs.

In the end, while energy companies and regulators work out the best ways to lower prices and maintain a stable grid, there are plenty of things that we can do to slash our power bills. Electricity price rises don’t have to be so detrimental if we’re all careful.

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