Gas bill rises hit households despite east coast price caps

Angela Macdonald-SmithSenior resources writer

Jul 12, 2024 – 4.34pm

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Household gas prices are rising by more than 10 per cent in major cities, saddling families with steeper energy bills despite a mandated pause in electricity tariff increases and a federal government cap on wholesale gas prices along the east coast.

AGL Energy, one of the country’s largest gas retailers, has notified customers in NSW of price increases to take effect on August 1, while Origin Energy and EnergyAustralia advised customers of price changes last month.

Households face higher gas bills, which are increasing more substantially in larger cities like Sydney and Melbourne. Jason South

Changes among smaller retailers are more varied, with Alinta saying customers in Queensland and Victoria can expect lower gas bills, while there are “modest increases” in NSW and South Australia.

MST Marquee analyst Saul Kavonic said retail gas prices had remained “unusually elevated” compared to prices for supply directly from producers to other customers since a cap on wholesale prices was introduced by Labor in late 2022.

“The price cap has ended up setting a floor rather than a ceiling for gas supply contracts,” he said. “Retail users appear particularly worse off under the price cap policy, as liquidity has reduced, leaving them reliant on fewer suppliers.”

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Higher energy prices are making it more difficult for the Reserve Bank to bring inflation back to its target range, some economists have already warned.

Barrenjoey’s Jo Masters told The Australian Financial Review earlier this month that while the average increase in power prices may not be material to headline inflation, the bank did consider electricity to be one of several items likely to add more to inflation than it did before the COVID-19 pandemic.

Brian Spak, director of energy system transition at Energy Consumers Australia, which speaks for small customers, said consumers were “doing it tough” already and the increases would add to that.

“Electricity prices haven’t increased that much [this year] but they haven’t come down either so they remain relatively high,” he said. “Increasing gas prices and gas bills just make the problem that much worse.”

The increase in gas prices comes after a reprieve on electricity bills after two years of significant rises, pushing up the regulated default tariffs by about 40 per cent. Over the next 12 months, however, changes to those electricity tariffs range from a decrease of 9.7 per cent to an increase of 4.9 per cent.

Households in NSW appear to be some of the worst hit on gas, with some increases in the usage charge for AGL customers reaching 11 per cent, and in the daily supply charge 11.5 per cent, according to letters to customers.

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AGL said the average increase for customers in NSW was 8.2 per cent and 8.6 per cent in Victoria.

A spokeswoman said the increases were the result of “market conditions and the cost of providing gas to customers, including wholesale, network and environmental costs”.

Powershop, owned by Shell, said it was absorbing higher network and wholesale costs and holding gas prices steady “for the overwhelming majority of our residential gas customers in Victoria and NSW”. Red Energy and Lumo Energy, operated by Snowy Hydro, are increasing prices by up to 6.7 per cent and 5.6 per cent respectively.

Origin said its average increase in gas prices for households in NSW was 8.1 per cent, or $83. Average prices in Victoria were rising less, by 7.3 per cent, although they were higher in dollar terms at $125. They were smaller in South Australia and Queensland.

Origin blamed its gas tariff increases on higher costs to distribute gas and higher operating costs for the increases, rather than increasing prices for the commodity.

That’s despite recent spikes in east coast wholesale prices to their highest in more than a year in Sydney and Melbourne, and warnings from the Australian Energy Market Operator of potential winter shortages.

aAFR is listening to letters