Default Market Offer: Australian Energy Regulator cuts ‘headroom’ in retail prices to lower costs
Instead of delivering a promised $275 cut to power bills, Anthony Albanese has presided over a $750 a year increase for households in Western Sydney, as even some charities struggle to keep afloat in a cost of living crisis.
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Instead of delivering a $275 cut to power bills as promised before the last election, Anthony Albanese has presided over a $750 a year increase for households in western Sydney, the federal Opposition says.
The Coalition rebuke came in response to Labor claiming credit for a proposed small fall in electricity prices for one in 10 NSW households and businesses in 2024-25.
The fall had been revealed earlier by the Australian Energy Regulator (AER), which said it intended to lower Default Market Offers, or DMOs, next financial year.
The biggest reduction is set to be 10 per cent. But for most customers on these standard retail plans, the saving will be three per cent or less.
The small drop in prices follows two years of much steeper rises and will be achieved by cutting the amount of profit retailers can earn from customers – a move made at the behest of state energy ministers and their federal counterpart Chris Bowen.
After noting his own contribution to the reduction, Mr Bowen described the savings in the draft DMOs as “encouraging”.
“But we’ve got a long way to go,” he told reporters in Canberra.
The government wanted to get more renewables into the system because they were the cheapest form of new power, Mr Bowen said.
The Opposition’s energy affordability spokeswoman Melissa McIntosh said that for Mr Albanese’s election pledge of $275 off a family home’s electricity bill to become a reality, “the highest cut needed to be more than $1000 for Penrith, Fairfield, Narellan and Parramatta residents and this has not happened in today’s draft DMO.”
Since Labor took office, Western Sydney has been hit hard, Ms McIntosh said, with customers experiencing a cumulative electricity cost increase of up to 37 per cent or $750.
High power bill prices could see Penrith food charity Mama Lana’s shut down for good.
The charity has seen a $900 increase in power bills and is urgently seeking funding and sponsors to help keep the lights on.
Founder Lana Borg called on the Albanese government to “do better”.
“We’re a charity here to relieve stress and help people, but now I’m starting to stress. The government need to do more. It’s disgusting that we’re being slapped with higher costs after being promised cuts,” Ms Borg said.
“In the last three months we have had to pay for two families’ power because they simply cannot afford it. Everyone is suffering, I regret recently signing a three year lease, we might not even make it by the end of this year”.
“We’ve been running meal services for 10 years, but this year has been the hardest. We’re not the only ones suffering, the whole community is.”
Mr Bowen said that the DMO would provide “very real pressure” on power companies to lower the market contracts entered into by nine out of 10 households and businesses.
If that didn’t happen, customers would leave, he suggested.
AER chairwoman Clare Savage said the cheapest deals on the market were 18 to 25 per cent lower than the DMO. She urged households and businesses to compare prices using the free and independent site energymadeeasy.gov.au.
“Shopping around remains the best way to get the best price,” Ms Savage said.
Without the AER stepping in to reduce energy company profit margins, the DMO would have gone up yet again – this time because of increased network costs due to reasons including higher inflation and interest rates.
The AER will now consult on its draft determination.
Unsurprisingly, power companies are not happy about with the draft DMO, and claim that there will be negatives for the majority of consumers as a result of slashing the “headroom” in prices that was designed to encourage new entrants into the market.
A spokesman for industry lobby group the Australian Energy Council said: “Unfortunately, the AER’s decision to reduce the headroom for competition may see some of the cheaper prices disappear, which in the future could negatively affect the more than 90 per cent of customers on market offers.”
The AER will announce its final DMO determination in May.
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