Research report

The cost of inaction: the impact of wholesale gas prices on household power bills in Queensland, New South Wales and Victoria

1 Feb 2018
Description

Few issues have resonated in Australian public discourse over the past few years like energy prices. Both household and business consumers have suffered the consequences of years of policy inertia, inconsistency and a lack of forward thinking by energy policy makers that have created a scenario in which Australians are significantly paying more, to power and heat their homes.

Wholesale gas prices play a central role in shaping household power prices, and current wholesale gas prices are significantly inflated, impacting businesses and household consumers. This report estimates the cost of policy inaction in gas to be significant. In 2017, households in New South Wales, Queensland and Victoria approximately paid $151, $175, and $134 more respectively than they would have been if wholesale gas prices were at levels the ACCC had argued would be reasonable. Using ACCC advised figures of where the wholesale gas price should have been at in 2017, and with the government’s current policy settings, by 2019 households in New South Wales, Queensland, and Victoria could be paying on average more than $434.08, $312.92, and $254.09 respectively.

This report identifies the patterns in household power prices across the Australian east coast energy grid at an electorate level, and the influence that forecast gas prices could have on future household energy prices, and the main drivers of escalating gas prices. Wholesale gas prices play a significant role in the retail price of electricity for households. Gas power plays an essential role in providing ‘dispatchable’ power, which often fills predicted shortfalls in electricity production during periods of high demand. Accordingly, when the gas price is high, household electricity prices tend to be higher.

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2018
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