Is your power discount in jeopardy?

If you’re one of those motivated money-conscious individuals who shops around for services in order to get the best deal, the Government’s plan to simplify the confusing energy market may actually cost you money.

In the wake of historically high power prices and confusing plans, the Australian Competition and Consumer Commission (ACCC) released its Retail Electricity Price Inquiry last June containing 56 recommendations. Since then, the Government has proposed a default market offer (DMO) that would set a regulated basic power price.

However the Grattan Institute warns that if the DMO is set too low, electricity companies could remove some discounted offers in order to maintain profits.

Effectively, consumers who have done the hard yards to lock in a good discount would be disadvantaged.

“The risk remains that retailers simply remove the best market offers or increase their prices to offset losses from reduced standing offers,” the Grattan Institute report says.

“In our view, a disengaged customer (who hasn’t searched for the best deals) should not receive protection over and above what an engaged customer can reasonably achieve in the market.”

Consumer comparison group CanstarBlue expects that the regulated default offer will save some households between $105 and $165 per year, depending on their state and electricity network.

EnergyAustralia, Origin and AGL reported strong profits last month, but Origin has estimated it would post a $44 million reduction in pre-tax earnings from the 2019-20 financial year as a result of the DMO.

The ACCC says: “There is a risk that lower-priced offers will be withdrawn from the market, to the detriment of active or price-responsive consumers.”

CanstarBlue spokesman Simon Downes told Fairfax Media that a regulated price would remove some of the imbalance in the market, but should not penalise consumers who have been engaged in the market.

He said: “Households that have been paying the high standing offers have been subsidising the savings of those who do shop around.

“But people who can least afford [it] are often left paying the most. It should be set so it doesn’t penalise people at either end of the spectrum.”

Energy Minister Angus Taylor said last month that the DMO would also act as a reference price, requiring energy retailers to advertise their standing and market offers against a common price benchmark.

He said the Australian Energy Regulator (AER) had estimated savings to customers on standing offers of:

  • up to $174 for customers on a flat rate tariff
  • up to $218 for residential customers on a controlled load tariff
  • up to $937 for small business customers on a flat rate tariff.

In June last year, 15 per cent of households in NSW were on standing, undiscounted offers, as well as 16 per cent in Queensland and nine per cent in South Australia.

Have you been able to make sense of the energy sector and lock in a good deal? Are you now concerned that deal might be taken away?

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Written by Janelle Ward


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