Several recommendations from the Australian Competition and Consumer Commission’s (ACCC) retail electricity pricing inquiry are being implemented, with reforms to lessen electricity prices for over half a million Australian consumers.
The ACCC found in its retail electricity pricing inquiry that current discounting practices confuse consumers, as high headline discounts do not always result in lower electricity prices. For example, one offer available in the market with a 35 per cent discount cost the average customer $887 more per year than another offer that had no discount.
“The proposed ‘default’ price would replace the current ‘standing offers’ and ensure that consumers are not paying excessive prices. Retailers should have addressed this problem themselves some time ago but, given they chose not to, it is appropriate for government to act,” ACCC Chair, Rod Sims, said.
“Requiring energy providers to advertise any discounts against this ‘default’ price will make it easier for consumers to choose between competing offers. This will enhance competition, and help more consumers to save money on their electricity bills.”
The default price would save average residential customers on standing offers between $115 and $218 a year and small business customers between $453 and $937 a year (depending on the type of tariff) in NSW, south-east Queensland and South Australia, where prices are not regulated.
“Conditional discounts, such as pay-on-time discounts, have escalated beyond reasonable levels and expose consumers to substantial extra costs if they don’t pay their bill on time. The reform will make retailers’ offers fairer and more comparable, and stop retailers charging what in effect can become significant late payment penalties which aren’t linked to savings they make when consumers pay on time,” Mr Sims said.
“A typical NSW household on a 40 per cent pay on time discount currently stands to lose $987 off their advertised offer if they pay late, which is completely inappropriate. Forcing conditional discounts to be cost-based should see these lost savings substantially reduce.”
The proposals to reform advertising cover about 80 per cent of residential and small businesses, but exclude customers on solar offers and embedded networks.
“The proposed industry code will introduce much needed changes to retail competition and affordability. This is a significant step in implementing our recommendations,” Mr Sims said.
Similar reforms have been recently introduced by the Victorian Government, which appear broadly in line with the ACCC’s recommendations.