The ACCC has announced a 9% fall in energy prices since the middle of last year providing much-needed relief for Australian households and small businesses, but there is still plenty of work to do.
Measures recommended by the Australian Competition and Consumer Commission in 2018 that have been subsequently adopted by Energy Ministers are having the desired effect on prices, but more reform and bill relief are still needed.
Default offer and price monitoring is reducing bills
Among changes to the system recommended by the ACCC’s 2018 Retail Electricity Pricing Inquiry was a requirement for retailers to provide a default offer at a price determined by the regulator with set terms and conditions for consumers.
Energy companies are free to offer new products and packages that match or exceed this floor and consumers are better able to directly compare different products from different retailers.
Default market offers have put downward pressure on prices because comparison between different retail offers is now easier for consumers. We are now seeing the benefits and it is extremely encouraging that the reforms which have been implemented are working as intended.
The recent news also shows the value of ongoing price monitoring by the ACCC, a measure that we strongly supported and is a welcome addition.
While it is good to see progress on energy prices, consumers are still under significant pressure.
Even taking these falls since mid-2020 into account, average retail electricity prices are still 75 per cent higher than the level in 2006, which means we are still nowhere near a level of electricity prices that allows Australian households and small businesses to operate without bill stress.
Further changes to aid consumers yet to be implemented
We note that the 2018 Inquiry had countenanced a price drop of up to 25 per cent, but we also note that not all of ACCC Chair Rod Sims’ recommendations have been implemented. Implementing the remaining measures would create the possibility of driving prices even lower.
The ACCC Inquiry recommended a fund be established to support consumer and community organisations to deliver targeted support – including energy literacy information – to consumers, particularly vulnerable households.
The fund would be a trusted voice to provide tailored, relevant and independent information to vulnerable households and help rebuild consumers’ trust in this market.
It is great to set up conditions that offer less complexity for consumers, but if they don’t understand the choices available to them the way in which they are being charged, there will always be a limit on how effective those measures can be.
More bill relief needed
Falling network prices and a significant drop in the price of wholesale electricity means that retailers have no excuse for not fully passing on potential savings to consumers.
The ACCC has warned that there will be zero tolerance for not passing on savings and we support that approach, consumers are entitled to every bit of relief that the system can make available to them.
About Energy Consumers Australia
Energy Consumers Australia is the independent, national voice for residential and small business energy consumers. We enable residential and small business energy consumers to have their voices heard by the sector by working with other consumer groups to gather evidence-based research with a national perspective, distil it to key viewpoints, and feed it back to the market to influence outcomes.