Oct 26 2023

Consumer affordability trends in the retail energy market

The Australian Energy Regulator's (AER) recent State of The Energy Market report highlights customer affordability trends in the retail electricity market, as well as market impacts from the increasing efficiency of homes and demand response technologies. The report also looks at hardship programs offered by retailers and other support available to consumers. We take a look.

Energy affordability

As the wider industry anticipated, the AER highlights increases in customer bills across all regions in the report. Given the differing local conditions in each state across the NEM (where the customer lives, type of generation in the market, retailer competition in their area), affordability challenges are not split evenly across all consumer types. In particular, the report notes that higher wholesale prices resulting from the June 2022 energy crisis and sustained high prices throughout the September quarter contributed to higher customer bills. The report also notes that regional electricity networks have higher ‘per customer’ costs as a result of the increased costs of operating geographically longer networks in less densely populated areas when compared with networks in metropolitan areas.

Impacts of energy efficient homes

The report highlights the thermal deficiency of older homes compared with new homes built to the recently introduced 7 star standard. Consumers living in older homes are likely to record higher electricity consumption and face additional costs to retrofit their property with energy efficient appliances and installations such as double-glazed windows.

Consumers living in older, less energy-efficient homes could be spending significantly more on their energy use according to the Race for 2030 H2: Opportunity Assessment Enhancing home thermal efficiency Final Report May 2023, which notes that retrofitting an existing Australian home and reducing home energy use by up to 9,000 kilowatt hours (kWh) per year could reduce an average home energy bill by up to $1,600 per year. Note this maximum figure factors in the installation of solar PV.

The AER has partnered with a number of institutions under the RACE for 2030 program, who have undertaken research into energy efficiency dividends as a result of upgrading a detached four bedroom home with 202 square meters of useable living area. We have provided an extract from their research in the form of a table below.

Table 1 – reductions in energy use for upgraded homes compared to baseline

Annual Energy use (kWh)


New South Wales

Western Australia





Upgrade 1 – Improved roof, wall and floor insulation, pipe lagging and draught sealing

8,734 (31% reduction)

7,918 (18% reduction)

7,603 (23% reduction)

Upgrade 1 + upgrade 2 – addition of ceiling fans, reverse cycle air conditioners and double-glazed windows

7,298 (42% reduction)

7,815 (19% reduction)

7,215 (27% reduction)

Upgrade 1 + upgrade 3 – efficient appliances, LED lighting and a clothesline to reduce the need for a dryer

5,210 (59% reduction)

3,476 (64% reduction)

3,577 (64% reduction)

Upgrade 1 + upgrade 4 – addition of solar PV and a hot water heat pump

2,169 (83% reduction)

669 (93% reduction)

710 (93% reduction)

All upgrades

103 (99% reduction)

0 (100% reduction)

4 (99% reduction)

Source: DISER, Race for 2030, Pathways to scale: Retrofitting One million Plus Homes

As research has shown in the past, having the resources and autonomy to modify energy usage (for example, owning your home and having the financial capacity to pay for upgrades) is a key factor in determining what action consumers will take.

The AER report notes that there is a correlation between consumers not having the ability to install energy saving or self-generating technology (solar panels) – generally because they live in an apartment or don’t own their home – makes them more likely to have high energy bills and in turn more likely to experience financial hardship. The report also notes that smart appliances may be out of reach for consumers facing hardship given upfront costs can be high. Most jurisdictions have or have had programs in place to support consumers to upgrade their appliances; Victoria, New South Wales, Queensland, South Australia, and Tasmania.

Assisting customers in energy debt

Energy retailers have a number of programs available to support customers who may be experiencing difficulty paying their energy bills. These programs were particularly important during the COVID-19 pandemic, and again in the past 12 months as energy costs increased across the NEM. Since 30 June 2022, overall customer energy debt has increased by 11 per cent across the NEM. The largest increases were recorded in the ACT (25 per cent) and Tasmania (21 per cent). The report highlights Queensland as the only region with a decrease in consumer energy debt, but also provides causation:

“Queensland was the only region with a decrease in customers in energy debt (–7 per cent). This is likely due to the Queensland Government’s $175 energy bill rebate from 1 August 2022 and relatively stable prices for customers on the highly regulated Ergon Energy network.”

It will be interesting to assess the impact of state and federal governments’ Energy Bill Relief programs to see if a similar outcome is recorded across the NEM.

Figure 1: Residential customers in energy debt

Source: AER, Quarterly retail performance report, Q3 2022–23, June 2023.

Figure one shows recent trends in customer debt across the NEM. While debt levels have increased, the report notes that there has been a 28 per cent decrease in debt levels on entry to hardship programs, meaning customers are getting help sooner compared with the previous year.

While retailers have a range of relevant regulatory obligations to support customers, their hardship programs go over and above their obligations to help customers in payment difficulty or at risk of payment difficulty. Retailers take their role as providers of essential services very seriously and the intensive monitoring and reporting of their obligations illustrates this. Their willingness to invest further in supporting customers in need is a sign of their broader customer commitment. The AEC looked at these programs in detail in an earlier EnergyInsider.

While prices remain higher year on year, the report notes that positive consumer sentiment has continued to lift since 2021. Findings from Race for 2030’s research provide encouraging signs for consumers and the market that energy savings are possible through investment in greater home efficiency. The AEC will continue to support robust programs that support lower income consumers to upgrade inefficient appliances and other cost-saving measures.

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