Why do electricity prices increase?

Before we delve into the solution, it’s essential to understand the root causes of these price hikes. Numerous factors contribute to fluctuations in energy prices, some of which are beyond our control, while others can be influenced through individual actions.

Factors outside of your control:

1. Retail or administration costs: These are the expenses associated with managing customer accounts and meter readings. While not directly under your control, efficient utility providers can help keep these costs in check.

2. Purchase costs: Energy providers buy electricity and gas from the National Energy Market, where prices are influenced by supply and demand. International factors can also play a role in these costs.

3. Network costs: Building, maintaining, and operating energy infrastructure such as electricity poles and gas pipes incurs substantial expenses, which are passed on to consumers.

4. Green costs: Supporting renewable energy development comes with a price. Those who opt for greener energy may face slightly higher bills due to the additional cost of generating clean electricity.

5. International influences: Global events, geopolitical tensions, and supply issues abroad can have a ripple effect on energy prices within Australia.

6. Weather conditions: Extreme weather events, especially during hot summers or cold winters, increase energy demand for heating and cooling, leading to higher costs.

In 2020-21, wholesale costs accounted for 32% of the average household electricity bill, while network costs constituted a substantial 45%. Maintenance and expansion expenses incurred by distributors eventually trickle down to customers.

What you can control:

Now that we’ve explored the factors beyond our control, let’s shift our focus to the aspects we can manage to mitigate electricity price increases.

1. Your consumption: It may sound obvious, but the more electricity you consume, the higher your bill will be. Be conscious of your energy usage and adopt energy-saving practices, particularly during peak seasons.

2. Your tariff: Your electricity provider calculates your charges based on the tariff you’re on. If you have a smart meter, consider using power during off-peak hours to take advantage of lower rates.

3. The efficiency of your appliances: Upgrading to energy-efficient appliances can significantly reduce your energy consumption and save you money in the long run.

4. Your plan type and provider: Keep an eye on your energy plan or contract. When your benefits expire, you might be shifted to a more expensive standing or default offer. Regularly review your options and consider switching plans to access discounts and incentives.

By taking control of these factors, you can empower yourself to navigate the rising electricity costs more effectively. Making small adjustments can lead to significant savings over time.

The path towards sustainable energy consumption:

In addition to cost-saving measures, embracing sustainable practices can further contribute to a positive energy future. Governments and energy providers are increasingly investing in renewable energy sources, such as solar and wind power, to reduce our reliance on traditional fossil fuels. By supporting such initiatives and choosing greener energy options, you play a part in fostering a cleaner and more sustainable environment for future generations.

The power is in your hands:

As we adapt to a world of shifting energy costs, it’s essential to recognize that we hold the power to make a difference. While some factors may be beyond our control, our choices and actions can influence our energy consumption and expenses. By implementing energy-saving practices, being mindful of our tariff options, and staying informed about plan types and providers, we can proactively tackle rising electricity costs.

Let’s embrace this opportunity to create a positive impact on our energy usage, our environment, and our wallets. Together, we can light the way to a brighter, more sustainable future.

Reach out to EMPOWER Agency today! https://empoweragency.com.au/

Why are electricity prices rising?