This is the ninth price trends report. It provides a clear picture of how market and policy decisions have affected consumer prices for the best part of a decade. It provides the transparency governments need to understand whether price changes proposed by retailers are consistent with changes in underlying costs – so price rises can be understood before they happen. It provides context for policy makers to understand how decisions being considered now are likely to affect prices in the future.

We can contain prices if we contain costs. We must stop over-engineered solutions to avoid gold-plating and price spikes.

The challenge going forward is to continue balancing supply and demand across the nation as the energy sector restructures. Network poles and wires account for up to half of consumer bills, depending on where you live. Managing the costs of connecting new generation will be a major challenge.

While the overall trend is down there are differences across the states and territories as a result of local factors impacting different parts of the supply chain.

Most Australians can expect to see falling electricity prices over the next two years. The pressure is coming off prices because a huge pipeline of new renewable generation is coming into the market, and demand is relatively flat.

The Australian Energy Market Commission (AEMC) releases an annual report on what’s driving costs up and down across the electricity supply chain.

We are fostering the efficiency of network investment and operations through major projects like the coordination of generation and transmission investment review; introducing new transmission connection and planning arrangements; introducing competition in metering; and establishing the value of customer reliability.

We continue our analysis of market design changes which currently includes the market making obligations rule request, and advice on the impact of a default offer which has been requested by the COAG Energy Council .

At the same time we are reviewing what’s needed to support adequate investment in generation as the power system evolves to include more variable, intermittent generation and demand-side innovation. Our package of reforms in this area includes:

We completed or are undertaking a number of rule changes and reviews with the potential to directly or indirectly impact consumer prices and bills, including:

We are doing our bit to cut costs in the power system by addressing the drivers of our costs through our work program. Our focus on price impacts drives everything we do through the reliability and security frameworks; consumer choice, control and protection; the networks of the future and the continuing importance of integrating energy and environmental policies.

A detailed explanation of the pricing methodology is set out in the 2018 Residential Electricity Price Trends Methodology report.

This report uses the most common type of residential electricity consumer (the representative consumer) to analyse residential electricity prices, annual bills and the cost components of a bill. In Western Australia the representative consumer:

The retail component is provided by the Western Australian Public Utilities Office for new entrants' efficient retailer operating costs and retail margin. The approach for estimating the retail cost in Western Australia is different to how the residual component is derived for other jurisdictions.

In Western Australia, retail costs comprised approximately 8.1% of the cost of supply in 2017-18, and are expected to account for a relatively flat proportion of the cost of supply from 2017-18 to 2020-21.

In 2017-18, the RET comprised 3.2% of the representative residential electricity bill and is expected to comprise an increasing proportion of the representative residential electricity bill from 2018-19 to 2020-21.

The environmental policy cost that is relevant in Western Australia during 2017-18 to 2020-21 is the Commonwealth Government's Renewable Energy Target (RET) .

Regulated network costs comprised approximately 48.9% of the representative residential electricity bill in 2017-18, and are expected to account for an increasing proportion of the representative residential electricity bill from 2018-19 to 2020-21.

In Western Australia, wholesale market costs comprised approximately 39.8% of the cost of supply in 2017-18, and are expected to comprise an increasing proportion of the cost of supply from 2018-19 until the end of 2020-21.

The below chart shows the expected trends in supply chain components in Western Australia from 2017-18 to 2020-21.

The expected increases in residential electricity prices in 2019-20 and 2020-21 are attributable to the annual increase set by the Western Australia Government. Residential electricity prices are set by the Western Australian Government and may not reflect the underlying cost of supplying electricity.

In 2017-18, the representative consumer on the electricity price set by the Western Australian Government had an annual bill of $1,566 exclusive of GST.

In 2017-18, the residential electricity cost of supply in the South-West Interconnected System (SWIS) for the representative consumer was approximately $1,573 exclusive of GST. This is made up of a:

Power prices are estimated to increase over the next two years from 2018/19 to 2020/21 in line with the price path set by the Western Australian Government. The final outcome will be determined by state government decision and may not reflect the underlying costs of supplying electricity.

