Australian Energy Market Commission review finds price cuts in power only for the few
Shop around and you’ll find a better deal, they say on power prices. Well, turns out prices have fallen steeply this year – but it’s not the savvy shoppers who’ve made the big savings.
SA News
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The ceiling price imposed on the electricity market has delivered big benefits to the few consumers who have not shopped around for a better deal but savvy households have been left behind.
Consumers who had been paying the highest prices in South Australia enjoyed a 25 per cent cut — or $589 — in their bills this year compared to 2019, according to a major annual review by the Australian Energy Market Commission.
However, the average of market offers, taken up by nine out of ten households, actually rose 3 per cent — or $42 a year.
Preventing retailers from keeping some customers on highly profitable contracts meant the companies “have less incentive and financial ability to offer lower priced market offers”, the commission said in a review published on Tuesday.
It also narrowed the difference between the most expensive and cheapest deals.
“This may have reduced the incentive for consumers to engage in the market to the level they otherwise might have,” the commission said, noting a nationwide drop in customers switching retailers.
The ceiling — the Default Market Offer — was imposed by the Federal Government from July 2019 and applies to 8 per cent of consumers in SA.
It will reduce by 5.6 per cent, or $109, for next financial year.
The commission found an increase to just over half of consumers satisfied the electricity market was giving them value for money.
“Higher satisfaction levels are welcome news for the retail sector, although customers clearly think there is still room to improve,” commission chief executive Benn Barr said.
Looking to the new financial year which begins on Wednesday, the commission expects average prices in SA to fall by 3.8 per cent, to $1812 a year.
Other states would see even bigger falls — SE Queensland down 12.8 per cent, Victoria 6.5 per cent and NSW 5 per cent.
The commission is an independent statutory body which advises governments and makes the rules for energy markets.
In a far ranging report, it calls for a significant overhaul of consumer rights, saying current rules are no longer fit for purpose.
“In the past, retailers simply sold energy to customers,” Mr Barr said.
“Now, customers can generate and store their own energy.
“So, we need to think about new ways to apply the retail rules, so they move with the times and don’t leave consumers behind.”
Increasing use of rooftop solar, batteries, electric vehicles, energy management systems and other innovations did not fit with the outdated model.
It recommended broader powers for energy Ombudsman offices, more flexibility in how retailers operate and simplicity in billing.
“A one-size-fits-all approach can actually work against energy consumers,” Mr Barr said.
“For example, when retailers comply with regulation that requires them to include 24 pieces of information on consumer energy bills, they may simply end up overwhelming their customers with information.
“In cases like this we need to reimagine the rules, so they help retailers focus on customer outcomes, not ticking regulatory boxes.”
The commission urged moving early on electric vehicle systems and protocols to take advantage of the opportunities they presented.
Electric vehicles had the potential to increase prices by making peak demand steeper – or lower prices by acting in harmony with solar and virtual power plants.
Along with transforming the transport sector, electric vehicles created a viable opportunity to
decrease emissions by providing a flexible demand side resource and a low cost form of electricity storage. This could support the increasing share of renewables that is characterising the overall power generation mix.
“The key will be maintaining the momentum and working together so we can act decisively and quickly to prepare for the change that is coming,” Mr Barr said.
“Getting this right will mean all energy customers benefit from electric vehicles – whether they drive one or not.”