Stubborn tariffs watched
Experts say power tariffs appear unlikely to drop as much as hoped.
In the ever-evolving Australian energy market, expectations for a significant decrease in electricity tariffs from July 2024 are being recalibrated.
Wholesale power prices, crucial for setting retail tariffs, have barely shifted from last year's figures. For instance, in Victoria, the benchmark price for the Default Market Offer (DMO) is around $73 per megawatt hour, showing negligible change.
Despite a drop in spot prices across the National Electricity Market (NEM), the DMO calculation, influenced by forward prices for hedging retailer costs, suggests minor adjustments at best.
This revelation comes amid warnings of potential power shortages in New South Wales and Queensland, where demand spikes are expected due to rising temperatures.
Some experts predict a slight decrease in the wholesale component of the DMO but anticipate overall adjustments to be minimal, affected by network and capital costs.
The sustainability of retail margins is under scrutiny, the Australian Energy Council has emphasised the importance of retailers in stabilising prices for consumers. It warns against further squeezing retail margins, highlighting the role of reasonable costs in ensuring the sector's viability.
As the Australian Energy Regulator gears up to release its DMO draft proposal, the energy community is watching closely.