Federal energy minister Chris Bowen has put energy retailers on notice for failing to pass on electricity price reductions, amid reports that consumers across the NEM are facing bill hikes just weeks after regulators confirmed that the cost of power is set to fall across the board.
In a letter to the Australian Energy Regulator (AER) and the Australian Competition and Consumer Commission (ACCC), Bowen asks the two watchdogs to look at the way retailers are packaging up costs to households and businesses, and to make sure they are not flouting the rules.
Of particular concern is the trend towards jacking up the fixed-cost component of the bill stack – the fixed daily charge for connecting to the grid – to the extent that it cancels out any savings from falling wholesale power costs, and often results in a higher overall bill.
This practice has come into stark relief in the wake of final determinations from the AER and the Victorian pricing regulator last month that promised power prices would fall for the majority of households and all small businesses across National Electricity Market (NEM) states.
“The Default Market Offer is very clear,” Bowen told a press conference on Wednesday. “There are reductions, small in some cases and quite substantial in others, across the board. There is a very small increase in South Australia and reductions everywhere else.
“We’ve seen some companies, not all, far from it, choose to increase their fixed supply costs while reducing their per-kilowatt-hour costs.
“What I’ve asked the regulators to do is look at that and ensure it complies, particularly with the prohibited misconduct provisions in energy market laws, which require companies to pass on sustained reductions in energy costs through their bills.
“Those laws require energy companies to pass on sustained reductions in energy costs through bills, while allowing them some flexibility in how they do that,” Bowen said.
“I’ve also asked [the regulators] to look at the way companies are communicating these changes.
“I want to be reassured by the regulators that those laws are being complied within spirit and letter. I think that’s appropriate. The regulators will now do their job.”
How retailers package up and pass on the various cost inputs for electricity – and what networks are allowed to charge for their part of the bill stack – has been a particularly contentious topic of late, and the subject of a series of reviews and proposed rule changes.
An Australian Electricity Market Commission (AEMC) review has recommended making the fixed price of connecting to the network a larger part of the overall cost of electricity, to protect consumers that are unable to cut their usage through solar, batteries or energy efficiency.
Critics of this proposed reform – and Bowen himself has said he is yet to be convinced that this is a good idea – say it unfairly punishes the millions of households that have invested in solar and battery storage and also send the wrong message on energy efficiency and load shifting.
AEMC chair Anna Collyer says the commission’s final recommendation on fixed prices is “not a one‑size‑fits‑all approach” that will guide networks to recover costs in a way that reflects the benefits different customers receive from and provide to a shared network.
The AEMC has also recommended setting clearer rules for retailers to package up electricity supply offers in a way that meets more customers’ needs and in a way that is easier to understand.
“Electricity pricing has become too complex, too hard to compare, and too often unfair. You shouldn’t need to be an energy expert to get a fair deal, and long-standing customers should not pay more than someone who just walked in the door,” Collyer said last week.
“This review sets out a clear roadmap for change. These are recommendations only, bringing them to life will require further work, consultation and collaboration with consumer representatives, industry and governments over the years ahead.”
To this end, Bowen last week submitted a rule change request to the AEMC proposing a new “principles-based rule,” or set of rules, “to uplift the general standard for retailer engagement with customers.”
“This is to ensure that retailers not only comply with minimum engagement standards, but also make best efforts to tailor, where practicable, their engagement and communication practices to the individual needs and circumstances of customers.”
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