Australia to cut default electricity prices from July
Sydney (26 May)
The Australian Energy Regulator (AER) and Victorian Essential Services Commission (VESC) have reduced 2026-27 fiscal year electricity price caps for East Coast customers on default plans, largely because of reduced energy and environmental compliance costs.
Electricity prices for households on default plans in New South Wales, Southeast Queensland, and Victoria will slide by up to 7.2% (see table), depending on the region, AER and VESC announced on 25 May and 26 May, respectively.
But utilities in South Australia can raise default household electricity prices by 1.4% in 2026-27 because of a substantial increase in network costs, AER said. Residential network costs in the state are expected to rise by 8.6% in 2026-27 because of safety investments and new transmission costs, AER added.
Around 63% of Australian households were on electricity plans that are at least as cheap as default plans in 2025, according to the Australian Competition and Consumer Commission. But all retailers are required to offer customers default plans.
Electricity wholesale and environmental regulatory costs are expected to fall in every region regulated by AER and VESC.
Wholesale electricity contract prices for 2026-27 declined across the National Energy Market (NEM) over 2025 because of increased wind generation and battery storage, AER said. The US-Israeli war in Iran briefly increased 2026-27 contract prices, but they quickly returned to pre-conflict levels, AER added.
Electricity spot prices also declined across every NEM region in 2025-26. Prices averaged between A$51.49/MWh and A$77.90/MWh in July 2025 – May 2026, down from between A$86.84/MWh and A$128.16/MWh over the previous year, data from the Australian Energy Market Operator (AEMO) show.
AER expects environmental compliance costs to fall in 2026-27 because of the environmental credit prices. Many electricity retailers need to buy Large-scale Generation Certificates (LGCs) – equivalent to 1MWh of renewable generation – from utilities to meet legal climate obligations.
LGC spot prices have collapsed over the last year because of increased renewable supply. They traded at A$2.90 on 31 March 2026, down from A$22.50 a year earlier, according to Australia’s Clean Energy Regulator (CER).
LGC supply exceeded demand by 25 million certificates in February 2026, CER data show.
By Avinash Govind