Why Compare Electricity Costs & Factors Causing Differences

Electricity plays a significant role in our lives, as well as in our own country. Businesses and households depend on it every day. Machines and appliances use it to make working on different tasks possible. Without it, livelihood will falter, and life will become difficult. All topics on electricity go down to its benefits to people and many sectors in the society. But what happens when it becomes an issue?

Problems about gas and water are just some of the challenges that any country face. While some countries also worry about electricity. One of their issues is its price, where consumers look for a more reasonable price from the generating suppliers. Yet, there are many reasons why the price would not go down right away.

This article will discuss the factors that affect the cost of electricity in Australia. It will also talk about the challenge of looking for a retailer. It will also discuss how to find the best retailer in the country.

In many countries like Germany, Denmark, and Belgium, its price is the highest compared to other countries. Read here to know more about it. If you looked at the chart, you would notice that it is the same thing with Australia, which is a bit higher than in the US. But how did their price hit that high?

Let us discuss the factors that affect the cost of electricity in Australia.

Factors Affecting the Cost of Electricity

1. Renewable Energy

One of the reasons why there is a change in the cost is the use of renewable energy. It includes solar, wind, and hydropower. Although it plays a little of 20%, still many businesses and households make use of this. It plays an essential role in Australia’s energy consumption.

2. Gas

Australia gets its energy in many sources, and gas is one of them. Some of these are from non-renewable sources like natural gas. It ranks third as the most used source. It comes from gas fields, which could make the country survive for 20 years. Visit this link https://www.energycouncil.com.au/analysis/gas-in-australia-where-is-it-now-and-where-is-it-going/ to get more information about it.

3. Network Cost

Network cost is just one of the many things that you can see in your retail electricity bill with the environmental policy cost, retail cost, and wholesale cost. The network needs to meet some standards set by the government. Therefore, they would need to increase its price. The more the consumer demand for it, the higher is its cost. Moreover, they also need to improve their infrastructure in providing electricity and safety too.

What Is The Biggest Challenge In Choosing A Retailer?

Every consumer wants the worth of his or her money. However, it is difficult for consumers to choose the best retailer because of their inability to judge correctly. Many retailers offer good deals, yet it becomes tricky to people already on what to prefer. Standards are sometimes not met, which becomes a disadvantage on the side of the consumers.

How to Find the Best Retailer

In Australia, some generators produce electricity for the country. You can choose from the three big energy providers, namely Origin Energy, AGL, and EnergyAustralia. However, the market has been very competitive, making finding the best retailer quite a challenge. It is better to get to know them first before you settle on one retailer that will suit your budget and need.

So, how do you find the best retailer in your country? The answer to the question is to compare electricity offers of different retailers. Yes, this is the vital thing that you have to do to get your money’s worth.

One reason why you should compare is to get better deals with quality service. Not all retailers can be suitable for your household or business needs. It is why it is essential to look at their offers, services, and prices wisely.

Australia is just one of the many countries that have a significant source of electricity. However, the cost of electricity depends on many things which you should also examine and study. Find the best retailer through energy consultants to help you decide on what to choose. Surely, you will get the best from it.

A proper video on how to understand the electricity bill

FAQs on Electricity Costs and the Bill

Q: What does your electricity bill contain?

A: Your electricity bill covers the generation of electricity, the wires and poles to bring power to your home, the environmental costs, and the costs for the marketing and the administration of the electricity company.

Q: What makes the most of your electricity bill?

A: The cost for producing the energy, no matter what the source is, will make around 40% of the value of your electricity bill, which is also known as the wholesale electricity price.

Q: Why did the wholesale price of power increased over the last couple of years?

A: Several factors cause an increase in the wholesale price of power over the last couple of years. The cost of generating electricity from gas is one, whereas the closure of old and less effective coal power plants in Victoria and South Australia is another.

Q: Will the wholesale electricity lower anytime soon?

A: It was expected that the wholesale electricity price to decrease by 11.6 every year from 2018-2019, until 2020-2021. It was also anticipated that more than 8500 MW of new large-scale renewable energy sources would become widely available for customers, easing out the supply-side pressures.

Q: Are wires and poles that expensive?

A: With such a big country, it’s expected that the electricity network would be the largest in the world. The prices for the wires and poles carrying the electricity from the power plants to your residence/business will impact your electricity bill’s costs.

The costs for maintenance for poles and wires are high, but adding new elements doesn’t come cheap either. To give you a number, in 2018-2019, 44% of your electricity bill was typically for covering this spending.

Q: What are the costs for the marketing and administration of the electricity company?

A: Part of your electricity bill will cover the price for the company to keep the customer databases and billing processes. It also comprises the marketing for gaining new customers.

In 2017, a study revealed that this sort of cost of the electricity company makes almost a quarter of the residential electricity bill. Either way, many professionals agree that the increase in these costs is one reason your electricity bill increases.

Q: How much do you pay for the environmental costs?

A: Regardless of what you may think, the environmental costs make the smallest part of your average bill. It comprises the price of meeting the national Renewable Energy Target and the constant spending for the rooftop solar power support systems. The rates will vary from state to state. A 2019 study revealed that spending on environmental schemes was around 7% of your electricity bill. As the Renewable Energy Target was accomplished, it’s expected that the costs will decrease importantly in the future.

Q: What did the price cap on electricity prices mean?

A: With prices of electricity increasing over the country, the Australian government decided to install in February 2019 a ceiling for power prices, for clients on standing offers. The price-capping regulation will modify the median rates and guide both the home and business-owning electricity consumers.

The decision was pushed by the Australian Competition and Consumer Commission that highlighted that the regular retail plans (aka the standing offers) were inexplicably pricey.

The high costs of retail plans kept clients away from the energy market, but the decision is already making changes.

Q: Standing offers vs. market offers- what’s the difference?

A: The standing offers are the energy plans regulated by the government. Typically, they are pricier than the market offers, also named variable retail rates. The best part of the standing offers stability, as the retailers won’t change the costs regularly. Also, there are no exit fees included either.

However, market offers will vary a lot amongst various retailers. Discounts and promos are provided with the market offer to attract new customers, which is why you should carefully look for your unique electricity provider. The market offers are more attractive, especially for clients who are always paying attention to electricity costs.

Q: What are the benefits of setting a price cap on electricity prices?

A: The decision will make a difference, especially for the financially vulnerable clients, but also for the clients unable to watch for the falling/rising of electricity prices. For some standing offers, the decision has positive effects.

Q: Are there downsides for the decision?

A: The less fun part of the price cap is that now there’s a chance for the low-priced market offers to become pricier as electricity retailers will look for ways to cut down the losses from the high-priced standing offers that are currently capped. The change will directly affect the clients with the lowest-priced contracts.

All in all, the government planned to help the families and small businesses with their energy bills, which is a good intention.

Q: Are electricity costs higher in Australia than in other countries?

A: Compared to the countries part of the Organisation for Economic Cooperation and Development, Australia had the highest electricity prices a couple of years ago. Data in 2019 from 36 OECD countries showed that Australia made significant progress in reducing the electricity prices.

Slowly, and inevitably, Australia came down from 1^st place to 8^th place. But it’s a decrease that works for the good.

Thanks to AER’s new cost capping decision, we all expect some changes in the price of electricity for home and businesses. The decision doesn’t eliminate the fact that you still need to do due diligence when choosing your electricity provider to make the best deal for you.