As at March 2018, 94% of Victorian small customers are on a market offer. A detailed explanation of the pricing methodology is set out in the 2018 Residential Electricity Price Trends Methodology Report.

This report uses the most common type of residential electricity consumer (the representative consumer) to analyse residential electricity prices, annual bills and the cost components of a bill. In Victoria the representative consumer:

The increase in environmental policy costs is primarily driven by increasing costs associated with the SRES and VEU.

In 2018, environmental schemes represented 7.2% of the representative market offer and are expected to account for an increasing proportion of a representative consumer's electricity bill from 2019 to 2021.

The environmental policy costs that are relevant in Victoria during the reporting period are the Commonwealth Government's Renewable Energy Target (RET) and the Victorian Government's feed-in-tariff (FiT) schemes and Victorian Energy Upgrades (VEU) scheme . The costs associated with the RET are borne by retailers who may recover them through customer's retail bills. The costs associated with the FiT are recovered through distribution network charges or at the discretion of the retailer and the VEU is recovered through retail prices.

Regulated network costs comprised approximately 40.1% of the representative electricity market offer in 2018, and are expected to account for an increasing proportion of a residential electricity consumer's bill from 2019 to 2021.

In Victoria, transmission network services are provided by AusNet Services, and distribution network services are provided AusNet Services, Jemena, United Energy, CitiPower, and Powercor.

Wholesale electricity costs comprised approximately 43.9% of the representative electricity market offer in 2018, and are expected to account for a decreasing proportion of a residential electricity consumer's bill from 2019 to 2021.

The chart below shows the expected trends in supply chain components in Victoria from 2017-18 to 2020-21.

The expected decrease in residential electricity market offer prices from 2018-19 to 2020-21 is largely attributable to a decrease in the wholesale cost component.

In 2018, a representative consumer on a standing offer had an annual bill of $1,597 exclusive of GST.

In 2018, the residential electricity market offer​annual bill in Victoria was approximately $1,132 exclusive of GST. This is made up of a:

Power prices are estimated to fall in Victoria over the next two years in response to rising renewable generation capacity. Representative consumers should be paying around $61 less by January 2021 than they are today. And this year consumers who are still on standing offers could save $465 by switching to the best competitive market offer available.

As at March 2018, most residential customers in Tasmania are on a standing offer and therefore the representative consumer is on a standing offer. A detailed explanation of the pricing methodology is set out in the 2018 Key concepts and calculation methodology report.

This report uses the most common type of residential electricity consumer (the representative consumer) to analyse residential electricity prices, annual bills and the cost components of a bill. In Tasmania the representative consumer:

Aurora Energy offers a number of feed-in-tariffs for small-scale renewable energy generators. However, the costs of these schemes have not been estimated as they do not directly affect residential prices.

The main driver of these trends is the significant increase in the cost of the Commonwealth government's SRES policy .

In 2017-18, the RET represented 6.1% of the representative standing offer and are expected to account for an increasing proportion of a representative consumer's electricity bill from 2018-19 to 2020-21.

The environmental policy cost that is relevant in Tasmania during the reporting period is the Commonwealth Government's Renewable Energy Target (RET) .

Regulated network costs comprised approximately 45.7% of the representative regulated electricity offer in 2017-18, and are expected to account for an increasing proportion of a residential electricity consumer's bill from 2018-19 to 2020-21.

In Tasmania, wholesale market costs comprised approximately 37.8% of the representative standing offer in 2017-18, and are expected to comprise a decreasing proportion of a residential electricity consumer's bill from 2018-19 to 2020-21.

The chart below shows the expected trends in supply chain cost components in Tasmania from 2017-18 to 2020-21.

The residual component is derived for 2017-18 and 2018-19 by subtracting wholesale, environmental and network costs from the standing offer price. The residual component is assumed to increase at an inflation rate of 2.5% for future years in the reporting period. The residual component is derived specifically for the representative consumer using the methodology in this report and is not equivalent to the regulated retail margin set by the TER in Tasmania.

