How Power Prices are Completely Changing on July 1

From July 1, power prices in Australia will never be the same again.

The years of discounts as big as 45% in some states, and prices that are some of the biggest in the world, are over.

That’s because the federal government has acted to introduce a new ‘Default Market Offer’, or benchmark bill, for your electricity.

This change will affect millions of Aussies in the switching areas of SEQLD, NSW, and South Australia. And they may yet be copied in Victoria.

THE WINNERS

From July, anyone who doesn’t shop around will be put on this benchmark bill, which would reduce their current annual bills by $115 to $218, depending on where you live.

That’s great news for these people, who make up about 20% of the population in states where you can switch providers.

It’s also great for small business customers who don’t shop around and will save between $453 and $937 for an average business, depending on which state they are in (although why you’d own a small business and not spend some time keeping your bills down, I don’t know!).

But here’s the catch: the new default offer might mean the end of big pay-on-time discounts.

THE LOSERS

In other words, those who DO shop around could pay more in future than they do now.

That’s because currently, those who don’t shop around pay top dollar and they basically cross-subsidise the big discounts for those who hunt down the cheapest plans.

The AEMC and power companies have warned that this could be an unintended consequence of the reforms, which are similar to new rules in the UK.

There, the changes have also driven some smaller retailers out of business.

THE VERDICT

If you’re an on-time payer and you want to lock in a big pay-on-time discount for at least the next year, now’s the time to do it.

And if you’re a do-nothing sort of person, sit tight and wait for your price to drop on July 1 - but note that it still won’t be as cheap as if you shopped around for a market offer.