Default power prices come into effect to save ‘loyal’ consumers up to $219 a year

If you’ve found it too hard to work out the electricity market, celebrate — new changes announced today will save up to $219 a year under a new pricing system.

• Federal Election 2019: Where the parties stand on power prices

South Australian consumers who have found it too hard to work out the electricity market will save up to $219 a year under a new pricing system announced today.

The savings take effect from July 1, with up to 70,000 South Australians potentially to benefit.

The “default market offer” system is a signature policy of the Coalition’s energy package but was first backed by the Australian Labor Party.

Default offers will act to cap the price of “standing offers” — intended as a safety net for consumers who haven’t taken up the competitive market offers introduced when the electricity system was handed over to the private sector.

The Australian Competition and Consumer Commission identified those standing offers as being used by retailers to create confusion about discounts and to subsidise cheaper contracts.

“The Morrison Government has abolished the loyalty tax and the misleading use of discounts to attract customers,” Energy Minister Angus Taylor said.

“For too long, the energy companies have been taking advantage of loyal Australian families and small businesses who have been paying the highest electricity prices on the market.”

Default market offers will also act as a common benchmark against which retailers must compare their offers.

Labor Energy spokesman Mark Butler said Labor was “first to commit to the ACCC’s recommendation to replace expensive and confusing standing offers with a default market offer”.

“If implemented correctly and consistently with the ACCC recommendation, as Labor has committed to doing, the introduction of a default market offer will not see anyone paying more for their electricity,” he said.

The Federal Government is using consumer law — yet to be legislated — to introduce the offers, intervening in a part of the electricity system usually controlled at state level.

It will only apply in SA, NSW, southeast Queensland, Tasmania and the ACT as other jurisdictions have their own regulated prices.

The move has been opposed by retailers, industry groups and others which say it risks stifling competition.

South Australia’s Energy and Mining Minister Dan van Holst Pellekaan urged caution when the Australian Energy Regulator was assessing the move and setting the prices.

He said there was a risk of unintended consequences of price rises for some consumers now on competitive market offers.

EnergyAustralia was among retailers opposed to the move.

“Due to the volatile nature of the SA energy market, only retailers with generation assets would be able to offer highly competitive offers, causing some retailers to exit the market,” it told the AER.

Actual savings under the new system will depend on what consumers are paying now and how much electricity they use, the AER said.

Compared with median standing offers of the various retailers, a small household in SA consuming 4000kWh a year would pay $1941, saving $171.

A larger household — typically a family with two or three children — consuming 6000kWh would pay $2420, saving $219.

A typical small business would save $896, paying $9120 on 20,000kWh.

Only limited numbers of customers remain on standing offers — 9 per cent in SA, 15 per cent in NSW and 16 per cent in southeast Queensland.