Victorians are paying, on average, 21 per cent more than the cheapest price on offer for electricity and gas, according to a bipartisan review into the state’s electricity and gas retail markets that recommends regulating power prices again, eight years after they were deregulated.
The recommendation is one of 11 measures put forward to drive down prices, protect consumers and “put people first”, Energy Minister Lily D’Ambrosio said.
Any move to regulate power prices would require legislation and Ms D’Ambrosio said the Government would take “decisive action” when it officially responded to the report by the end of 2017.
The minister said a “no-frills” option could be made available to consumers as part of a reregulated pricing scheme.
“Consumers will have the choice … to actually have a basic service offer that is regulated by an independent party, a no-frills option that represents a reasonable price for buying electricity or gas in the market,” Ms D’Ambrosio said.
“The review that I commissioned late last year has made it absolutely clear that competition and deregulation is not working in the interest of families and businesses.”
Research commissioned by the panel found that on average, Victorian consumers pay 21 per cent more than the cheapest available offer.
The report said prices in Victoria were “unusually high” compared to elsewhere in Australia, saying there was “evidence of market failure”.
It found that the “retailer charge” — costs, marketing and profit — typically makes up 30 per cent of a household electricity bill, more than producing or distributing electricity.
- Customers should be provided a basic offer not greater than the regulated price
- Promote access to smart meter data to help people manage bills
- Abolish standing offers
- Collective bargaining on behalf of low income, vulnerable customers
- Monitoring by Essential Services Commission
- Marketing information on prices to be easily comparable
“Marketing is a major factor in energy price rises in Victoria. That’s costing more than the cost to actually generate or supply electricity,” Ms D’Ambrosio said.
“It’s a very complex market. The retail pricing practices have also made customer choices more complex and that’s resulted in consumers often paying higher prices than they ought to.”
The Andrews Government launched the bipartisan review into the state’s electricity and gas retail markets last November, which was headed by former MPs Terry Mulder and John Thwaites.
It looked at whether the electricity and gas retail markets were working in the best interests of Victorians.
Some families are going without heating to keep energy costs down. (ABC News: Stephanie Ferrier)
Consumers could save $200 on bills
The report said marketing information must be easily comparable, contract prices and variations are to be clear and fair and increased protection for low-income and vulnerable customers.
It recommends “brokerage and collective bargaining” on behalf of low income and vulnerable customers and recommends the Essential Services Commission (ESC) should monitor the market.
One of the authors of the report, former Labor MP John Thwaites said implementing the recommendations could save people around $200 on their power bills.
He said the costs of competition were so great that numerous extra costs were added and consumes had to pay for those costs.
“Competition does generally drive down costs. Now we’ve had 10 years of that experiment and it hasn’t worked as we expected,” he said.
“It’s an essential service. People can’t exit the market.
“So there’s no constraint on prices if they go up and up people have to keep paying those higher prices.”
Victorians ‘fleeced’ by power barons
A report prepared for the Victorian Council of Social Service (VCOSS) and RMIT showed some people were refusing to turn on their heating, scrimping on food and taking showers at local charities to save money on their power bills.
VCOSS chief executive Emma King said Victorian households are experiencing significant suffering and the Government must act.
“Every day Victorian households are being fleeced,” she said.
“We have power barons who are making significant profits on the back of vulnerable Victorians and on the back of everyday Victorian households.
“This can deliver huge differences that will impact on every single Victorian. [It’s] time for that to happen.”
Gerard Brody, from the Consumer Action Law centre said the state’s energy market had been dysfunctional for too long.
He said a proposal to regulate a basic price would offer an “immediate benefit” to customers who had been ripped off for too long.
“Competition needs to work to benefit customers and well-designed regulation can support effective competition,” Mr Brody said.
“We will work with Government so that a ‘basic service offer’ works for all Victorians.”
The Brotherhood of St Laurence called the proposals “good news for households on low incomes”.
“The review released today makes a series of important recommendations, which, if implemented, would lead to much lower bills for households on low incomes,” spokesman Damian Sullivan said.