This week the ACCC released recommendations to significantly improve electricity affordability for Australian consumers and businesses.
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,” ACCC Chairman Rod Sims said.
The Retail Electricity Pricing Inquiry looked at the causes of high electricity prices across the entire electricity supply chain.
“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.”
“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.”
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, 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.
“The ACCC’s affordability measures for consumers also include improvements to state and territory concession schemes, and funding for organisations to assist vulnerable consumers to choose a low-priced electricity offer that suits their circumstances,” Mr Sims said.
“One of the most important recommendations is to move customers off excessively high ‘standing’ offers to a new standard ‘default’ offer to be independently set by the Australian Energy Regulator.” This could result in savings of $500 to $750 per annum (25-35 per cent).
“Too many consumers and small business customers have given up trying to understand offers and switch in a confusing retail electricity market. Big changes are required to make it easier for consumers and businesses to understand market offers and improve competition,” Mr Sims said.
“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 focussed debates; addressing affordability requires change across a broad front.”