Last week, the Federal Government announced a proposal for power price relief after a meeting with states and territories. Parliament passed legislation to enact that proposal today.
It includes a cap on gas prices and a bill discount for some people and businesses.
Will this affect your power bill, and if so, when? Here’s an explainer.
Most of our power comes from coal, gas or renewables.
The global prices of gas and coal have spiked due to the war in Ukraine, which affects Australian prices.
On top of that, Australian coal plants have been malfunctioning, renewable storage capacity is lacking, and much of our gas (especially on the east coast) is locked in contracts to be sold overseas.
The result: high power prices.
The Government is putting a temporary limit on gas prices in the ‘wholesale’ market (we’ll come back to what that is in a moment).
The limit is $12 a gigajoule (which is about a fortnight of usage for a normal household). For context, the price was about $6 in 2020-21 but has risen to around $30.
The $12 limit will last about a year, but the Government will also require “reasonable” prices after that if global prices are still too high.
There will also be a limit on coal prices, implemented by states with federal funding. The coal limit will be $125 per tonne (compared to about $100 at the beginning of 2021 and around $400 now).
Again, this applies to the ‘wholesale’ market. That’s where the generators sell to retailers and some businesses.
Most of us don’t buy directly from this market, we buy from retailers, so how will this affect our power bills?
How will it affect me?
The short answer: it should flow through to power bills next year.
According to the Prime Minister, government regulators will update the minimum amount retailers must offer customers in February. These changes will be reflected in that update.
This may not actually lower power bills – it might just result in a smaller increase than there otherwise would have been. It also won’t necessarily be automatic – you’ll need to check your contract.
For small businesses and for people on government support payments, there is also additional support: governments will pay a portion of your power bill directly. This will be jointly funded by federal and state governments and is expected to be in place by March next year.
The gas industry opposes the plan, arguing gas price caps will make the problem worse and have a “chilling” effect on new gas supply projects.
Opposition Leader Peter Dutton calls the approach a “train wreck”. He argues the lower price will discourage gas supply and says the Government should instead negotiate with sellers to supply more. The Opposition voted against the measures.
However, the Government passed the changes without the Opposition support, thanks to support from the Greens, the Jacqui Lambie Network and Independent David Pocock.
In exchange for their support, the Greens successfully negotiated funding to help low-income earners and renters transition from using gas appliances to electric appliances.