The Australian Competition and Consumer Commission (ACCC) has released its final Retail Electricity Pricing Inquiry report.
The Inquiry, which commenced in March 2017, began by identifying the root causes of high electricity prices across the entire electricity supply chain, and has now made 56 recommendations detailing ways to fix the National Electricity Market.
Sarah McNamara, Chief Executive of the Australian Energy Council, welcomed the inquiry’s findings.
“The energy industry acknowledges that consumers find the retail market confusing and that is why we have been working with regulators at both the state and federal level to make energy offers easier to understand,” she said.
“There are changes the energy sector can make to improve customer outcomes.
“The ACCC report indicates there are no simple solutions but that more steps can be taken to improve confidence in the energy market.” Ms McNamara said.
“The National Electricity Market is largely broken and needs to be reset. Previous approaches to policy, regulatory design and competition in this sector over at least the past decade have resulted in a serious electricity affordability problem for consumers and businesses,” ACCC Chair, Rod Sims, said.
“There are many reasons Australia has the electricity affordability issues we are now facing. Wholesale and retail markets are too concentrated. Regulation and poorly designed policy have added significant costs to electricity bills. Retailers’ marketing of discounts are inconsistent and confusing to consumers and have left many consumers on excessively high ‘standing’ offers.”
The ACCC estimates its recommendations, if adopted, will save the average household between 20 and 25 per cent on their electricity bill, or around $290-$415 per annum.
“It is clear that most households are paying far too much for electricity. In addition, some of the most vulnerable in our community are forced to struggle through freezing winters and scorching summers, with many others also having difficulty paying their bills,” Mr Sims said.
Further, Australia’s 2.2 million small to medium businesses could save an average of 24 per cent on their electricity bill, if the ACCC’s recommendations are adopted.
“Many small to medium businesses operate on very small margins, and cannot afford the increases to their costs that have occurred over past years,” Mr Sims said.
Commercial and industrial customers, the heaviest users, could see electricity costs decrease on average by 26 per cent.
“Commercial and industrial customers, like mining and manufacturing companies, have watched what has been a relative competitive advantage to them, affordable electricity, now threatening their viability,” Mr Sims said.
“While important steps have been taken recently, restoring electricity affordability will require wide ranging and comprehensive action. We believe our changes can and will, if adopted, have a powerful and tangible impact on electricity affordability for all Australians; this will reduce economic inequality and enhance our national welfare.”
“Three further points need to be made. First, our recommendations require some difficult decisions as sound economic reform usually does. Second, despite poor decisions over at least the past decade creating the current electricity affordability problem, it now falls to current Commonwealth and State Governments to make the difficult decisions to fix it. Third, we must move away from narrowly focused debates; addressing affordability requires change across a broad front,” Mr Sims said.
The ACCC’s recommendations include:
- Abolishing the current retail ‘standing’ offers (which are not the same between retailers), and replacing them with a new ‘default’ offer consistent across all retailers, set at a price determined by the Australian Energy Regulator (AER)
- Requiring retailers to reference any discounts to the new ‘default’ offer pricing determined by the AER, making it easier for consumers to genuinely compare offers. Conditional discounts, such as pay-on-time discounts, must not be included in any headline discount claim
- A mandatory code for comparator websites be introduced so that offers are recommended based on customer benefit, not commissions paid
- Voluntary write downs of network overinvestment, including by the NSW, Queensland and Tasmanian governments (or equivalent rebates). This could save consumers in NSW, Queensland and Tasmania at least $100 per year
- Premium solar feed-in-tariff schemes should be funded by State Governments and the small scale renewable energy scheme should be phased out, saving non-solar consumers $20-$90 per year
- Government support to make bankable new investment by new players in generation capacity to help commercial and industrial customers and drive competition.
- Restructuring of Queensland generators into three separately owned portfolios to improve competition
- Limiting companies with 20 per cent or more market share from acquiring more generation capacity
- Improving the transparency of over-the-counter contract trading by requiring reporting of these trades to a central registry
- Improving the AER’s powers to investigate and address problems in the market and increasing penalties for serious wrongdoing
For more on the final inquiry report, read about the Australian Energy Council’s response to the report and how ACCC recommendations could provide relief for energy consumers.