Fixed network charges carry hidden risks

25 February 2026 (IEEFA Australia): Proposals to increase the fixed component of electricity network tariffs could disproportionately impact households who have invested in energy efficiency upgrades, solar panels or batteries, as well as low-consuming households. 

The Australian Energy Market Commission (AEMC) has proposed a major shake-up to the structure of electricity network tariffs. Under current retail electricity plans, households typically pay a combination of a fixed daily charge and a usage-based (volumetric) charge. Network charges – the cost of poles and wires – make up around 39% of a typical electricity bill. The AEMC is proposing to shift a greater share of these costs into a fixed charge. 

However, analysis by the Institute for Energy Economics and Financial Analysis (IEEFA) has found that higher fixed network charges could raise bills for customers that consume less energy, and lower them for high-consuming customers. This could disproportionately impact low-income households, who tend to use less energy. Moreover it could weaken incentives for energy efficiency and largely wipe out the effect of federal battery rebates. 

IEEFA’s findings are presented in Network tariff shake-up could create more problems than it solves, a new briefing note by Jay Gordon, Energy Finance Analyst, Australian Electricity. 

Gordon said: “The AEMC's proposal is missing key information about how a shift to higher fixed network tariffs would work in practice. However, we believe it could lead to a range of negative consequences. Most notably, our modelling found homes that installed batteries under new rebates could see bills rise by between $5,800 and $11,500 over the battery's lifetime, which outweighs the rebate under the federal government’s incentive scheme. 

“The shift could also weaken the financial case for most other household energy upgrades. With longer payback times, households could be deterred from installing efficient electric appliances or rooftop solar. 

“Increasing fixed network charges could disproportionately impact low-consuming customers, including many low-income households, who may face increased network costs.”

What the modelling shows

IEEFA modelled the impact of its interpretation of the AEMC’s proposal across capital cities in the National Electricity Market (NEM), comparing existing retail tariffs as of February 2026 against a scenario where network costs are recovered entirely through a fixed charge, with no volumetric network component, shared equally across customers. IEEFA found:

• Low- and median-consuming households could pay more, while high-consuming households could pay less.
  If the proposal is implemented as we have assumed, most households could see higher fixed charges and lower per-kilowatt-hour (kWh) rates. This would lead to bill increases for homes with below-average electricity consumption (including the median household in most regions).
• Energy efficiency upgrades become less financially attractive.
  Higher fixed charges reduce the savings households achieve from lowering their electricity consumption. Payback periods for upgrading inefficient electric appliances to efficient appliances at their end of life could lengthen by 0.5 to 2.5 years.
• New efficient homes could face higher bills.
  In most capitals, newer, efficient, all-electric homes without solar would see higher electricity bills under predominantly fixed network tariffs. Homes with rooftop solar could see bill increases of $239–$564 annually.
• Solar and battery economics are significantly weakened.
  A household that installed a 10kWh battery in 2025 could pay an additional $5,800–$11,500 in electricity costs over the battery’s lifetime under predominantly fixed network tariffs. This would more than outweigh the estimated $3,300 rebate under the federal government’s Cheaper Home Batteries Program. Payback periods for new combined 8kW solar and 10kWh battery systems could increase by 1.2 to 4.4 years – in some cities effectively cancelling out any benefit of government incentives.
• Electrification would become only slightly more financially attractive
  By lowering the per-kilowatt-hour charge for electricity, it becomes more appealing to switch gas appliances to electric alternatives. However, our modelling found this effect was relatively minor – reducing end-of-life electrification paybacks by less than a year for a typical home (or less than 0.3 years for a home with rooftop solar).

Equity and design questions remain

The AEMC has provided limited detail on how “predominantly fixed” network tariffs would be implemented in practice. Nonetheless it argues the change is needed to address concerns that the rise of rooftop solar and batteries means infrastructure costs are not being shared fairly between households. IEEFA’s analysis suggests this is likely to bring a range of undesirable side effects. 

“Predominantly fixed network tariffs are a blunt instrument,” Gordon explains. “While they may increase network contributions from some solar and battery owners, they could also raise bills for low-consuming customers, such as households on low incomes, or that are still using gas, including renters who are unable to electrify. This raises significant implementation questions, which aren’t yet answered in the AEMC’s proposal.

“At the same time, shifting costs away from usage reduces incentives to cut peak demand, including through rooftop solar, batteries and energy efficiency upgrades. These are all measures that could bring system-wide benefits by reducing the amount of investment needed in new network assets.”

A need for broader reform

IEEFA’s analysis argues that the AEMC’s proposal would simply redistribute network costs between different customer groups through higher fixed charges. However, it fails to address the deeper fundamental questions about how such costs and risks should be borne by all actors in the electricity system – including both consumers and networks. 

IEEFA believes a first-principles review of electricity network economic regulation is needed to ensure network services are delivered as efficiently as possible and costs to consumers are minimised in a rapidly changing electricity market.

“Our electricity network economic regulations were designed before households had widespread access to rooftop solar and batteries,” says Gordon. “As more consumers start to rely on these technologies to meet some of their energy needs, and the potential for these technologies to support the broader grid becomes clearer, this raises questions about how costs and risks should be allocated between customers and networks.

"We are calling for an independent review of electricity network economic regulation because we know changing tariffs alone cannot resolve these underlying issues.” 
 

Read the report: Network tariff shake-up could create more problems than it solves

Media contact: Amy Leiper, ph 0414 643 446, [email protected] 
Author contacts: Jay Gordon [email protected]
 

About IEEFA: The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends, and policies. The Institute's mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. (ieefa.org)