Compare Electricity and Gas Prices NSW: How to Switch and Save

The wholesale cost of generating electricity makes up about 26 per cent of an average electricity bill. When the cost of wholesale electricity rises, the price is passed onto consumers so that energy retailers can remain profitable.

There are many reasons that wholesale electricity prices can rise, pushing up the NSW electricity prices per kWh:

• • Coal prices – with about 76% of the state’s electricity coming from coal-fired power stations, an increase in the price of coal can have a big impact on the cost of generating electricity. Unfortunately, coal prices are volatile. Recent impacts on the market include global distribution issues caused by COVID-19, local distribution issues caused by bushfires and flooding, and a supply shortage caused by sanctions placed on Russian coal following the war in Ukraine. 

• • Transition to renewables – although renewables are a more economic way to generate electricity, the transition from fossil fuels to renewables is causing a volatile electricity market.
    Several coal-fired power stations in NSW have closed ahead of schedule, leaving a supply deficit in the market, as renewables are not yet established enough to fill the gap.

    An example is the closure of Victoria’s Hazelwood Power Station in 2017, which saw wholesale prices rise 85% compared to 2016. In NSW, Origin’s Eraring Power Station, the biggest coal-fired power station in the country, will close in 2025, seven years ahead of schedule, with the remaining four stations also scheduled to close by 2043.

    These closures pose a risk to the capacity of the network to supply adequate power if enough renewable sources haven’t been established. These shortages could lead to skyrocketing electricity prices.

• • Network congestion – the transmission network in NSW was originally designed to connect to several large scale electricity generators. In recent years, these requirements have changed, as many small-scale renewable energy sources have connected to the grid.

    These generators, which are often located in remote areas to optimise solar or wind production, have new transmission needs, which is putting strain on the current network. This congestion leads to increased expenses to maintain and expand the network, which causes a rise in the cost of wholesale electricity.

  • Changes in demand – along with an increased demand for power following warm temperatures, heatwaves and return-to-work after the lockdowns, there has also been a shift in the way consumers manage their energy needs.

    Many homes and businesses are now small scale electricity suppliers, requiring the grid to move away from the traditional model of a few large generators to a more complex two-way system.
    These changes have caused local network challenges while the system transitions, which in turn leads to increased expenses that are passed on to customers.

Network costs account for up to 46% of your bill and vary depending on the transmission network costs. Customers living in rural areas pay more for distribution than metro customers, due to the increased cost of transporting electricity and maintaining the infrastructure including poles and wires.

In New South Wales, there are three distribution network areas. Customers in each different area pay a different rate for their electricity.

The cheaper distribution network is Ausgrid, powering the Sydney metropolitan area. Customers in the Ausgrid area pay up to $500 less than customers in the most expensive Essential Energy distribution zones of regional and country NSW.

Unfortunately, your distributor costs are determined by the area you live in, so NSW customers cannot shop around for distributors in the same way you can for retailers.

During times of peak electricity consumption, consumers pay more for their electricity usage. In NSW, peak demand periods are between 2 pm and 8 pm on weekdays in summer and 5 pm to 9 pm in winter. In recent years peak demand has grown due to population growth and an increase in technological use.

The amount you pay for your on-peak and off-peak electricity usage depends on the rate agreed in your plan. There are three types of Time of Use (ToU) tariffs:

• Single rate – the cost of electricity is the same at all times of the day and night, and every season.
• Time of Use – the cost of electricity is lower during off-peak periods. A smart meter is used to track how much electricity is used during different times.
• Controlled load – the cost of electricity is lower for certain high-usage appliances, such as hot water systems, swimming pools or underfloor heating. These appliances are tracked with a separate meter and are usually used during off-peak times.

The DMO is part of the Federal Government’s national energy legislation and rules that regulate the electricity industry. It was introduced in 2018, after a report by the ACCC found that the electricity market was disadvantageous to customers, with plans that were too complicated, making it too hard to compare electricity rates NSW.

The same report found that loyal customers were being exploited with non-discounted standing offers that were significantly more expensive than other plans, leaving them hundreds of dollars out of pocket each year. 

The DMO is an electricity reference price that is set by the Australian Energy Regulator (AER), rather than by retailers. It addresses both of the issues in order to protect residential and small business customers from price gouging and unaffordable energy prices. Retailers are now required to show all of their discounted plans as a percentage of the DMO price, to allow customers to clearly and fairly compare electricity providers NSW. The DMO is also the maximum price that retailers can charge for customers on their standing offer. 

The DMO price is reviewed every year, and an increase in the DMO will lead to an increase in your electricity bill.

You can read all about the DMO here.