Watch the video below or read on!
It came as no surprise this week when the Australian Energy Regulator (AER) released the 2022-23 Default Market Offer (DMO) with some big increases.
From July 1 2022, the DMO price in New South Wales will increase for households 8.5% – 18.3% (adjusted for inflation) and small businesses 10.0% to 19.7%.
Who is the AER and what is the DMO?
The Australian Energy Regulator (AER) is the energy industry watchdog.
The Default Market Offer (DMO) is the safety-net price cap that ensures that you, the consumer, is protected from unjustifiably high prices. This benchmark price is set to increase up to 18.3% in NSW on July 1st, and whilst it is not supposed to be the lowest available, it is the benchmark that retailers use to set their prices and offers. When the DMO goes up, power prices follow.
Why the big price rise?
Just last month, the Australian Energy Market Operator (AEMO) said that wholesale costs in the National Electricity Market (NEM) soared 141% in the 1st Quarter of 2022 when compared with the 1st Quarter of 2021.
Why? Here are a just a few of the contributing reasons:
- Higher coal and gas prices (with added global pricing pressure caused by the ongoing war in the Ukraine)
- Outages at multiple coal plant generators
- Extreme weather events in NSW and QLD impacting coal supplies and electricity demand
- Slowing of investment in new capacity
- Reductions in thermal generation
- Increasingly sharp highs and lows of demand causing significant price volatility
All of this has compounded and driven up the cost of wholesale electricity contracts for retailers – and come July 1, those increasing costs will start to be passed on to Australian consumers.
When the cost of living is a struggle for so many Australians, why did the AER set the Default Market Offer so much higher?
The AER Chair Ms Clare Savage said it was a particularly difficult decision as they tried to strike a balance between the additional cost pressures on consumers with the need to ensure retailers could recover their rising wholesale and network costs.
“Setting the DMO is not about setting the lowest price. We are required to set a price that will allow retailers to recover their costs, earn a reasonable margin and support retailers to compete and offer better deals and products in a competitive retail environment. If a large number of retailers are unable to recover their costs and are forced to exit the market – as we have seen recently in the United Kingdom – that will add more cost to consumers.”
Earlier this year, Britain’s energy regulator increase their price cap by a record-breaking 54%. Whilst our Aussie increase of up to 18% might not seem so bad by comparison, it will still hit many Aussie homeowners where it hurts – their wallets – and the UK could be an indication that prices will continue to soar in the years to come.
How can I save money on my power bills?
Now it isn’t all doom and gloom. If you’ve already got solar, congratulations! Your solar power is now up to 18% better value today than it was last week!
Here are a few proactive things you can do to reduce your power bills in preparation for the pending price hike (and some longer term solutions too):
1. Reduce your power usage.
This one might seem obvious, or even a little silly, but if you adjust some of your power usage habits, it all helps.
I’ll always remember my Environmental Educator mother teaching hoards of children in the 80’s and 90’s (she was ahead of her time) simple tricks like:
- Switching off the lights when you leave a room
- Not holding the fridge door open whilst you slowly decide what you want to cook for dinner
- Keeping hot showers short (perhaps the length of your favourite song)
- Close doors to rooms that are not in use, so that you are only working to warm or cool the rooms that are in use.
These simple habits have stayed with me for life and I’m even teaching my one-year old to help me switch of the light every time we leave a room. Every bit counts!
2. Purchase energy efficient appliances
Every time you replace an appliance, consider the energy usage of the new one. Did you know a (heat pump) clothes dryer can get up to a 10-star Energy Rating?!? I thought it was out of 5 stars! Yes – my dryer was a bit more expensive upfront, but with less than half the annual power usage of its cheaper counterparts… worth it!
Pro Tip: If you have solar, you should be using your power-hungry appliances during the day when you can!
From hot water heaters to fridges, washing machines to dryers, heaters to air-conditioners – do your homework when purchasing and keep energy ratings in mind!
3. Get solar!
Now of course we are a little biased here, but our motivations are pure. Installing solar power is the single most effective thing you can do to reduce your power bills, and the more solar power you can use in the home the more money you can save!
Generating your own power from solar panels is significantly cheaper than buying electricity from the grid. To give you a hint – a solar system sized up correctly can generate power at only 5-6 cents per kWh, significantly cheaper than what you would otherwise pay. Plus, once the system is installed, you don’t need to worry so much about the future price of electricity. Our team of experts can help you size up a system to maximise your savings and help you estimate just how much you could save.
If slashing your power bills has appeal, but the upfront cost is a concern – it shouldn’t be. Solaray offers easy finance options with no upfront costs and there are Government rebates available (that drop in value each calendar year – so the longer you wait, the smaller the rebate). Plus, the savings from your solar will offset your repayments – so you can actually be cash flow positive from the very beginning – and you’ll be enjoying those savings for decades to come!
4. Get a solar battery and gain some grid independence
With the big benefit of solar shifting away from big feed-in tariffs and moving towards self-consumption (of your own solar power) – the value proposition of a solar battery has shifted dramatically.
Why would you sell your excess solar power to the grid for 5 cents per kilowatt hour during the day, and then pay 30 cents to get it back that night? That’s madness!
A reliable battery paired with a suitably sized solar system should give you independence from the power grid (not the same as being ‘off-grid’). Simply put, your excess solar power charges your battery so you can use your own power at night.
As an added bonus, if there is a blackout, you can continue to run power in your home and your solar will recharge your battery in the morning!
If you have an electric vehicle, or are considering getting one in the future, a battery will keep the overnight charging costs down (or even wipe them out!).
There is so much more to a battery than just return on investment (ROI) these days – so it might be worth having a chat with one of our team to help you determine if/when a battery will be a smart investment for your home.
5. Shop around for a better deal on your energy prices
When July hits and the prices go up, it is the perfect time to shop around for the Energy Retailer that is going to give you the best deal.
We recommend using the Energy Made Easy comparison site, as it is run by the AER, it is compulsory for EVERY energy retailer in Australia to list their offers. Importantly, the site is free and independent.
Why does this matter? If you pick a retailer from this site, Energy Made Easy doesn’t earn a commission from the retailer. Many other comparison sites [or com-Parasites as we like to call them] charge referral fees to their listings for any new customers that came through via their site – and those fees typically get passed on to the customer or have a potential to create bias with paid ads for top-billing etc.
Energy Made Easy also let’s you see how ‘green’ the power from each provider is, so if using renewable energy matters to you (and we hope it does), this helps you find a provider that aligns with your preferences and values. But most importantly, it will help you find the best deal on energy prices for your home!
Pro Tip: We’d suggest you shop around for retailers every 12 months or so. The rates usually change at least once a year, so why not take a quick look and make sure you’re getting the best (and greeneest) bang for your buck!
Where do I start (on saving money on my power bills)?
Pick any one of the tips above and put it into action. Every step you take towards reducing your grid power usage is good for the planet and good for your wallet!
If solar or a battery is on your radar, we’d suggest you start with a quick ten-minute conversation with on of our team so they can answer any questions you might have. No high-pressure sales (something our industry is unfortunately famous for) – just good advice to help you see if solar is right for you.