A controversial proposal to raise the fixed price component of electricity network charges would cut power costs for “most households,” new modelling claims, but could also have a perverse impact on low energy users, potentially inflating their bills by more than $800 a year.
The scenario-based modelling, published on Thursday by the Australian Energy Market Commission (AEMC), considers potential impacts on different customer types of proposed reforms to the way network costs – both fixed and variable – are recovered from a rapidly evolving consumer base.
The modelling finds that increasing the fixed network charge component of consumer electricity bills would lower costs for most households – with or without solar or batteries – in some cases saving them up to $740 a year on their electricity bills by 2040.
According to the modelling, a household that installs a 10kW solar and 20kWh battery system would still notch up around $27,000 in cumulative energy cost savings over 10 years under the reform – and that does not include the savings that could be earned through dynamic pricing, the AEMC says.
But there would be losers, too, with the report noting that customers most at risk of higher bills under the proposed reforms are low-consumption households and small businesses, where the fixed charge rises faster than usage savings. Solar and battery households may face higher costs too.
Network tariffs are a mix of fixed and variable costs charged to retailers and passed on to consumers, often accounting for up to 50% of the final bill. The AEMC has proposed shifting to a higher share of fixed charges, as one in a series of electricity pricing reforms published in a draft review in December.
The AEMC argues that while the shift to dynamic pricing has created winners – households with solar and storage who can adjust their energy use to proactively engage with price signals – it has created losers, too, disadvantaging customers like renters and low-income households with no means to cut grid power consumption or to change behaviour.
But the proposal to remedy this by charging less for electrons consumed and more for a connection to the grid has proven highly contentious, driving a staggering 2,700 submissions to the draft that, according to analysis by Nexa Advisory, show overwhelming opposition to this approach.
“The market and the individual public submissions see this as a backward step,” says Nexa Advisory CEO Stephanie Bashir.
“These measures would undermine the home battery scheme and broader CER uptake by making household investments less attractive. It would also weaken incentives for energy efficiency, demand shifting and CER investment.”
Meanwhile, separate modelling by Green Energy Markets has turned up a starkly different set of figures to the AEMC modelling – warning that solar and battery households would be the biggest losers of the reforms, facing increases in electricity bills by between $400 and $700 a year.
Green Energy Markets analyst Tristan Edis, who has described the AEMC tariff proposal as a “Robin Hood scheme in reverse,” also warned the reforms could be a disaster for low-income households that keep their energy consumption to a minimum.
“What the boffins in the AEMC don’t seem to realise (or have perhaps chosen to ignore?) is that low income households consume noticeably less electricity than high income households,” he writes on Renew Economy, here.
“What this analysis illustrates is that the low income consumer will be noticeably worse off under the AEMC proposal, facing an increase in their annual power bill of anywhere between $127 in Endeavour’s network [in NSW] to as high as $217 in the [South Australia] SAPN network.”
But the AEMC modelling has actually factored in this possibility. It reveals that – while two-thirds of households currently unable to have solar or batteries would be better off under the proposed reforms – the customers most at risk of higher bills are low-consumption households.
In one scenario modelled by the AEMC, “Nina the Florist,” whose small Sydney shop is a low-level consumer of electricity could face a bill of up to $810 higher by 2040 under the proposed reforms.
And in response to scenarios like Nina’s, the AEMC commissioned a separate report from economists HoustonKemp focused on what consumer protections could be put in place to manage the risks of the reform.
HoustonKemp’s advice, also published by the AEMC on Thursday, is that practical options exist at the network and retail levels to stop the reforms from creating a new set of winners and losers, ranging from caps on how quickly fixed charges can increase, to requirements for retailers to offer lower fixed charge alternatives.
And in scenarios where solar and battery households faced higher costs, the consumer protection options identified by HoustonKemp could apply to them too, says the AEMC.
AEMC chair Anna Collyer says the purpose of the modelling – which will be weighed against the HoustonKemp report and feedback gleaned from the 2,700 submissions – is to get the settings right to reward the households that invest in solar and batteries, and ensure a fair share of costs for those who cannot.
