Are Australians being overcharged for electricity? It's a hot topic that hits close to home. Many Aussies feel the sting of rising energy costs, but is it really worse than elsewhere? Brace yourself for a deep dive into the numbers.
The common belief is that Australia's electricity prices have skyrocketed, especially compared to the good old days of cheap energy. But is this perception accurate? The truth might surprise you.
Let's get technical. Are Australia's electricity prices higher than most countries? The simple answer is no. Australia sits around the middle, and when considering our higher incomes, we're even lower down the list.
From 2023 to 2025, the average electricity price for Australian households was 39 cents per kilowatt-hour (kWh), according to the Australian Energy Council. This is just above the OECD average of 38c per kWh, ranking Australia 15th out of 38 countries.
But hold on, comparing prices directly between countries with different living standards can be misleading. Carol Tran, an AEC analyst, explains that when adjusted for the cost of living, Australia's ranking drops to 24th, well below the OECD average.
So, in terms of electricity affordability for the average Aussie household on a global scale, we're not doing too badly.
But has Australia's energy advantage slipped over time? There's a belief that we've lost our edge, but is it true? Let's compare.
The AEC's analysis in 2016, using 2014 data and 'purchasing power exchange rates' for adjustment, shows a similar story. Australia ranked 21st out of 32 nations, slightly below the OECD average.
In other words, while our electricity prices have risen significantly over the past decade, other countries have experienced similar hikes.
Comparing power prices internationally is complex. Data from the International Energy Agency reveals that wholesale electricity prices in Australia have remained in the middle of the pack among large countries since 2018.
Wholesale prices, which account for 31-45% of residential customer bills, reflect the cost of power generation. Network costs (33-48%), retail costs (11-16%), and environmental costs (3-4%) also contribute to the final price.
Now, let's talk about the recent trends in electricity bills. We all know prices are rising, but regional variations and occasional energy rebates, like those during Russia's invasion of Ukraine, complicate the picture.
The Australian Energy Regulator sets a default market offer (DMO) for Queensland, NSW, and South Australia, while Victoria has its own. This DMO is the maximum price retailers can charge residential and small business customers, expressed as an annual average bill.
In the past three years, the DMO has increased by 30-32% in Queensland and NSW, and by 25% in South Australia. Victoria's default offer rose by 19% between 2022-2023 and 2025-26.
Surprisingly, despite these increases, Aussies on the east coast are paying lower power bills now than three years ago, thanks to various subsidies.
The ACCC's reports show that in NSW and South Australia, the median household electricity bill in Q3 2024 was around $330, 5-7% lower than three years prior. In southeast Queensland, quarterly bills have dropped from $230 to a $100 credit, and in Victoria, they've decreased by 17% to $256.
However, without subsidies, the story changes. Bills would have increased by 19-22% in NSW and South Australia, 14% in Victoria, and a staggering 66% in southeast Queensland.
The Australian Bureau of Statistics' consumer price index confirms this, showing a 19% increase in electricity costs nationally over three years, compared to a 12% rise in the CPI. Excluding subsidies, power bills are nearly 35% higher.
So, what's driving these price hikes? Johanna Bowyer, an analyst at the Institute for Energy Economics and Financial Analysis, points to wholesale electricity prices and network costs.
Bowyer explains that rising coal prices have been a factor over the past 10-20 years, but the real driver is gas prices. Research shows a strong correlation between gas and electricity prices in Australia's east coast market.
Coal-fired power plant outages have also contributed to higher wholesale prices. During the day, solar energy pushes wholesale prices towards zero, but in the evening, as energy demand increases, prices jump towards the higher cost of gas-powered energy.
Bowyer suggests that reducing reliance on gas is key to cheaper energy. Investing in renewable energy and energy efficiency, especially for individual households, can significantly reduce bills.
Retail prices include more than just power generation costs. Network costs, such as building the infrastructure for a clean energy grid, are proving more expensive and time-consuming than expected.
Tony Wood from the Grattan Institute highlights the challenge: 'While renewable power is cheap, we underestimated the cost of delivering it and ensuring reliability.'
So, while cheap green power is balancing out higher build-out costs, many Australians are still waiting for the promised savings. The question remains: When will cheap renewables bring cheap power to everyone?
The debate continues. Are Australians being overcharged for electricity, or is it a necessary transition cost towards a greener future? Share your thoughts in the comments!