The expected decrease in residential standing offer electricity prices from 2018-19 to 2020-21 is largely attributable to a decrease in the wholesale cost component.

In 2017-18, a representative consumer on the regulated standing offer using 7,908 kWh each year had an annual bill of $1,868 exclusive of GST. This is made up of a:

The Tasmanian Government has not yet set prices for the next two years. They are expected to decrease slightly but this will be subject to changes in the energy sector that could happen between now and when prices are set for July 2019 and July 2020.

The Tasmanian Government has established a cap for electricity price increases at the Hobart consumer price index (CPI) from 2017-2018 to 2020-2021. This capped the actual increase in the state’s retail price to 2.05% from 2017-2018 to 2018-2019.

As at March 2018, 89% of South Australian small customers are on a market offer and therefore the representative consumer is on a market offer. A detailed explanation of the pricing methodology is set out in the 2018 Residential Electricity Price Trends Methodology Report.

This report uses the most common type of residential electricity consumer (the representative consumer) to analyse residential electricity prices, annual bills and the cost components of a bill. In South Australia the representative consumer:

The 25% increase in environmental costs from 2017-18 to 2018-19 is driven by increasing costs associated with the Commonwealth Government's Small-scale renewable energy scheme (SRES ) and South Australian FiT schemes.

In 2017-18, environmental schemes represented 6.6% of the representative market offer and are expected to account for an increasing proportion of a representative consumer's electricity bill from 2018-19 to 2020-21.

The increase in network costs is driven by increases in both transmission and distribution network costs.

Regulated network costs comprised approximately 38% of the representative electricity market offer in 2017-18, and are expected to account for an increasing proportion of a residential electricity consumer's bill from 2018-19 to 2020-21.

In South Australia, transmission network services are provided by ElectraNet and distribution network services are provided by SA Power Network.

Wholesale electricity costs comprised approximately 45% of the representative electricity market offer in 2017-18, and is expected to account for a decreasing proportion of a residential electricity consumer's bill from 2018-19 to 2020-21.

The below chart shows the expected trends in supply chain cost components in South Australia from 2017-18 to 2020-21.

The expected decreases in residential market offer electricity prices from 2018-19 and 2020-21 are largely attributable to decreases in the wholesale cost component.

In 2017-18, the representative consumer on the residential electricity standing offer​ had an annual bill of $2,194 exclusive of GST.

In 2017-18, the representative residential electricity market offer bill​ in South Australia was approximately $1,889 exclusive of GST. This is made up of a:

Power prices are estimated to fall in South Australia over the next two years in response to rising renewable generation capacity. Representative consumers should be paying around $120 less by July 2020 than they are today. Consumers who have not shopped around are missing out on current savings of $357 between the best competitive market offer and the lowest standing offer.

As at December 2017, 81% of small customers in South East Queensland were on a market offer and therefore the South East Queensland representative consumer is on a market offer. A detailed explanation of the pricing methodology is set out in the 2018 Key concepts and calculation methodology report.

The uses the most common type of residential electricity consumer (the representative consumer) to analyse residential electricity prices, annual bills and the cost components of a bill. In South East Queensland the representative consumer:

The main driver of this trend is the increase in the Commonwealth government’s SRES policy.

In 2017/18, the RET comprised 4.2% of the representative market offer in south east Queensland and is expected to comprise a decreasing proportion of the representative consumers’ electricity bill from 2017/18 to 2020/21.

The environmental policy cost that is relevant in south east Queensland during the reporting period is the The RET applies on a national basis and consists of the LRET and SRES.

The main driver of this trend is the decrease in distribution network charges.

Regulated network costs comprised approximately 45% of the representative market electricity offer in 2017/18, and are expected to account for a decreasing proportion of a residential electricity consumer’s bill from 2017/18 to 2020/21.

In South East Queensland, transmission network services are provided by Powerlink and distribution network services are provided by Energex.

