With rising energy prices, is it worth switching to a flat rate?
Earlier this month I received an email from my electrical retailer.
My bill was about to increase dramatically, thanks to a 76% increase in usage and a 26% increase in daily provisioning charges.
After a frantic search for a better deal, I found a retailer in Victoria offering similar rates to what I was already paying. Best of all, rates have been locked in until August 2023.
With rising energy prices, you may also be wondering if it’s worth switching to a flat rate energy package.
We asked Energy Consumers Australia Managing Director Lynne Gallagher about the pros and cons of fixed-price energy plans.
“Like setting the interest rate on a home loan”
Fixed-price plans give you certainty about your energy bills, but there’s a risk you’ll end up paying more.
“Fixing your energy rate is a bit like setting the interest rate on a home loan,” says Gallagher.
“There is no one answer to this as everyone’s circumstances will be different.
“The Australian Energy Regulator’s first quarter 2022 data indicates that all regions have seen increases in wholesale electricity prices and price increases are expected to persist in the Queensland and New Wales regions. of the South between 2022 and 2024.
“We have yet to see how the events of the past month, such as the market suspension and the administered price cap, will further impact wholesale power prices in the second quarter.”
The main advantage is certainty. In my case, I now know that my energy rates won’t go up until next August.
But you can end up paying more over the term of the contract by opting for a fixed rate plan.
“You will need to consider a number of factors… [including] the likelihood that energy prices will change in the future or if there is an exit fee for switching plans before the end of the contract,” says Gallagher.
The rules regarding price increases
The rules for energy price increases depend on where you live.
In Victoria, for example, retailers can generally only raise prices once a year, usually on August 1.
In other parts of Australia, retailers are allowed to change prices more frequently. For example, you can subscribe to a 12-month energy supply and have your prices increased before the end of the 12-month period.
Your retailer must provide notice when changing prices. In most states and territories, the minimum notice period is five business days.
If you have a fixed-price contract, keep in mind that your retailer cannot increase prices before your contract expires.
Why it is important to check the reference price
When my retailer contacted me about their price changes, I was told that the new tariffs would be 26% more expensive than the “benchmark price”, the base energy price that all retailers must offer to their customers.
If you receive a similar notice from your retailer, that’s a good incentive to shop around.
At a minimum, you can ask your current reseller to offer you a package at the reference price.
“You can always choose the reference price (in Victoria this may be called the Victorian default bid) which is set by the Australian energy regulator or the Essential Services Commission,” says Ms Gallagher.
“This is available at all retailers.”
That said, there are usually deals available below the listing price, which is why it’s worth shopping around.
How to check if you’re getting a good deal on energy
- People living in New South Wales, Queensland, South Australia, Tasmania or the ACT can use the Federal Government’s Energy Made Easy website, which covers all plans in the market.
- If you live in Victoria, there is a separate service run by the state government, Victorian Energy Compare. The state government is currently offering a one-time payment of $250 to households that use the service.
- Western Australia and the Northern Territory are not part of the National Energy Market, meaning customers cannot upgrade to better deals.
When comparing offers, Ms Gallagher says it’s important to look for:
- Use rate: the price you pay for energy.
- Supply costs: this is the amount billed to you per day for the energy to be supplied to your household.
- The price: a single tariff means that you will be charged the same amount for electricity at all times of the day; a time-of-use tariff means that you will be charged different amounts for your energy depending on the time of day.
These details will be available through government comparison services or the retailer’s website. You can also check your bill to see what you’ve already paid.
Finally, it is important to check if you will have to pay a fee to change your current plan.
Where you can get help
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