David Koch’s bill warning for households: ‘10 years of pain’

Aussie households could be stuck paying high electricity prices for the next decade, David Koch has warned.

Wholesale electricity prices have come down significantly, with the latest figures finding prices have dropped by around 50 per cent in many parts of Australia.

But Koch said this wouldn’t automatically translate to lower bills for consumers because wholesale prices only made up one-third of households’ total electricity bills.

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“People are desperate to see some price relief this year,” the Compare the Market economic director told Yahoo Finance. “A drop in wholesale prices may have been a glimmer of hope, but that’s just one piece of a complex puzzle.

“Outdated electricity grids and networks have been expensive to maintain and will cost even more to transform over the next 10 years. It’s regular Aussie families who will bear the brunt as some of these costs are passed on."

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Because of these added costs, Koch said electricity customers could be looking at "10 years of pain".

“None of these changes will happen overnight, so we could face a long, protracted period of price pressure," Koch said.

The average bill is currently $434 per quarter for NSW households, according to Finder. Victorian households are paying $348 per quarter, on average, while Queensland households are paying $368 per quarter, on average.

Why will energy bills stay high?

The remaining two-thirds of a power bill is made up of network, environmental and retail costs.

Network costs include the cost of building, maintaining and operating electricity wires and gas pipes, as well as the cost of transporting and distributing electricity and gas to your home, the Australian Energy Regulator said. This makes up about half of your electricity bill.

“Due to inflation, the cost of materials to maintain the network has increased, rising fuel costs mean it’s costing more for distributors to read meters, maintain poles, wires and pipes and transform the grid,” Koch said.

“On top of that, Australia has renewable energy commitments to meet. While federal and state governments, retailers and distributors are working to make that happen, it costs a lot of money. Unfortunately, consumers foot part of that bill.”

How can customers save now?

Drops in wholesale prices usually take between six and 12 months to flow through to household bills. But Koch said customers could save now by seeking a better deal.

“We know many households are on so-called ‘standing offers’, which means they’re paying more than they need to,” Koch said.

The default market offer sets a price cap on how much energy retailers can charge customers on default plans, also known as standing-offer contracts. They are usually more expensive than a market-offer contract.

“Retailers are legally obligated to display the percentage difference between their market electricity plan on offer and the default offer - which makes it easy to compare,” Koch said.

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