Electricity market is broken: ACCC

“The national electricity market is largely broken and needs to be reset.”

That was the grim but, for consumers, welcome finding of the Australian Competition and Consumer Commission (ACCC) in its Retail Electricity Pricing Inquiry report released yesterday.

The inquiry, which started in March 2017, has made 56 recommendations on ways to fix the market and estimates that the average household would save between $290 to $415 – or 20 to 25 per cent of their annual bills – as a result.

ACCC chair Rod Sims said: “It is clear that most households are paying far too much for electricity. In addition, some of the most vulnerable in our community are forced to struggle through freezing winters and scorching summers, with many others also having difficulty paying their bills.

“The ACCC’s affordability measures for consumers also include improvements to state and territory concession schemes, and funding for organisations to assist vulnerable consumers to choose a low-priced electricity offer that suits their circumstances.”

Mr Sims said the inflated costs related to a range of problems.

“Wholesale and retail markets are too concentrated. Regulation and poorly designed policy have added significant costs to electricity bills. Retailers’ marketing of discounts are inconsistent and confusing to consumers and have left many consumers on excessively high ‘standing’ offers,” he said.

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 that is consistent across all retailers and set at a price determined by the Australian Energy Regulator (AER).
  • Requiring retailers to reference any discounts to the new ‘default’ offer pricing, 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 comparison websites so that recommendations are based on benefit to the customer, not on commissions paid.
  • 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.

To begin the inquiry, the ACCC issued more than 100 notices to retailers compelling them to provide information about revenue and usage, wholesale costs, network costs, green scheme costs, retail costs and margins. As a result, it received, examined and analysed 48,000 documents.

Consumer group CHOICE said advertising and billing arrangements had been unfair for years.

“The current standing offers are clearly failing people, with many of them priced well above other offers on the market,” said CHOICE’s Erin Turner.

“You shouldn’t need a PhD to sort through and find the cheapest energy offer.

Do you welcome the ACCC’s recommendations? How quickly do you think the savings will flow?

Related articles:
Energy sector ‘too complex’
Energy plans explained
The reasons Aussies overspend

Written by Janelle Ward

RELATED LINKS

Under-fire energy sector accused of being ‘too complex’

Watchdog heads to court with supplier as chorus grows for royal commission.

Energy plans can be confusing. Here’s what you need to know

Cutting through the waffle to explain how energy pricing works.

Research reveals the reason why Aussies are overspending

The decreasing reliance on cash is leading people to lose control of their finances.



SPONSORED LINKS

LOADING MORE ARTICLE...