Explainer: Why is the price you pay for electricity increasing?

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If you’re reading this, chances are you’ve received an email from us telling you the price you pay for electricity in Victoria is increasing. We know that isn’t great news, so we’ve put together this information to help you understand why it’s happening.

Hazelwood Power Station closure

The recent announcement of the closure of the Hazelwood Power Station (Hazelwood) has had a significant impact on forward wholesale electricity prices, causing them to increase (and in turn, the price you pay for electricity is increasing).

This is the most significant change in the Victorian electricity market since privatisation in the late 1990s. Hazelwood is the lowest cost generator in the entire National Electricity Market (NEM), and the dirtiest, producing about 10.3 TWh of electricity per year.

The withdrawal of Hazelwood’s 1,600 MW generating capacity will change the dispatched energy outcomes across the whole NEM. Currently, we don’t know exactly how the closure will impact the spot electricity market and we probably won’t know until around April 2017.

It’s expected that the loss of supply of electricity from the closure will be made up from both Victorian and interstate generation sources. The impact of sourcing energy from interstate will likely cause the Victorian wholesale price to move toward that of NSW, because the new energy will come from higher-priced sources, such as black coal, gas and hydro.

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What does this mean for you?

For electricity consumers in Victoria this means that what you pay for electricity is going up, and it’s most likely going to be the same across the industry no matter which retailer you’re with.

The reality is, wholesale energy costs are a major component of what customers pay, so when they increase, unfortunately we have to pass that on to our customers. We will always limit the impact as much as we can, and we pride ourselves on remaining one of the most competitively priced retailers in NSW and VIC.

You can see below how this price change is likely to affect different sized households.

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It’s not all bad!

If you have solar at your home or business, you’ll now receive 8.2c/kWh from Powershop for the power you generate.

We’re paying more for electricity from the wholesale market, so we’re paying you more for your solar generation.

Plus, our online tools can help you get the most out of your solar. Head here and here to find out more.

41 thoughts on “Explainer: Why is the price you pay for electricity increasing?

    1. Powershop Post author

      Hey Jeremy, we know that sounds a little strange, however the announcement of the closure of Hazelwood caused the wholesale price to increase. If you take a look at the graph in the post, you can see where the wholesale cost jumped coincided with the announcement of the closure. Cheers, Lauren

      Reply
      1. Hazel Knight

        Please tell me what you are paying me at the moment before price changing for my solar feedback to the grid Cheers Hazel

        Reply
      2. Steven Coulter

        Hi, sorry but your graph movement doesn’t actually explain why we will pay more. The news and increase seems like just a great excuse to hike prices. For a start we should all be happy that the ancient polluter is closing although are we still in the ‘dark’ with Engie’s future plans? More importantly we want to know if our extra costs will go the the possible creation of more ‘Victorian’ green projects like solar or wind, and what you will do to influence government to do so? thanks, Steve.

        Reply
  1. Eric

    You’d think that the politicians would have arranged for alternative sources of power to be in place before closing Hazelwood. Yet another stupid Government decision causing price increases for consumers.

    Reply
  2. John

    By my rough calculations 15 % more for peak and a staggering 30% more for off peak, hard to believe its justified.

    Why is the off-peak hike so much more …

    Reply
  3. Lorraine Leach

    The closure of Hazelwood has been forecast for years. Failure of successive governments to plan for its closure is the problem – ditto the power suppliers.
    Excessive infrastructure padding by power companies and their use of this ploy to demand the costs be passed on to consumers is also a major reason for the price rise.
    Even worse is the likelihood that much of this excessive infrastructure will never be used as new technology will make it obsolete.
    It’s a dirty business all round!

    Reply
  4. John

    I find your prices incredibly confusing and vague. This is one more example of the same. Why don’t you simply say how much prices will increase by per kWh?

    Reply
    1. Powershop Post author

      Thanks for the feedback, John – the exact percentage of the price increase will vary depend on your usage and the distribution area you’re under that’s why we can’t give one definite number that’s applicable to all. Happy to look into what these changes mean for you and have a chat if you’ve any Qs – just let us know.

