It's almost two years since Australia's energy system was thrown into chaos by a perfect storm of problems.
Just a few months ago, on the back of news that wholesale power prices had fallen considerably in the final three months of 2023, there had been hopes that bills might tumble.The truth is that power prices were always likely to stay up.To understand why, it might be useful to know what goes into your bill and, by extension, what was driving the regulators' thinking.Behind the bill you receive every few months sits an entire supply chain.
The wholesale cost of power depends on a range of things, but good examples include the price of coal and gas, the availability of plants, or even just the weather.Take electricity customers who are part of the Energex network area in south-east Queensland. One way to do this is through what's known as the futures market, which predicts the cost of electricity at a future date.
The central bank could start cutting interest rates faster than the market expects, causing variable mortgage rates to tumble.It's a similar story for energy companies that might have locked in contracts when the wholesale market was going ballistic.This is the long tail of the energy crisis, and why we'll all be paying for it for some time yet.The million-dollar question in energy markets is whether prices will continue to fall and, if so, by how much.