Electricity Service Price

IBISWorld expects the electricity service price index to increase by 4.9% in 2024-25, to reach 154.9 index points. Prices in the National Energy Market (NEM) expanded over the first six months of the year, with Black Coal generated electricity prices (38.9% of total energy generation) expanding by over 30.0%. Wind (15.1% of total) and Hydro (6.8%) have also increased by 13.8% and 46.6%, respectively, through the first two quarters of 2024-25. These higher procurement costs have translated to higher downstream service prices. Electricity demand across the NEM also increased by 3.4% in Q3 2024 compared to Q3 2023, placing further upwards pressure on electricity service prices. Prices are expected to remain high over the second half of the year, particularly if downstream demand continues to escalate.

The electricity service price has surged over the ten years through 2024-25. Higher natural gas prices increased input costs for generators, placing upwards pressure on the costs of electricity generation. Australia has targeted liquefied natural gas (LNG) export opportunities, exposing previously low domestic gas prices to global market forces and boosting gas prices. The closure of the coal-fired Liddell Power Station in April 2023, which supplied baseload power to New South Wales and issues with the electricity grid’s reliability, particularly in South Australia, have offset further pricing declines across the electricity supply chain over the past few years. The unpredictability of wholesale prices has also significantly hindered potential reductions in electricity service prices. Retailers are often reluctant to lower their prices proportionately when wholesale electricity prices take a sudden dive, primarily because of the highly uncertain and risky nature of the market conditions in which they operate. This makes retail prices stickier than those in wholesale markets.