Review into Victoria’s gas, electricity markets finds we’re paying too much

VICTORIANS are forking out hundreds of dollars more than necessary on their power bills, according to an independent review. Here’s what the experts think should be done to fix it.

Victorians are forking out between $300 to $500 more than necessary on their power bills, according to an independent review. Picture: Thinkstock

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VICTORIANS are forking out between $300 to $500 more than necessary on their power bills, according to an independent review calling for an overhaul of the state’s electricity market.

The long-awaited report warned households across the state were facing the highest retail prices in the country and many struggled with increasing bill shock.

Eleven recommendations have been put forward to overhaul the energy market system and make bills fairer and easier to understand.

Potential changes include power companies being forced to offer a basic “no frills” plan, based on annual power usage, which will be set by the Essential Services Commission.

Retailers will also be forced to make their offers to customers in dollar terms rather using confusing percentages.

Current contracts, also known as Standing Offers, which give a set price will be abolished after the panel found many base plans provided minuscule savings to customers who took them up.

Contract periods will also be set at a minimum of 12 months to help customers stay on top of any changes made by retailers.

Protecting low income families and vulnerable small businesses appeared to the biggest focus of the report into Victoria’s electricity and gas retailers, after costs had risen by 200 per cent since March 2000.

Lilly D'Ambrosio wants to drive down power prices. Picture: Mitch Bear

The Victorian Government will respond to the recommendations by the end of the year.

Energy, Environment and Climate Change Minister Lily D’Ambrosio said the government intended to “put people first and help drive down power prices.”

“This review gives us a plan of action that will see a better deal for Victorians,” she said.

Retailers will be consulted on the proposed changes this week.

The report was undertaken by former government ministers John Thwaites and Terry Mulder and company director and business consultant Patricia Faulkner, after it was commissioned by the Andrews Government last year.

Advice from the panel also included implementing a brokerage service which will negotiate the best deal for vulnerable Victorians.

The powers of the Energy Water Ombudsman Victoria will also be expanded to cover power businesses.

Access to smart meter data could also be made easier to help consumers know their consumption habits and manage their bills better.

Almost 700 Victorians had their bills scrutinised under the review.

Mr Thwaites said he was “concerned” Australia had gone down the wrong track with deregulation and backed the proposed “no frills” offer to help people who just want to make “the fridge and the TV work.”

“The retail market is failing Victoria,” Mr Thwaites said.

“Our research has shown people are paying something like 21 per cent more than the best offer in the market.

“Essentially there are four aspects, first the cost of competition is so great.

“The second reason the market is not working is the industry structure is such that the three larger tier one retailers, have significant advantages over the others.”

Former deputy premier John Thwaites (right) with former premiers John Brumby and Steve Bracks.

Mr Thwaites said consumers were also overloaded with confusing data and people were paying more for marketing and “fixed price” costs but people could not drop the service as it was an essential service.

Mr Mulder said companies appeared to purposely be making deals confusing.

Ms Faulkner said poor customers were being exploited to help power retailers to make big profits.

Standing Offers were also slammed with research showing the set prices were often much higher than other charges available.

If the government adopts all recommendations it is hoped the typical power bill of $1200 in Victoria could be reduced by $200.

Victorian Council of Social Services chief Emma King backed the report saying Victorians “have been fleeced” and urged the government to accept all recommendations.

“The reality is the government now has to deliver on the report ... every day they don’t Victorians are going without.”

She also called for a response to the report sooner, as Victoria was in the middle of a energy “crisis”.

The panel also looked at the closure of the Hazelwood Power Station and said it would impact the market but it was unknown how it would be used by retailers, which was the focus of the report.

There are 25 electricity retailers and 13 gas retailers in Victoria, who will be impacted by any changes adopted.