Wholesale electricity costs comprised approximately 38% of the representative market electricity offer in 2017/18, and are expected to account for a decreasing proportion of a residential electricity consumer’s bill from 2017/18 to 2020/21.

The below chart shows the expected trends in supply chain components in south east Queensland from 2017/18 to 2020/21.

Electricity supply chain components include wholesale market costs, regulated networks costs, environmental policy costs and the residual component. In addition, residential customers in Queensland received a $50 rebate in 2017/18 and 2018/19.

The expected decrease in residential market offer electricity prices in 2019/20 is largely attributable to decreases in the wholesale component.

In 2017/18, a representative consumer on a standing offer had an annual bill of $1,699 exclusive of GST, which equates to a revised customer bill of $1,649 after the Queensland Government rebate of $50.

In 2017/18, a residential electricity market offer bill in South east Queensland was approximately $1,526 exclusive of GST, which equates to a revised customer bill of $1,476 after removal of the Queensland government rebate of $50. The market offer was made up of the following components:

South east Queensland consumers can expect falling prices over the next two years in response to rising renewable generation capacity - paying around $76 less by July 2020 than today. Almost 1 in 5 south east Queenslanders are on standing offers and could save money by shopping around. This year the representative consumer could save $254 between the best competitive market offer and the standing offer.

The analysis in this report relates to the Darwin-Katherine power system. A detailed explanation of the pricing methodology is set out in the 2018 Residential Electricity Price Trends Methodology Report .

This report uses the most common type of residential electricity consumer (the representative consumer) to analyse residential electricity prices, annual bills and the cost components of a bill. In the Northern Territory the representative consumer:

The increase in environmental policy costs is driven by increasing costs associated with the Small-scale renewable energy scheme (SRES ).

In 2017-18, RET costs comprised 4% of the representative residential electricity bill and are expected to comprise an increasing proportion of the representative residential electricity bill from 2018-19 to 2020-21.

The environmental policy cost that is relevant in the Northern Territory during 2017-18 to 2020-21 is the Commonwealth Government's Renewable Energy Target (RET) .​

Regulated network costs comprised approximately 49.8% of the representative residential electricity bill in 2017-18, and are expected to account for an increasing proportion of the representative residential electricity bill from 2018-19 to 2020-21.

In the Northern Territory, transmission and distribution network services are provided by the government-owned Power and Water Corporation . There is also no distinction between transmission and distribution prices when network prices are recovered from consumers, which is different from other jurisdictions.

Wholesale electricity costs comprised approximately 56.8% of the representative residential electricity bill in 2017-18, and are expected to account for a stable proportion of the representative residential electricity bill from 2018-19 to 2020-21.

Wholesale electricity costs for 2017-18 to 2020-21 were provided to the AEMC by the Northern Territory Government.

The below chart shows the expected trends in supply chain cost components in the Northern Territory from 2017-18 to 2020-21.

The expected increases in residential electricity prices in 2019-20 and 2020-21 are attributable to the annual increase projected by the Northern Territory Government.​

​ It is noted that the sum of the supply chain cost components in the Northern Territory add up to more than 100% due to the negative cost differential (that is, the residential electricity price is being subsidised].

In 2017-18, the representative consumer had an annual bill of $1,711 exclusive of GST. This is made up of (excluding residual-retail component):

Residential electricity prices in the Northern Territory are set by the Northern Territory Government, which subsidises electricity prices so that the prices paid by consumers are less than the cost of supply.

Power prices are expected to rise slightly in the Northern Territory in line with the price path set by the Northern Territory government. Prices don’t reflect the cost of supply in this vast territory of relatively small, scattered communities. Representative consumers could be paying around $47 more in July 2020 than they are today.

*The residential price paid by the representative consumer in the Northern Territory is less than the sum of the cost components (which includes the cost of environmental policies, regulated networks and wholesale electricity) in the chart. This is due to the cost differential (that is, the residential electricity price is subsidised).

