Power Prices Expected to Drop Up to 10% from July — What It Means for Your Hot Water
— Northern Beaches Hot Water
Source: Australian Energy Regulator / The Guardian
The AER's draft decision means lower electricity bills for most NSW households from July. Here's what that means if you're running an electric hot water system — and why heat pumps still come out ahead.
The Australian Energy Regulator released their draft default market offer last week, and the headline is good news: electricity prices are expected to drop between 1.3% and 10.1% for residential customers from July 2026.
For NSW households on the Ausgrid network — which covers the Northern Beaches — the reduction could be meaningful. If you're paying $2,000 a year on electricity, even a 5% drop saves you $100. Not life-changing, but it adds up.
What This Means If You Have an Electric Hot Water System
Electric storage hot water is the most expensive system to run. It accounts for roughly 25-30% of your household electricity bill. So a 5-10% price drop does help — but you're still paying more per year than you would with any other system type.
At current rates, an electric storage system costs about $1,500 a year to run for a 3-4 person household. A 10% price drop brings that to about $1,350. Better, but still nearly three times what a heat pump costs.
Heat Pumps Still Win on Running Costs
A heat pump running on the same electricity network costs around $480 a year. Even with the price drop, an electric storage system costs roughly $870 more per year to run. Over 10 years, that's $8,700 — more than the cost of buying and installing a heat pump.
The reason is simple: a heat pump uses about a quarter of the electricity. It pulls heat from the air instead of generating it from scratch. Lower electricity prices make everything cheaper, but they don't change the efficiency ratio.
What About Gas?
This price drop is for electricity only. Gas prices are a separate market — and they haven't been going down. If anything, the gas connection fee alone ($280+ per year just to stay connected) makes gas less competitive every year. More councils across Sydney are phasing out gas in new developments, including North Sydney Council from July 2026.
If your hot water is the only reason you have gas connected, it's worth doing the maths on switching to a heat pump and eliminating the gas connection entirely.
The Bottom Line
Lower power prices are welcome, but they don't change the fundamentals. Heat pumps are still the cheapest system to run by a significant margin. If you're on electric storage, the price drop saves you a bit — but switching to a heat pump saves you a lot more.
We've got a running cost calculator on our site that lets you compare all system types with current rates. Worth a look if you're weighing up your options.
Want to know exactly how much you could save? Try our free Running Cost Calculator or call us on 0448 581 325 for a no-obligation chat about your options.