The ACCC says your energy bills are too high. Here's how it thinks prices can be slashed
Summary: The consumer watchdog believes Australians are paying too much for their electricity.....
A lack of competition in the energy market and policy mistakes by successive state and federal governments has added significant costs to power bills, according to the Australian Competition and Consumer Commission (ACCC).
The watchdog says power bills can be reduced by at least 25 per cent — 25 per cent! — if governments adopt a series of recommendations from its report on the energy market.
And the ACCC's chairman, Rod Sims, reckons that's a conservative saving.
Here's what you need to know from the Retail Electricity Pricing Inquiry report.
Who's to blame for high energy bills?
Everyone, and no-one.
Mr Sims said among the many reasons why bills have gone up, multiple governments have made poor decisions over the years that have contributed to ripping off consumers.
Then there's market concentration in some parts of Australia, confusing bills, and the gold-plating of the energy network.
"They've gone up because costs have increased right across the board — the costs of the poles and wires, retailer costs, retailer behaviour in the sense of deliberately confusing offers for customers," Mr Sims told the ABC.
"We've got a lot of costs imposed into the system, the market's too concentrated and we've had some unfortunate behaviour by retailers."
So how can bills come down?
The ACCC reckons if all its recommendations are adopted, people will save at least 20 to 25 per cent on their bills.
But it says many people, including small and large businesses, could save much more.
Some of the suggestions include:
- Setting a default rate for electricity prices
- Changes to the way companies advertise discounts
- Voluntary write-downs of network over-investment
The biggest change would require a base or "default" price for power in each jurisdiction.
"[It's] really important. We're suggesting the default offer that's in the market be regulated by the Australian Energy Regulator and that all discounts have to come off a common base," Mr Sims said.
"That will mean you'll get clearer marketing to consumers, and therefore they'll be better placed to take up better offers.
"But for those people stranded on very high offers, those prices will automatically come down."
Mr Sims said part of the problem was that people were sold energy deals, and were then taken advantage of if they didn't stay on top of their bills or shop around.
"We are going to end that by having the Australian Energy Regulator set the price for those who don't engage in the market, and it will be the base from which discounts occur," he said.
"So when a customer sees a discount of 20 per cent from one player and 15 per cent from another player, they have every confidence the 20 per cent discount is the best offer."
The ACCC said another key way to slash bills would be for governments to fund the write-down of network assets, such as the poles and wires.
Tony Wood from the Grattan Institute said that was a good idea.
"I think this is heading in the right direction because the network prices constitute more than 40 per cent of the end-user bill, both for households and small businesses," he said.
My power bill is confusing. Will this change?
Under the ACCC's recommendations, yes it will.
It recommends simple pricing, minimum payment periods, and access to paper bills for any default offer set by the Australian Energy Regulator (AER).
PHOTO: Power bills need to be simpler, the ACCC says. (ABC News: Lucy Barbour)
Also, if you move house and haven't contacted an energy retailer, you would be offered that default price on power that's set by the AER.
The ACCC report also recommends changes to marketing, so headline discounts are set from the AER's default price and they must include a guaranteed discount.
This is because some electricity plans offer discounts for short periods, before going on to charge consumers a much higher price.
In other cases, discounts apply if you pay on time and if you're late you get slapped with a fee.
Mr Wood said it was a "no-brainer" to sort out misleading practices.
"The Government has been trying to embarrass the retailers to do something about it," he said.
"They've clearly failed to take real action so far and I think it's one that's going to have to be tightened up — weird advertising, confusing advertising, strange discounts no-one can understand, penalties for paying about 24 hours late, big penalties."
Consumer group Choice said existing advertising and billing arrangements had been unfair for a long time.
"The current standing offers are clearly failing people, with many of them priced well above other offers on the market," Choice's Erin Turner said.
"You shouldn't need a PhD to sort through and find the cheapest energy offer.
"The ACCC recommendation would introduce a real safety net that could mean people save up to $750 per annum on their energy bills."
What if I'm facing financial hardship due to my big bills?
The report wants concession schemes improved, including applying a means test to ensure they are targeted at those most in need.
The ACCC also suggests introducing a targeted scheme to improve energy market literacy.
It recommends additional government funding to a value of $5 per household in each National Energy Market (NEM) region — or $43 million across the NEM — to assist vulnerable consumers.
What about comparison websites, do they get me a better deal?
The ACCC said there needed to be a mandatory code for comparison websites so offers were based on customer benefit, not commissions.
And it recommended the code should contain civil penalty provisions for any breaches.
"Comparator websites have a very mixed record and they are very costly, which adds cost into the system," Mr Sims said.
"The mandatory code means they would make their commissions clear and they would put the customer first."
I've got solar panels, what does this report mean for me?
It shows you've been getting a good deal.
But things might change pretty soon, with the report recommending subsidy schemes for solar eventually be scrapped.
The report found solar customers were paying on average $538 less per year than non-solar customers.
That suggests affordability concerns are most acute for those customers who have not, and possibly cannot, install solar panels.
The ACCC recommends changes to solar panel subsidy schemes.
"If governments want to subsidise solar panels, that's absolutely fine, but they should be doing it from their budgets," Mr Sims said.
"They shouldn't be charging other energy consumers more so that those who've got solar panels receive a subsidy."
The report said households with solar energy had benefited from generous feed-in tariffs, and also received subsidies for the installation of the system itself through the Small-scale Renewable Energy Scheme (SRES).
"Meanwhile, non-solar households and businesses have faced the burden of the cost of premium solar feed-in tariff schemes and the SRES," the report said.
The ACCC recommends that any costs remaining from premium solar feed-in schemes should be borne by state governments through their budgets, as Queensland has done, rather than being recovered through charges to electricity users.
The report also recommends the SRES should be wound down and abolished by 2021 to reduce its impact on retail prices paid by consumers.
That's alarmed the Smart Energy Council, which is calling on the Government to immediately rule out abolishing the SRES in the wake of the report.
And community-based organisation Solar Citizens said slashing the small-scale renewable energy scheme was "absolutely the wrong way to go".
"Energy consumers are tired of being taken for a ride by electricity retailers, which is why Australians are installing solar at record rates so that they can take the power back into their own hands," the group's Shani Tager said.
"Abolishing the small-scale renewable energy scheme will just make it harder for everyone else who wants to be a part of the rooftop revolution and the Turnbull Government must rule out changes to the scheme."