Energy bills set to rise again after sharp increase in cost of maintaining and upgrading networks

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Energy bills set to rise again after sharp increase in cost of maintaining and upgrading networks

*********** households and small businesses are set to pay more for electricity from July 1, as the energy regulator confirms price hikes driven by a sharp escalation in the cost of maintaining and upgrading the nation’s power networks.

The *********** Energy Regulator benchmark prices for electricity customers in New South Wales, South East Queensland and South Australia will rise between 0.5 per cent and 9.7 per cent, depending on their region.

NSW customers will bear the brunt, with average household price rises of 8.3 to 9.7 per cent, driven primarily by higher wholesale electricity contract costs. NSW small business customers across the east coast will see increases of up to 8.5 per cent.

The other jurisdictions under the Default Market Offer would not be a heavily affected, with price rises of 0.5 to 3.7 per cent in South East Queensland and 2.3 to 3.2 per cent in South Australia, with small business customers facing rises of up to between 0.8 per cent to 3.5 per cent.

AER chair Clare Savage described it as a “difficult decision” amid persistent cost-of-living pressures.

“Sustained pressures across almost all components of the DMO (Default Market Offer) have driven these price rises,” Ms Savage said, citing wholesale and network increases of up to 11 per cent and retail cost rises of up to 35 per cent in the past year.

Ms Savage urged consumers to shop around, noting that 90 to 95 per cent of market offers remain below the DMO price, with discounts averaging between 18 and 27 per cent.

The bill hikes reflect a blowout in construction costs for the network, a deeper structural issue that will continue to put upward pressure on bills, according to the *********** Energy Market Operator’s Draft 2025 Electricity Network Options Report, released Friday.

The report shows the cost of building and maintaining the high-voltage transmission system has ballooned by up to 55 per cent since the last planning cycle, driven by supply chain constraints, workforce shortages, and the sheer scale and complexity of new projects.

“AEMO recognises that increases in costs for electricity transmission network development would impact bills for electricity consumers,” the report noted.

Even after accounting for inflation, the real costs of overhead line projects are up 25 to 55 per cent, while substation costs have climbed 10 to 35 per cent.

Distribution upgrades needed to accommodate growing rooftop solar and battery use are also proving expensive, with augmentation costs ranging from $730,000 to $2.4 million per megawatt depending on location.

For example, SA Power Networks faces average distribution upgrade costs of $1.6 million per megawatt, while Ausgrid in NSW is at the lower end at $730,000 per megawatt, according to AEMO.

The surge in infrastructure costs is expected to feed through to retail electricity bills in the coming years, particularly as the energy system adapts to electrification, more variable renewables, and consumer energy resources such as rooftop solar, electric vehicles and batteries.

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