      Reply
  5. Ugly Chung

    There is no valid reason whatsoever for an increase in prices because of Hazelwood shut down. That is all bullshit. The electricity demand over all is falling & the advent of separate in house supply from renewables ids much closer than people think. This price increase is a rip off, ‘making hay while the sun shines’. I lived on wind & solar in Far North Queensland using RAPS system. Soon with new batteries coming out now we can all do that wherever we live. The lines (Poles & wires) will be largely or only for large commercial users, bigger factories.

    DO NOT PUT THE COST OF PHASING OUT FOSSIL FUELLED GENERATION ON US. YOU HAVE HAD MORE THAN YOUR FAIR SHARE ALREADY IN THE ELECTRICITY GENERATION INDUSTRY.

    Reply
  6. Stuart Tolliday

    You’ve stopped showing me the price I am paying when I buy power via my app so I suspect that is part of a strategy to hide the real cost increase. All my friends who are using Powershop have the same feeling. What are you hiding?

    Reply
  7. Dale

    Since signing up with Powershop I have always purchased the 100% renewable option., paying the extra cost. Hence I have not been buying power from the coal electricity market. Why should Hazlewood closing change the price I have to pay for wind energy? The whole point of paying this extra money is to support the development of wind energy and to signal to polluting energy providers that consumers want better. At this moment when Hazelwood closes, consumers should see that they have to pay a bit more for continuing with dirty power, or they can switch to green energy; but that premium should be narrowing., not being maintained. Something seems wrong with the economics here. Can you please explain further?

    Reply
    1. David Thomas

      Your system stripped the “less than” and “greater than” characters from my comment. The comment was meant to be:

      “In your table, above, I think the Usage Threshold for the low user should be LESS THAN 4000, not GREATER THAN 4000..

      Reply
  8. Steven

    The main reason I moved over to Powershop was to get renewable energy. If you put up you price because a coal power station closes, which shouldn’t even be one of your suppliers, it sends the message that the premium we Payne or renewable is not really related to the cost of production as it’s driven by demand from coal users.

    Reply
    1. Powershop Post author

      Hi Steven, appreciate your feedback and understand your perspective. Closure of hazelwood is great for the environment – there’s no doubt about that and we welcome the news but the announcement coincided with a significant jump in wholesale prices of electricity and we have many customers, both residential and business, who struggle to pay their power and other bills. Further power price increases are very unwelcome for them. The closure will lead to more renewable and other technologies that have the potential to lower prices in the future, but that doesn’t help the customer struggling to pay tomorrow. Hope this makes sense – happy to have a chat over the phone if you wish.

      Reply
    1. Powershop Post author

      Thanks for the feedback Darren. The c/kWh info is still available in the Rates section of the app. Your Base Rates are available there as well and remain the same through out the year (only change when we’re reviewing prices for everyone). Watch out for some improvements. Cheers!

      Reply
      1. Brian May

        “The c/kWh info is still available in the Rates section of the app.” – What do you mean by “app”? I don’t see anything like a “Rates section” in the Android App. Yes, I know I can get this information from the website, however you said “app” not “website” – hence I am somewhat confused what you were referring to.

        Reply
  9. Richard Schurmann

    I buy green power, as I have decided to pay extra so that I am not a contributor to brown coal burning. I expected to find a note in the announcement that of course the price of green power will not be going up. Is it? If it is, why? The price increase explanation offered so far does not include any arguments that would support a price increase in green power.
    Apart from leaving out these detail I seek, you are doing good work. Keep it up!
    Richard.

    Reply
  10. geraldine bagwell

    prefer previous pricing profile, new one more confusing, since usage shows kwh used, but powerpacks show what it would cost me per day – \I want to know a standard unit price. anyone else confused ?
    is it possible to convert my previous price bills/usage table to a flexible rate to see if it would be cheaper for me to switch\/

    Reply
    1. James

      Yes! Usage per day changes. At least with units you can forcast what not to use to make those Kwh last. To save you, the consumer, money of course. But this is not the case in everyday terms because people are still paying while they try to figure out what Powershop are doing. A spanner in the works I say, keep the people guessing.

