Statement On Default Price Decision

The reduction and moderation in today’s final default prices is coming at a cost to retail competition, according to the peak body for electricity retailers, the Australian Energy Council.

The Australian Energy Council’s interim Chief Executive, Ben Barnes, said with reductions in wholesale electricity costs, the major upward pressure on prices was now coming from higher network costs – the cost of the poles and wires.

“To achieve a reduced default price the regulator has again changed its methodology and reduced the retail allowance, and this, along with lower wholesale costs, is offsetting higher network and environmental costs.

“The ACCC recommended the default price act as a safety net to protect customers who do not shop around from unreasonably high prices, while ensuring retailers can recover their costs and provide room for market competition. The decision to remove an allowance designed to drive competition will likely mean the vast majority of customers who shop around will pay more.

“As the energy grid continues to transition, we would expect to see wholesale and retail costs decline, whilst network costs will increase. To date, reductions in the DMO have focused on reductions in retailers’ costs and margin, but there is little left to squeeze. How the AER sets the DMO in future years will be critical to building confidence in industry and allow them to set cheaper market offers.

“Customers on default prices will no doubt be pleased to see lower regulated prices. The risk with a regulated price is that many people may see it as the best option. Ideally the DMO should act as an important reminder for households and businesses to shop around for cheaper market deals.

“Customers looking to save money shouldn’t wait for the new default market offer (DMO) to come into effect on 1 July. They should check online or ring their retailer because there are more competitive deals available.

“It is quick and easy to switch to a cheaper market offer today using the government comparison website EnergyMadeEasy. Retailers also inform you on your bill if you are not on their best deal, but the need for informed consent means they cannot automatically move you to a different deal.”

Mr Barnes said that retailers were working with the Federal Government to get the $300 bill relief measure announced in the Budget onto customer bills from July. He said that retailers also had hardship programs and other support available to assist those who are having difficulties with their bills.

You can find fact sheets on how prices are determined on the AEC website:

Understanding Household Energy Bills and How to Go About Finding the Best Deals

Regulated Prices and Hedging Contracts

About the Australian Energy Council

The Australian Energy Council is the peak industry body for electricity and downstream natural gas businesses operating in the competitive wholesale and retail energy markets. AEC members generate and sell energy to 10 million homes and businesses and are major investors in renewable energy generation. The AEC supports reaching net-zero by 2050 as well as a 55 per cent emissions reduction target by 2035 and is committed to delivering the energy transition for the benefit of consumers.

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