Let’s face it -both you and I, or someone close to us, have recently complained about what seems to be the unstoppable increase to our home and business energy bills.
These increasing prices affect us all – we all use electricity.
So who’s job is it to keep energy prices stable?
By Chris Dennis, Consultant- Law Quarter.
The Role of the ACCC
The ACCC plays a role in the regulation of energy markets. Specifically, the ACCC’s role in energy markets is in the context of the Competition and Consumer Ac 2010. For example, the ACCC enforces the competition and consumer protection provisions in energy markets and assesses energy mergers and authorisations.
So what is the ACCC doing about increasing energy bills?
Just this month the ACCC released their final Retail Electricity Pricing Inquiry report, or a ‘blueprint to reduce electricity prices’. The ACCC states that this blueprint is designed to ‘significantly improve electricity affordability for Australian consumers and businesses’.
The blueprint or report is the result of an inquiry, which commenced in March 2017. This inquiry began by identifying the root causes of high electricity prices across the entire electricity supply chain.
The report describes the National Energy Market as ‘largely broken and needs to be reset’. That’s a big statement from a Government regulatory agency.
As part of the process, the ACCC has admitted that ‘poor decisions have been made over the past decade creating the current electricity affordability problem’, and ‘it now falls to current Commonwealth and state governments to make the difficult decisions to fix it’.
So why have electricity prices increased?
According to the ACCC, electricity has become unaffordable because:
– Wholesale and retail markets are too concentrated;
– Regulation and poorly designed policy have added significant costs to electricity bills; and
– Retailers’ marketing of discounts is inconsistent and confusing to consumers and has left many consumers on excessively high ‘standing’ offers.
It is their view that most households are paying far too much for electricity and many are having difficulty paying their bills.
As a result, the report of the ACCC has made 56 recommendations detailing ways to fix the National Electricity Market
The ACCC’s recommendations include:
- Abolishing the current retail ‘standing’ offers (which are not the same between retailers), and replacing them with a new ‘default’ offer consistent across all retailers, set at a price determined by the Australian Energy Regulator (AER).
- Requiring retailers to reference any discounts to the new ‘default’ offer pricing determined by the AER, making it easier for consumers to genuinely compare offers. Conditional discounts, such as pay-on-time discounts, must not be included in any headline discount claim.
- A mandatory code for comparator websitesbeintroduced so that offers are recommended based on customer benefit, not commissions paid.
- Voluntary write downs of network overinvestment, including by the NSW, Queensland and Tasmanian governments (or equivalent rebates).
- Premium solar feed-in-tariff schemes should be funded by state governments and the small scale renewable energy scheme should be phased out, saving non-solar consumers $20-$90 per year.
- Government support to make bankable new investment by new players in generation capacity to help commercial and industrial customers and drive competition.
- Restructuring of Queensland generators into three separately owned portfolios to improve competition.
- Limiting companies with 20 per cent or more market share from acquiring more generation capacity.
- Improving the transparency of over-the-counter contract trading by requiring reporting of these trades to a central registry.
- Improving the AER’s powers to investigate and address problems in the market and increasing penalties for serious wrongdoing.
The ACCC estimates its recommendations, if adopted, will save the average household between 20 and 25 per cent on their electricity bill, or around $290-$415 per annum.
Conclusion
While the efforts of the ACCC are welcomed, a sanguine approach must be adopted. There will be no quick fix to ongoing increases in energy bills and sector reform to reduce power bills will take time.
Our Energy Experience
We have significant experience in energy law. Our experience includes working for energy retailers, energy storage, and renewable energy companies. Working on ‘both sides of the meter’ gives us a unique and unmatched perspective.
Our lawyers have written extensively for industry publications including WattClarity and RenewEconomy. Our clients include small solar installers alongside large network distribution businesses.
Our firm is a finalist in this year’s Innovator of the Year award in the 2018 Australian Law Awards. Our sister business, Compliance Quarter has applied for over 80 percent of the recent energy retail authorisations with a 100 percent success rate. Compliance Quarter was a 2018 Westpac 200 Business of Tomorrow winner.
