Why are my electricity bills going up?

Posted in Energy essentials

Electricity price trend graph

Have you been feeling the pinch of increasing power prices? You’re not imagining it. The cost of electricity has risen almost 120% in the last decade.

Prior to this, electricity prices were tracking fairly closely to general consumer price trends, but the last decade has seen a four fold increase in electricity over that general price trend.

It’s no wonder Australians don’t trust electricity companies. The chain to get electricity to your house is a long one and when any part of that system ups their prices, consumers are the ones to feel the pinch.


Who is responsible for increasing electricity prices?

From the electricity generators, to the networks, to your power company, there are many players involved in getting electricity to your home and your power bill reflects this.

The final price you are charged is made up of a number of costs:

  • the cost of generating the electricity
  • the cost of transporting the electricity to your house through the poles and wires
  • your electricity company’s profit margin
  • costs from environmental regulations.


The price of generating energy

Part of what you pay for on your energy bill is the cost of generating power.  This is known as the wholesale cost of energy and has been on the rise recently due to a number of factors, from high gas prices, to uncertain policy, to the closure of old coal power plants coupled with a lack of investment in new generators.

All of this results in more pressure on the system and therefore increasing prices.


Increasing network charges

Another large chunk of your electricity price comes from the networks who are responsible for maintaining the poles and wires that deliver electricity to your home.

These charges are increased from time to time to cover upgrades and extensions to the electricity network. And that’s no small feat – Australia has one of the longest electricity networks in the world!


Changes in energy company prices

Most power companies build their margin into your usage rate, even though they don’t explicitly tell you that. In this case, the more energy they sell you the more money they make, and it might not be immediately obvious when they increase that margin.


Will there be an end to increasing energy prices?

The energy industry has been doing things largely the same way for over 100 years and, without a coherent energy policy from government or fundamental change in the industry, the price of electricity is unlikely to come down any time soon.

While there are immediate steps you can take to minimise your energy usage and try to reduce your energy bill, one way you can really protect yourself from potential price rises into the future is investing in a battery. If you can afford it, a battery makes sense today. And you could be well on your way to doing away with electricity bills for good.

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