A lot goes on behind the scenes in the world of electricity to ensure your lights at home turn on every day. To help you learn about the factors that can cause your energy prices to change, here’s a simple and informative summary.
Generally speaking, energy retailers update rates once a year. 2021 has been unusual in that there has been two reprices – with one also happening in January 2021. This has been done so that future reprices occur in the second half of the year.
Energy rates tend to change when those in the energy supply chain review their wholesale and network costs and decide what to charge energy retailers. We update our prices to reflect these changes in external costs.
While we hope these changes mean we can reduce your prices, sometimes market conditions will result in an increase. The impact to you is also dependent on your usage, network, and other factors.
Here are the main underlying costs that make up energy prices and can cause them to change:
- Distribution & network: Associated with the maintenance of power infrastructure, such as poles and wires, necessary to supply you with electricity. This is charged by local network service providers and vary greatly between region and tariff type. Distribution & network costs often depend on any upgrades or extensions that are required.
- Wholesale energy: This is the price of electricity at which retailers buy from a generator to supply to you. The cost of wholesale energy is determined by demand and the level of rooftop solar entering the grid. The more renewable power entering the grid the less wholesale energy is required, thus reducing demand and cost.
- Solar: Lower wholesale prices reduce the cost of energy from the grid. However, it also means the value of exported solar falls in a similar way. We have worked hard to maintain as high a FiT as we possibly can.
- Environmental: The cost retailers must pay to comply with government environmental regulations and boost investment in renewable energy.
- Retailer: This is what you pay us to ensure you can turn the lights on, receive billing information and receive great customer service.
What is the Victorian Default Offer (VDO)?
The Victorian energy regulator has updated the Victorian Default Offer (VDO) that governs retail energy pricing in the state. This has been done to reflect changes in wholesale, network and other costs critical to getting electricity to your power points.
The VDO is a regulated price for electricity in Victoria, set by the Essential Services Commission that Victorian energy retailers must make available for consumers. It also provides a reference point for consumers to compare the competitiveness of offers.