      Reply
  11. Craig Beasy

    Quite frankly Jeremy Richardson, it is your snide comment about Powershop raising its prices ( according to the laws of supply/demand ) that are bogus & offensive. Granted, Powershop is a energy retailer just like Powerdirect, Origin Energy, AGL, . . . . the list is almost endless.

    However, Powershop are subject to the same competitive variances of their energy market retailer peers; they don’t just raise prices for the sheer point of making life miserable for its customers & to make obscene profits like other retailers who will remain nameless.

    I’ve had nothing but ” honest-to-goodness ” service provision by Powershop over the past 2 yrs. Admittedly, I do have a 5 Kw Solar system on my roof that saves me a huge bucket of hard earned every year + there’s also the FIT factor; so in a way, you are paying me for any surplus there-in being pumped into the Victorian State & National Grid; that’s if you don’t have or haven’t yet had installed on your home a similar system to mine.

    So please don’t muddy the waters unnecessarily, & do get a life!

    Reply
    1. Brian May

      The announcement didn’t make any immediate changes to supply (AFAIK Hazelwood is still supplying just as much power as before the announcement) and it didn’t make any changes to demand, hence I am still puzzled why it resulted in a immediate increase in price.

      Reply
      1. Powershop Post author

        Hi Brian, the announcement led to a significant spike in forward wholesale electricity prices which in turn led to the price rise. This spike can be attributed to sentiments in the market regarding uncertainty caused by Hazelwood’s closure in March. The immediate increase in price across most retailers was because customer prices are set on a 12 month period. Happy to have a chat over the phone if you’ve any Qs. Cheers, Adi

        Reply
  12. Gregorio

    As for me, pensionner, this is a very bad news.
    More and more we are suffering the squeeze.
    Ahh!!… What’s the point of complaining…anyway nobody listen….

    Reply
    1. Jeremy Richardson

      Complaint to your local member and Federal ministers are more valuable.

      As you say, no point complaining here. The employee is answering questions based on available info. Basically quoted from their website.

      The country is a sell out. Just look at who owns our power supply. Singaporean and Chinese companies with business brains.

      We are mere slaves to the top one percenters. Simple.

      Reply
  13. Claudia

    Why has my price per kWh increased significantly in November compared to October even though the packs I purchased were cheaper per unit than those in October? I have emailed about this a week ago but am still waiting for a response? I was a happy customer until now…

    Reply
    1. Powershop Post author

      Hi Claudia, looking into this right now. We were closed during the break hence the slight delay. Cheers, Adi

      Reply
  14. David

    And the power reduction from the closure of pt Henry smelter and the 65% reduction of the Portland smelter is how much power ?
    I must have missed the email on the price reduction as a result of that?

    Reply
    1. Powershop Post author

      Hi David, as you know the future of the smelter remains in the balance and we’re certainly not aware of any decision to close. We hope for the sake of the workers and the community that a positive outcome can be found. Cheers, Adi

      Reply
  15. Andy G

    Hi. The table showing Annual useage and the expected weekly increase does not seem to be linear. Surely the price increase is just reflected in the increased cost per kWhr – surely linear?

    Will power sourced from NSW reflect the increased transmission losses as well?

    Reply
    1. Powershop Post author

      Hi Andy, the increase isn’t leaner as the daily supply charge (fixed component of your rates) remains the same regardless of how much you use. If you want to know what the price change means for you – just let us know. Regarding your second Q, the increase in forward wholesale price reflects the reduction in supply. This may lead to some powerbeing importerd from NSW at times, but we expect increased investment in renewables to address this in time. Cheers, Adi

      Reply
    1. Powershop Post author

      Hi Graham, % increase varies depending on your personal usage and distribution area. We find this out for you if you share your details. Cheers!

      Reply

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