AEMC publishes its 2014 price trends report

The Australian Energy Market Commission (AEMC) has released its 2014 Residential Electricity Price Trends report. The report forecasts retail electricity prices for each Australian state and territory out to financial year 2016/17. Frontier (Australia) was engaged by the AEMC to conduct wholesale market modelling as well as assisting in building the tariff models for each jurisdiction.

Retail electricity prices are forecast to decline in real terms in most eastern states. This trend is mainly driven by suppressed wholesale electricity prices and the expected decline in network charges.

Frontier’s modelling shows that wholesale electricity prices in eastern states will remain low for the forecast period due to continuing decline in electricity demand. The removal of the carbon price also led to a one-off drop in electricity prices at the beginning of the financial year 2014/15.

In its recent draft determination, the Australian Energy Regulator (AER) has proposed a large reduction in allowed revenues for network businesses in New South Wales and Australian Capital Territory from financial year 2015/16. The AER has not yet announced its draft determination regarding Queensland and South Australia. Lower network charges will also contribute to lower final retail bills paid by customers.

The electricity market in Western Australia operates differently from the eastern states. Retail electricity prices in Western Australia are predicted to rise in financial years 2015/16 and 2016/17, which mainly reflects the budgetary outlook of the Western Australian government.

Frontier regularly advises clients on energy issues spanning wholesale, network, retail and regulation.
For more information, please contact Marita O’Keeffe on m.okeeffe@frontier-economics.com or phone +61 3 9620 4488.

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