As at March 2018, 83% of small customers in New South Wales are on a market offer and therefore the representative consumer is on a market offer.​ A detailed explanation of the pricing methodology is set out in the 2018 Residential Electricity Price Trends Methodology report.

This report uses the most common type of residential electricity consumer (the representative consumer) to analyse residential electricity prices, annual bills and the cost components of a bill. In New South Wales the representative consumer:

The main driver of these trends is the significant increase in the cost of the Commonwealth government's small-scale renewable energy scheme (SRES ).

In 2017-18, environmental schemes comprised 5.5% of the representative market offer and are expected to represent an increasing proportion of a representative consumer's electricity bill from 2018-19 to 2020-21.

The main driver of this cost trend is the increase in transmission network charges.

Regulated network costs comprised approximately 46.5% of the representative market electricity offer in 2017-18, and are expected to account for an increasing proportion of a residential electricity consumer's bill from 2018-19 to 2020-21.

In New South Wales, transmission network services are provided by Transgrid and distribution network services are provided Ausgrid, Endeavour Energy and Essential Energy.

Wholesale electricity costs comprised approximately 32.4% of the representative market electricity offer in 2017-18, and are expected to account for a decreasing proportion of a residential electricity consumer's bill from 2018-19 to 2020-21.

The chart below shows the expected trends in supply chain components in New South Wales from 2017-18 to 2020-21.

The electricity prices and bills are based on a weighted average of retailer's lowest market offers for the representative consumer in New South Wales.

The expected decrease in residential market offer electricity prices from 2018-19 and 2020-21 is largely attributable to a decrease in the wholesale cost component.

In 2017-18, a representative consumer on a residential standing offer​using 4,215 kWh each year had an annual bill of $1,578 exclusive of GST.

In 2017-18, a residential electricity market offer​bill in New South Wales was approximately $1,290 exclusive of GST. This is made up of a:

Power prices are estimated to fall in NSW over the next two years in response to rising renewable generation capacity. Representative consumers could be paying around $27 less by July 2020 than they are today. And this year consumers who are still on standing offers could save $293 by switching to the best competitive market offer available.

As at March 2018, 68% of ACT small customers are on a standing offer and therefore the representative consumer is on a standing offer.​ A detailed explanation of the pricing methodology is set out in the 2018 Residential Electricity Price Trends Methodology report.

This report uses the most common type of residential electricity consumer (the representative consumer) to analyse residential electricity prices, annual bills and the cost components of a bill. In the ACT the representative consumer:

The increase in environmental costs is primarily driven by increasing ACT FiT scheme costs, ​and to a lesser extent by the Commonwealth RET schemes.

In 2017-18, environmental schemes comprised 13.9% of the representative standing offer and are expected to comprise an increasing proportion of a representative consumer's electricity bill from 2018-19 to 2020-21.

Regulated network costs comprised approximately 30.3% of the representative standing electricity offer in 2017-18, and is expected to account for an increasing proportion of a residential electricity consumer's bill from 2018-19 to 2020-21.

In the ACT, transmission network services are provided by Transgrid and distribution network services are provided EvoEnergy.

Wholesale electricity costs comprised approximately 42% of the representative standing electricity offer in 2017-18, and is expected to account for a decreasing proportion of a residential electricity consumer's bill from 2018-19 to 2020-21.

The chart below shows the expected trends in supply chain components in the ACT from 2017-18 to 2020-21.

The expected increase in residential standing offer electricity bills from 2018-19 to 2020-21 is driven by increasing network costs and environmental costs.

In 2017-18, the representative consumer on a market offer​had an annual bill of $1,548 exclusive of GST.

In 2017-18, the residential electricity standing offer​bill in the ACT was approximately $1,693 excluding GST. This is made up of a:

Power prices are estimated to rise slightly in the ACT by $87 over the next two years because of rising environmental scheme costs and network costs. 68% of residential electricity consumers are still on standing offers. If they have not shopped around they’re missing out on current savings of $286 between the best competitive market offer and the lowest standing offer.

A detailed explanation of the pricing methodology is set out in the 2018 Residential Electricity Price Trends Methodology Report .

