Electricity users in the Australian Capital Territory will see average electricity costs fall by at least 1.25% on July 1 as the Capital Territory’s extensive contracts for 100% renewable electricity protect its consumers of the chaos spreading across Australian energy markets.
On Monday, the ACT Independent Competition and Regulatory Commission – which regulates electricity prices in the ACT – announced that regulated prices provided by state-owned retailer ActewAGL would fall in the next financial year.
Households and businesses in Canberra stand to benefit from lower electricity costs, although consumers in most other states face bill hikes of up to 18% or more.
“The minimum average decrease of 1.25% will result in an annual bill savings of $23 for an average residential customer consuming 6,500 kWh,” ACT ICRC Chief Commissioner Joe Dimasi said in a statement.
“For an average non-residential customer consuming 25,000 kWh, the reduction in the annual bill will be $88.
The ICRC says the ACT will become the only jurisdiction in Australia to benefit from lower electricity prices – potentially the lowest in Australia – during a time of intense disruption and rising oil, gas and gas costs. coal.
“The ACT is the only jurisdiction in the national electricity market where regulated tariffs will decrease in 2022-23,” he said.
“Canberrans’ average annual invoice on standing offers will be the lowest compared to the average invoices on standing offers faced by customers in New South Wales, Victoria, Queensland and South Australia. .”
The ICRC said the decline was mainly due to fixed-price contracts the ACT government signed to source from renewable energy sources for the equivalent of 100 percent of the territory’s electricity consumption.
“The price reduction is driven by lower ACT Government program costs, which more than offset increased wholesale power costs. ACT Government program costs put downward pressure on prices this year,” says the ICRC’s determination.
“ACT Government program costs have declined due to a decline in large-scale Feed-In Tariff (FiT) support payments. The large-scale FiT support payment is the difference between the fixed contract price to renewable energy generators and prevailing wholesale electricity prices,” the ICRC says.
“Due to an increase in wholesale electricity prices, contract for difference payments to contracted generators have decreased.”
The ICRC noted that the lower electricity price would apply to consumers on regulated tariffs provided by ActewAGL – which has a market share of over 80% in ACT – and encouraged energy users to check to make sure they received the best price for their electricity. retailer.
“The regulated price reductions mentioned only apply to the prices of permanent offers. We encourage consumers to regularly compare these rates to other offers in the market,” added Dimasi.
How ACT electricity prices will change
ACT Energy and Emissions Reduction Minister Shane Rattenbury welcomed the lower prices and emissions while encouraging ACT households to continue adopting energy efficiency programs offered by the government.
“We are very pleased to continue to see ACT’s energy prices among the most affordable in the country, while contributing to the shift to 100% renewable electricity and reducing our greenhouse gas emissions by around 40%,” Rattenbury said.
“Having said that, we encourage Canberrans to continue to follow the programs offered by the ACT Government.”
“There are a range of programs to move away from some of the fossil fuel appliances in your household to install solar power, to boost energy efficiency so we can continue to make sure energy is affordable for households here in the ACT.”
As RenewEconomy reported last week, ACT has been awarded fixed-price electricity contracts as part of its commitment to supplying the entire territory with 100% renewable electricity.
As part of the Renewable Energy Policy, ACT has signed Contracts for Difference with a range of solar and wind farms, which allows ACT to pay no more and no less than approximately US$90 per megawatt hour for wholesale electricity.
Since wind and solar projects have no fuel costs, they are not subject to the same cost fluctuations as coal and gas producers and therefore can offer contracts at fixed wholesale prices.
Contracts for difference see additional payments from ACT energy users to contracted wind and solar projects when wholesale electricity prices are below the fixed contract price, but when wholesale electricity prices exceed the price fixed contract, wind and solar projects are required to return the excess to consumers.
While it typically sees ACT households paying a small premium for their renewable electricity supply, the contracts also protect consumers from any wholesale price spikes – such as those currently affecting Australian electricity markets.
Wholesale electricity prices in New South Wales averaged $320 per MWh in May and currently average over $475 per MWh in June so far.
Although these high prices have contributed to higher electricity prices in other jurisdictions – notably New South Wales, South Australia and South East Queensland, all of which have seen their tariffs benchmark electricity bills increased by the Australian Energy Regulator – ACT electricity users will see their costs fall, thanks almost entirely to renewable energy contracts.
The ICRC found that ACT consumers would also benefit from lower transmission and distribution costs, contributing 0.74% to the overall reduction, while retailer margins were also slightly lower.
Shortly after the Federal Election, the AER released its latest “Default Market Supply” determination – setting the benchmark electricity price for consumers in New South Wales, South East from Queensland and South Australia.
The determination saw the benchmark electricity price in NSW rise 8.5-14.1%, rise 11.3% in South East Queensland and 7.2% in Australia -Southern.
The AER said the increases were caused by higher costs for coal and gas production and the impacts of an increase in the frequency of failures of large thermal generators.
Michael Mazengarb is a Sydney-based journalist with RenewEconomy, writing on climate change, clean energy, electric vehicles and politics. Prior to joining RenewEconomy, Michael worked in climate and energy policy for over a decade.