Most energy users in Victoria have now received or are about to receive their price increase notices. This happens at the start of every calendar year and while some retailers will send you short letters about it, others will only add the notification as a note on your last bill. At Momentum we try to be as transparent as possible and have put together this article to help explain the all important question that is on everyone's minds: "Why the increases?"

The energy industry is a complex one, not only for end users. New regulations, revisions to legislated environmental targets and regulated pricing determinations come out and needs to be included in the overall energy price that your retailer charges you.

To better understand the annual price increases that occur each January it's important to look at what makes up the electricity bill. Generally, the energy rate (the cost of the energy that you use) makes up very little of your bill. A large component is network charges (transmission and distribution), which are passed on from your Network company, through the retailer, to you. For Victorian small business and residential customers, this usually makes up 40-45% of the energy bill and the amount charged by the Network companies is regulated by the Australian Energy Regulator. The continued rise of network pass-through charges has been linked to increased peak time demand of electricity, and the cost associated with maintaining and upgrading aging infrastructure. View a map of Victoria's network areas here.

Other charges that often increase on the bill in January are environmental scheme charges. These are a combination of State and Federal Government policies related to renewable energy and energy efficiency. These have experienced considerable increases in recent years and make up approximately 5-8% of total price.  They are varied usually on an annual basis by government authorities and your bill will reflect these changes.

For more information about the different pass-through charges and CPI increases, please see our Electricity Knowledge Centre.

What about the Carbon Tax?

The Carbon Tax will start July 2012. It is expected that the increase to residential energy bills will be a further 10%, based on a Carbon Price of $23 per ton. Unlike the other environmental schemes, the Carbon Tax is levied on the electricity generator (who makes electricity) based on the amount of Carbon they produce. This may impact the wholesale price of energy, whereas the other envrionmental pass-through charges are costs of complying with various targets imposed by the Government directly on retailers.

What can I do to reduce my energy bill?

If you're not in a contract, you are most susceptible to these changes. Any component of your bill can and does change across all retailers. Being in a contract with Momentum will ensure that at least your energy rate (the power you use) will stay fixed for the life of your contract. The other components that are known as 'pass-through charges' will continue to be passed through to the end user, as these costs are not controlled by the retailer.

Call Momentum on 1800 SWITCH to compare your rates and secure a good price for up to three years.