As a result, the trends in the national summary most closely reflect the cost trends in the most populous jurisdictions. This also means that the national summary is more representative of trends in the National Electricity Market (NEM) that covers the eastern states.

In order to calculate the national weighted average consumption level and national weighted average prices, the representative consumption level and the estimate of prices used for each jurisdiction has been weighted by the number of residential connections in each jurisdiction. The national weighted average consumption is 4,596 kWh of electricity per year.

As the national numbers are an average of jurisdictional results that are, in some cases, already averages of multiple different network regions, the prices and costs are indicative only and may not reflect the actual costs faced by residential consumers.

The terms of reference for the review require the calculation of indicative national prices and cost components.

Environmental policy costs comprised approximately 6% of the representative national average electricity bill in 2017-18, and are expected to account for an increasing proportion of a residential electricity consumer's bill from 2017-18 to 2020-21.

The environmental policy costs that are relevant for the national summary from 2017-18 to 2020-21 are environmental schemes which have a direct cost that can be included on a customer's retail bill. This includes costs associated with the Commonwealth Government's Renewable Energy Target (RET) , jurisdictional feed-in-tariff (FiT) schemes and jurisdictional energy efficiency schemes.

Regulated network costs comprised approximately 44% of the representative national average electricity bill in 2017-18, and are expected to account for an increasing proportion of a residential electricity consumer's bill from 2017-18 to 2020-21.

Wholesale electricity costs comprised approximately 39% of the representative national average electricity bill in 2017-18, and are expected to account for a decreasing proportion of a residential consumer's bill from 2017-18 to 2020-21.

The below chart shows the expected trends in national supply chain components from 2017-18 to 2020-21.

The expected decrease in residential electricity prices from 2018-19 to 2020-21 are largely attributable to decreases in the wholesale cost component.

In 2017-18, the national weighted average electricity bill for the representative consumer was approximately $1,384 exclusive of GST. This was made up of a:

A detailed explanation of the pricing methodology is set out in the 2018 Residential Electricity Price Trends Methodology Report.

As a result, the trends in the national summary most closely reflect the cost trends in the most populous jurisdictions. This also means that the national summary is more representative of trends in the National Electricity Market (NEM) that covers the eastern states.

In order to calculate the national weighted average consumption level and national weighted average prices, the representative consumption level and the estimate of prices used for each jurisdiction has been weighted by the number of residential connections in each jurisdiction. The national weighted average consumption is 4,596 kWh of electricity per year.

As the national numbers are an average of jurisdictional results that are, in some cases, already averages of multiple different network regions, the prices and costs are indicative only and may not reflect the actual costs faced by residential consumers.

The terms of reference for this review require the calculation of indicative national prices and cost components.

In this section you can view a breakdown of the overall electricity cost components at a national and jurisdictional level. Select the area that you are interested in below, and choose to view via bills ($/year) or prices (c/kWh):

New South Wales, the ACT, Victoria and South Australia have jurisdictionally specific energy efficiency schemes which have a direct impact on residential electricity bills. Energy efficiency schemes comprise between 0.6 and 1.8 per cent of a representative residential consumer's electricity bill. These schemes are expected to be generally flat over the reporting period and therefore do not have a significant effect on trends in customers' annual bills.

Victoria and South Australia also have jurisdictionally specific FiT schemes which have a direct impact on residential electricity bills in this report. In 2017-18, these schemes comprise between 1.2 and 2.8 per cent of a representative residential consumer's electricity bill. These FiT schemes, other than the ACT FiT scheme, are expected to be generally flat over the reporting period and therefore do not have a significant effect on trends in customers' annual bills.