“We don’t want to discourage people taking up solar and batteries,” Collyer tells Renew Economy.
“We think they’re very valuable, and that’s why we’re looking at … the different ways you could achieve the efficiency benefits, which are benefits for everybody without having any adverse impact on the incentives for solar and batteries. So that’s really, I think, an important message.
“[But] … being mindful that you don’t want to leave people behind in the transition is [also] important.
“And so if we can find a way that those customers [who can’t install solar] are not so disadvantaged without negatively impacting the people who are investing in solar and batteries… I think that would be great, and that’s what we’re trying to explore in the in the balance of those two papers.”
Collyer says the plan is to set a range of fixed charge options potentially determined by factors like historical usage patterns or demand profiles. And then the onus would be on retailers to package up a variety of offers to suit different consumers.
“Quite a few different ideas have been put into the mix that mean it wouldn’t be one-size-fits-all, and that means you count those different characteristics of different users,” she told Renew Economy.
“The bit that we’re most interested in is the way the networks charge the retailers. And so one thing that we’d quite like to change is the assumption that retailers may simply pass through the network charge.
“Just because we say something happens at network level doesn’t mean the same thing happens at retail level – and what we’d really like is that, at the retail level, there are options for customers around, what kind of tariff suits me best?
“Do I want to have something that I get to really leverage my battery and I’m prepared to kind of invest in the technology to do that? Or am I a person who doesn’t have the time to do that? I’m happy to have my solar but I just want a really simple product.
“So I just want to disconnect what customers might see from what we might say networks should charge for retailers, and then … [on the subject of] energy efficiency …we still need to charge for the electrons, how many electrons you use, and so that’s still got a really strong aspect to it that says if you use less… then that is also a value balance, and we would expect that to be part and parcel of the kind of products that the retailers come up with.”
The HoustonKemp report makes this point too, noting that retailers commercial decisions about how to structure their tariff offerings as they compete for and retain consumers.
“As demonstrated in other industries such as telecommunications and grocery retailing, input cost structures bear little resemblance to what the end consumer pays,” the report says.
“There is also evidence that some electricity retailers already offer products that differ in structure from the underlying network tariffs they face.”
But the report also warns that relying on retailers to make sure different customer needs are met is not by any means a fail-safe.
“Stakeholders have raised concerns that retailers will simply pass through network tariff structure changes, resulting in higher fixed charges on retail bills,” it says.
“Whether existing consumer protections are sufficient to manage these risks, or whether additional measures are needed to provide an adequate safety net during and beyond the transition, is the central question this report addresses.”
For the AEMC’s part, it says that the publication of the modelling and the HoustonKemp analysis “allows time to consider targeted consumer protections and for retailers to work with networks to design new products and services for customers.
“This is precisely why the AEMC commissioned HoustonKemp to identify practical options to prevent [negative] outcomes … and why no recommendations will be made without those protections in place.”
But Nexa’s Bashir says the unresolved question is no longer whether the higher fixed chargers tariff reform creates winners and losers, but whether the AEMC can get and keep the balance right – including with the appropriate support from retailers.
“The real risk here is not just bill impact, it is trust impact,” Bashir tells Renew Economy. “Consumers were encouraged to invest their own money to support the transition, and many will see a move to higher fixed charges as changing the deal after they have already committed capital.
“If the AEMC believes this reform is genuinely pro-consumer, it should prove that in the rules before proceeding. Protections cannot be an afterthought. They need to be embedded upfront, enforceable, and strong enough to ensure vulnerable households, battery investors and low-consumption small businesses are not left worse off.
“If governments want people to back the transition, the signals have to be consistent,” Bashir says. “You cannot tell households to buy batteries on one hand, then support tariff changes on the other that weaken bill controllability and make those investments feel less worthwhile. That is how trust in the reform process is lost.”
The AEMC says it has not yet reached final recommendations on pricing reforms, and that all findings will be considered alongside the more than 2,700 submissions received before the final report is published in June 2026.
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