ACCC welcomes government action on electricity prices

22 February 2019

The ACCC welcomes moves by the Commonwealth Government towards implementing several recommendations from the ACCC’s retail electricity pricing inquiry. These reforms will bring down electricity prices significantly for over half a million consumers on excessive standing offers and will help all other customers generally better to compare offers.

“The proposed ‘default’ price would replace the current ‘standing offers’ and ensure that consumers are not paying excessive prices. Retailers should have addressed this problem themselves some time ago but, given they chose not to, it is appropriate for government to act,” ACCC Chair Rod Sims said.

“Requiring energy providers to advertise any discounts against this ‘default’ price will make it easier for consumers to choose between competing offers. This will enhance competition, and help more consumers to save money on their electricity bills.”

The ACCC found in its retail electricity pricing inquiry that current discounting practices confuse consumers, as high headline discounts do not always result in lower electricity prices. For example, one offer available in the market with a 35 per cent discount cost the average customer $887 more per year than another offer that had no discount.

The default price would save average residential customers on standing offers between $115 and $218 a year and small business customers between $453 and $937 a year (depending on the type of tariff) in NSW, south-east Queensland and South Australia, where prices are not regulated.

The ACCC also welcomes the Commonwealth Government’s proposals under which the most prominently advertised discount must not include conditional offers. The ACCC also welcomes the plan to reduce the size of conditional discounts in retail offers.

“Conditional discounts, such as pay-on-time discounts, have escalated beyond reasonable levels and expose consumers to substantial extra costs if they don’t pay their bill on time. The reform will make retailers’ offers fairer and more comparable, and stop retailers charging what in effect can become significant late payment penalties which aren’t linked to savings they make when consumers pay on time,” Mr Sims said.

“A typical NSW household on a 40 per cent pay on time discount currently stands to lose $987 off their advertised offer if they pay late, which is completely inappropriate. Forcing conditional discounts to be cost-based should see these lost savings substantially reduce.”

The proposals to reform advertising cover about 80 per cent of residential and small businesses, but exclude customers on solar offers and embedded networks.

“The proposed industry code will introduce much needed changes to retail competition and affordability. This is a significant step in implementing our recommendations,” Mr Sims said.

Similar reforms have been recently introduced by the Victorian Government, which appear broadly in line with the ACCC’s recommendations.

Background

The final report of the ACCC’s retail electricity pricing inquiry recommended:

  • Standing offers should be replaced with a default offer set by the AER (Recommendations 30 and 49)
  • All advertised headline discounts must be guaranteed discounts, and be calculated against a reference bill set by the AER (Recommendations 32 and 50)
  • Any conditional discounts offered by retailers should be limited to a reasonable estimate of the retailer’s expected savings should the customer meet the conditions specified in the discount (Recommendation 33)
Release number: 
19/19
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