The cost of the ACT feed-in-tariffs (FiT) scheme are expected to increase from 2018-19 to 2020-21 due to expected increase​ in FiT payments for large-scale generators.​ These support payments are based on a reverse auction process. The ACT FiT schemes result in new renewable generation that is likely to have similar effects on wholesale electricity prices and the wholesale electricity contract market as the LRET.​

SRES costs are estimated to increase in all jurisdictions from 2017-18 to 2020-21. This is driven by:

Under the small-scale renewable energy scheme (SRES) , consumers are able to sell renewable energy certificates that are generated by small scale renewable systems. Liable entities (usually retailers) are required to buy and surrender the certificates, and these costs are passed on to consumers in their bills.​

The large-scale renewable energy target (LRET) supports the installation of large-scale renewable generators, such as wind and solar farms and is part of the national renewable energy target (RET). LRET costs:

Environmental costs in 2017-18 represented approximately 3-14% of a typical residential electricity bill depending on the jurisdiction. They were 14% in the ACT due to the cost of the ACT FiT schemes.

* Note: For Victoria this represents calendar year, for all other states, financial year.

Commonwealth and jurisdictional governments have introduced a number of schemes that affect residential electricity prices. These include the renewable energy target (RET) , feed-in-tariff (FiT) schemes and energy efficiency schemes.

Environmental schemes have been introduced by Commonwealth and jurisdictional governments to encourage investment in renewable generation and improve energy efficiency.

The network charges used in this report are based on regulatory decisions made by the AER and the ERA . The decisions are made at different times because network service provider businesses' (NSP) regulatory control periods are not aligned.

On average from 2018-19 to 2020-21, the regulated network cost of a representative consumer's annual electricity bill is expected to:

Network charges in 2017-18 represented approximately 30-50% of a typical residential electricity bill for a consumer, across all jurisdictions. Of this, the transmission cost represented 4-12%, the distribution cost represented 23-40% and metering costs represented 2-6%.

* Note: For Victoria this represents calendar year, for all other states, financial year.

Network tariffs are the prices that electricity distribution network businesses charge retailers for their customers' use of the electricity network. These tariffs include:

As networks are natural monopolies, there is no competition for network services, so network service providers (NSPs) are economically regulated. In National Electricity Market (NEM) jurisdictions and the Northern Territory, NSPs are regulated by the Australian Energy Regulator (AER) , and in Western Australia they are regulated by the Economic Regulation Authority (ERA) . The AER and the ERA use incentive-based regulation frameworks to encourage efficient investment in and operation of the electricity network by NSPs.

Regulated network costs are the largest component of residential customers' bills, reflecting the fact that distribution and transmission networks involve large capital intensive investments.

Wholesale costs, wholesale price volatility and the wholesale contract market continue to be affected by environmental policy, with increased levels of intermittent generation, incentivised by the large-scale renewable energy target (LRET) . As sufficient renewable generation is committed or expected to be built to meet the LRET target for 2020, the price of large-scale generation certificates (LGCs) is expected to fall significantly and as a result the LRET is not expected to provide an incentive for additional renewable investment after 2020.

In the WEM in Western Australia, wholesale costs are estimated to increase throughout the reporting period. This is due to increasing gas and coal prices.

The 9,732 MW of new generation and battery storage that is expected to enter the NEM over the analysis period is comprised of:

From 2018-19 to 2020-21, wholesale costs are expected to decrease in all NEM jurisdictions and the Northern Territory. In NEM jurisdictions, forecast electricity demand is relatively flat, so the decreasing trend is driven by changes in the supply of electricity:

* Note: For Victoria this represents calendar year, for all other states, financial year.

Wholesale electricity market costs in 2017-18 represented approximately 33-45% of a typical residential electricity bill for a consumer in the National Electricty Market (NEM), and 40% in Western Australia’s Wholesale Electricity Market (WEM).

Networks already account for around half of consumer bills and managing the costs of connecting new generation will be a major challenge. We must have appropriate checks and balances in place to avoid network solutions that leave customers paying more than necessary.

The changing generation mix is affecting the amount and type of investment needed right across the power system.

The small-scale renewable energy scheme (SRES) is driving upward pressure on prices nationally in response to strong growth in take-up of solar PV and other technologies like solar hot water, small scale wind systems and source heat pumps.

