Australia electricity rate: Prices may be 25% higher than official reports

The IEA may be underestimating Australian household energy bills by 25% because of a lack of accurate data from the government.

The Paris-based IEA produces official quarterly energy statistics for the 30 member nations of the OECD. But to provide this service, the IEA relies on member countries to provide it with good-quality data.

Victorian households in other hands are expected to be slugged with a significant increase to their power bills next year.

The state’s third largest energy retailer Energy Australia is rolling out significant price jumps in the coming year. This price jump leads in pushing up the cost of both electricity by almost 15 percent and gas by 13.5 percent.

Energy Australia’s chief customer officer said wholesale electricity prices had risen about 55%. This huge pain was being passed on to customers.

 

Current Prices

This year’s reported household average electricity prices are almost certainly wrong too. The IEA says that household electricity prices in Australia for the first quarter of 2017 were US20.2c per kWh.

By contrast, the independent review of the Victorian energy sector surveyed the real energy prices paid by customers. In a sample of 686 Victorian households, those with energy consumption close to the median value were spending an average of AU35c per kWh in the first quarter of 2017. This is 25% more than the IEA’s official estimate. At least this was explained by the AEMC’s assumption that all customers are supplied on their retailers’ cheapest offers. But this is not the case in reality.

Surveying real electricity and gas bills drastically reduces the range of assumptions that need to be made to estimate the price paid by a representative customer. Indeed, as long as the sample of bills is representative of the population, a survey based on actual bills produces a reliable estimate of representative prices in retail markets characterized by high levels of price dispersion, as Australia’s retail electricity markets are.

An obvious question from this is where Australia ranks internationally if we used prices that reflect what households are paying.

This is contentious, not least because prices in NSW, Queensland, and SA increased – around 15% or more – this year. We do not know how prices have changed in other OECD member countries since the IEA’s recent publication. But we do know that prices in Australia have been far more volatile than in any other OECD country.

 

Conclusion

It is estimated that the typical household in SA is paying more than the average home in any other OECD country. The typical house in New South Wales, Queensland or Victoria is paying a price that ranks in the top five.

There are serious question marks over Australia’s official electricity price reporting. Policymakers, consumers, and the public have a right to expect better.