The National Energy Guarantee (NEG) we are told is all about bringing down the electricity prices paid by consumers whilst at the same time paying lip service to reduce our CO2 emissions. This latter objective is a little bit Ho-Hum as our prime minister is currently going to extreme lengths to appease the climate change deniers (and hold on to his job) and is likely to drop emission reduction targets altogether in the next few days, so for the moment let’s focus on bringing down prices.
It is electorally popular to have a policy of reducing household energy prices, the government have come out boldly and told us that with their NEG we can expect that the average household to start saving $550 a year on their electricity bills commencing 2020 and each year thereafter. But that headline-grabbing number won’t appear in any legislation neither will it feature as part of the ‘guarantee’. Indeed, only $140 of that saving is loosely linked to the NEG, the other $400 has got to come from somewhere else but it’s not clear where.
What the government are quite happy to sweep under the rug at the moment is the very sensible recommendation of the Australian Competition & Consumer Commission (the ACCC) who have said that electricity pricing should be transparent at the point of sale. What the ACCC are proposing is that we strip electricity pricing of the mystique that free market competition has brought to it. Their recommendation is to abolish standard retail contracts from big electricity retailers and replace them with “default market offers” set by the Australian Energy Regulator (AER). The regulator would be given the power to set the maximum price for the default offer in each state or territory, a form of price regulation imposing a price cap for consumers. The price set by the AER would represent the efficient cost of supply in a given region, including a “reasonable margin” for retailers from which they could discount should they wish to do so. Designated retailers would be required to supply electricity to consumers at the default price on request, or in circumstances where the consumer has not taken up a market offer. The default offer would contain simple pricing transparency for easy comparison purposes and would include minimum payment periods, optional paper bills (at no extra cost) and access to bill smoothing (spreading your estimated yearly energy costs over regular monthly installments : for example, if you estimate your annual outlays at say $1200 but with the concentration being during the winter [or summer depending on which end of the country you live] you will be able to pay at a pre-agreed rate of say $100 a month.)
This recommendation by the ACCC is simple and straightforward and will we are told bring down household energy costs and bring much-needed transparency to an industry that has thrived on obfuscation and the ability to gouge customers by intentionally making their pricing regimes obscure, unclear and unintelligible.
To quote the ACCC, their recommendation on default pricing would have the effect of :
Moving average residential customers who are still on the range of current ‘standing’ offers to the new ‘default’ offer could result in savings of $500 to $750 per annum (25-35 per cent). Similarly, small and medium businesses could save $1450-$2250 (30-35 per cent) per year by moving to a standard ‘default’ offer. Currently over 20 per cent of small businesses are on high ‘standing’ offers.
Whilst Labor have embraced the ACCC recommendations, the coalition have been less than enthusiastic with some on the far right of the coalition comparing this form of price transparency to rampant socialism.
At a time when our prime minister is poised to be unceremoniously dumped by a rabid right-wing mob led by Tony Abbott and Barnaby Joyce, like a bunch of extras from the Living Dead, salivating at the prospect of tearing down Turnbull and installing a potato in his stead – it is suggested that he will bypass the recommendations of the ACCC just to appease these knuckle-draggers. For us, the consumers, it is critical that we force the government to focus on and to adopt this eminently sensible recommendation from the ACCC.
The full ACCC report is here and the recommendation in question is under Chapter 12 Recommendation 30.