Direct costs associated with the large-scale renewable energy target (LRET) are expected to decrease over the next two years as the LRET target for 2020 is expected to be met through the large volume of new renewables. As a result the price of large-scale generation certificates is expected to fall significantly in coming years.

Demand is relatively flat so wholesale costs are being driven lower by increased supply from renewables.

The single biggest driver of price in the next two years will be structural change in the wholesale generation sector.

* Note: For Victoria this represents calendar year, for all other states, financial year.

Customer bills should be read in conjunction with pricing and usage data. For example a Tasmanian representative consumers’ consumption is more than double that of the representative consumer in Victoria (who is also connected to gas). So even though the price in Tasmania is lower than in Victoria, the annual bill is higher given the higher consumption level.

Prices are driven by the underlying cost components involved in delivering electricity to Australian homes and businesses. Bills are the final price paid by households. A customer’s bill will depend on the price of electricity in that state or territory, how much power is used and when. Every household is different.

Electricity prices and electricity bills vary in each state and territory but looking at either prices or bills in isolation can be misleading.

* Note: For Victoria this represents calendar year, for all other states, financial year.

All states in the national electricity market, that is South Australia, Victoria, Tasmania, New South Wales and south east Queensland are expected to see falling electricity prices. We estimate slight rises for Western Australia, Australian Capital Territory and the Northern Territory where prices are either regulated or set by governments.

The single biggest driver of price in the next two years will be structural change in the wholesale generation sector. New wind and solar capacity will drive the typical wholesale component cost down by $55 - offsetting small increases in other parts of the supply chain, with network costs flat and the environmental cost component up by $4.

Residential electricity prices are estimated to fall slightly over the next two years. Overall, a representative consumer will be paying around $28 less than today by July 2020 with the national average representative bill falling from $1367 to $1338.

About us and the electricity price trends report

Now in its ninth year, the AEMC price trends report is provided at the request of the Council of Australian Governments Energy Council.

It is a core document used to inform a range of stakeholders including jurisdictional governments, the Australian Energy Market Operator the International Energy Agency and the Reserve Bank of Australia.

This year’s report covers the period from 2017/18 to 2020/21. It focuses on the drivers of household bills across the three key parts of the electricity supply chain – wholesale (generation); regulated networks (transmission and distribution); and environmental (government policy schemes). A residual applies in most jurisdictions. The residual is the difference between bill outcomes and these three key cost components.

Price trends will affect individual households differently depending on how much each consumer uses electricity, and how willing they are to switch to a better energy deal where market offers are available. No two households use energy in the same way. Knowing how much power you use and when is important in controlling electricity bills in the future as new technologies become more affordable and energy entrepreneurs expand demand response options for consumers.

Price trends identified in this report are not a forecast of actual prices, but rather are a guide to pricing and bill directions based on current expectations, policy and legislation. Actual price movements will be influenced by how retailers compete, the dynamics of wholesale spot and contract markets, the outcomes of network regulatory decisions, and changes in policy and regulation.

The prices presented in this report are specific to the representative consumer. The representative consumer is different for each jurisdiction and is determined using a representative annual consumption level either calculated from benchmark values published by the Australian Energy Regulator (AER) or provided to the Australian Energy Market Commission (AEMC) by state and territory governments.

This year’s report has changed the method used to calculate wholesale electricity purchase costs. A detailed explanation of the pricing methodology is set out in the 2018 Residential Electricity Price Trends Methodology Report.

The AEMC

The AEMC is the rule maker for electricity and gas markets, and is a key advisor to the COAG Energy Council and its Energy Security Board.

The AEMC is very focused on least-cost solutions. We are putting structures in place that enable consumers to take control of their energy usage and bills, bearing in mind that the more costs you put into the system, the more burden there is on consumers.

Energy is one of the most important cost inputs to the Australian economy. High energy prices directly impact many parts of our economy, particularly retail and small business.

Our intention is to put the right settings in place so consumers can choose how much they want to engage with the energy market, without putting cost burdens on households and the economy that could be easily avoided with better planning and more efficient practices.