The Institute of Public Affairs last week issued some research, based on Australian Bureau of Statistics data, that revealed that retail electricity prices increased by 51 to 61 per cent in the most populous states of Australia between 2005 and 2010. These increases were up to four times the 16 per cent inflation rate over the last five years.

We believe that this trend of spiraling electricity prices will continue over the coming decade, with electricity rates to at least double and perhaps triple over the next 10 years. This would mean the average household can expect to pay an extra $1500 per year for electricity by 2020, equivalent to about an extra $30 per week taken from the household budget.

Such a large increase in retail electricity prices is expected due to the following five factors:

1. Australia’s population is forecast to continue to grow, which means more investment is needed in the electricity network (transmission, distribution) to provide power to more people. This has to be paid for by the end user – households and businesses.
2. Whilst many electrical appliances are twice as efficient as they were 10 years ago, Australians are using more power at home due to:
   • massive growth in purchases of large, power guzzling, flat screen TVs, often with two or three TVs in the same house
   • rapid growth in number of people installing air-conditioners and dishwashers in their homes (only about one third of homes currently have these)
   • increased multi-tasking especially among younger generation e.g. watching TV and surfing the Internet whilst listening to music
3. Australia currently produces the majority of its power from cheap coal but the price of coal is likely to increase as fast growing countries like China and India demand more and more coal to fuel their rapidly growing energy needs. Local power generators are likely to have to pay prices for coal at higher international levels.
4. State governments have in the past often kept consumer electricity prices artificially low but this trend has now come to an abrupt end as evidenced by the 15 to 20 per cent price rises in New South Wales and Queensland in July this year.
5. The Federal Government’s mandatory renewable energy target dictates that by 2020 Australia must produce 20 per cent of its energy from renewable sources such as wind or solar. This will mean much higher costs to produce and distribute power to households and businesses because:
   • renewable energy power plants cost more to build and run as they are relatively new technologies
   • the networks that carry electricity from these new power plants to homes will need to be upgraded and extended at significant cost
   • wind power can be unreliable and would likely require back up power plants to ensure reliable supply

What can you do to reduce the heat?

There are two ways to keep your power bills under control:

1. Reduce what you use at home – we recommend reading our electricity savings tips as well as requesting an energy audit to better understand where you might be wasting power at home.
2. Reduce what you have to pay for this usage - regularly compare energy suppliers to ensure you are getting the best possible deal.