Energy reforms show ‘early’ signs of electricity price drop

Households and businesses have seen a drop in their electricity bills one year after a cap on ‘standing’ offers were introduced.

Electricity prices have dropped by more than 4 per cent for households and more than 7 per cent for businesses that stayed with their provider on “standing offers” after reforms to the National Electricity Market came into force last year, a new report has revealed.

The Australian Competition & Consumer Commission indicated 1.5 million residential and small to medium enterprise customers saw the price drop between 2018 and 2019 after the default market offer scheme was introduced in July 2019.

The DMO was implemented by the Australian Energy Regulator to cap electricity prices charged by retailers to customers on default or “standing offer” contracts. Market offers are priced more competitively than standing offers and usually offer discounts.

Along with the Victorian default offer, the DMO was introduced to customers in regions where there is no other retail price regulation, including in South Australia, NSW and southeast Queensland.

The ACCC analysed 8.5 million electricity bills dated between July 1, 2018, and December 31, 2019, to “assess the early effects” of the reforms, which sought to “improve affordability” in the ­National Energy Market.

“The median effective price paid by standing offer customers across the four regions decreased by 4.4 per cent (residential) and 7.5 per cent (SME) between 2018 and 2019,” the report found.

The price paid by households decreased by 1.5c a kilowatt hour between 2018 and 2019, although they still paid more — 6c/kWh in 2018 and 5.5c/kWh in 2019 — than market offer customers, or about an extra $219 a year.

Electricity bills decreased by 3.5c/kWh between 2018 and 2019 for businesses with standing ­offers.

Businesses with standing ­offers paid more than market offer prices at an extra $424 a year.

The price of electricity for “market offer” customers dropped by 3.5 per cent for households and 1.5 per cent for businesses across all four regions expect Victoria, where businesses on standing offers saw a 0.3 per cent increase.

Monash University energy economist Gordon Leslie said the results were positive but “a full year” of data should be collected before the price drop could be attributed to reforms.

University of Melbourne electricity economics expert Dylan McConnell said the drop in prices sounded “like good news” for consumers but other factors could be involved.