The Australian Energy Market Commission will recommend changes to shift the complexity of electricity plans away from households and onto retailers. · Source: Getty
Choosing the best electricity plan could soon be as simple as buying milk, under a “radical” overhaul proposed by the country’s energy rule-making body. Households can currently face a complex and time-consuming process when trying to find the right electricity plan, and this means some opt to stick with deals that no longer suit them or simply disengage altogether.
The Australian Energy Market Commission (AEMC) revealed it will recommend a redesign of electricity pricing. Speaking at Australian Energy Week, Chair Anna Collyer said the new rules would shift the complexity away from households and onto retailers and energy providers.
“Rather than consumers being forced to understand demand charges, export charges, time-of-use windows and locational signals to get the best deal – we want to make their experience more like buying milk,” she said.
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Collyer said milk involved lots of different input costs, such as the cost of milking the cow, packaging it and delivering it to the supermarket, but it was wrapped into a simple price for customers.
“Electricity is the same. It’s just that we spend an awful lot of time talking about the input costs in a way that we don’t for other products,” she said.
Under the proposal, retailers like AGL Energy and Origin Energy would be required to “work in the background to manage customer risk and bundle all the different input costs into simple, clear plans that work for different households”.
Smaller retailers would also be required to offer simpler plans to customers, which theoretically could improve competition.
Collyer said it was the body’s “most radical” recommendation.
It follows the AEMC’s controversial proposal to change the way households are charged to use the power grid by introducing a higher fixed charge, including for those with rooftop solar and batteries.
The recommendation would mean most Aussies who don’t have solar and batteries would be better off under the plan, with the regulator saying it could save up to $6 billion in network savings over 15 years and reduce the average bill by $40 to $80 per household.
However, those with solar and batteries would end up about $3,000 worse off by 2040.
Electricity changes from July 1
A range of new electricity rules will come into effect from July 1, aimed at helping households compare and switch plans.
The new rules include limiting price hikes on market retail contracts to no more than once a year, and ensuring customers pay no more than the standing offer price if their plan’s benefits change or expire.
They will also scrap unreasonably high penalties for not paying bills on time, and prohibit retail fees for vulnerable customers.
Millions of households will also see cheaper electricity bills from July, following changes to the default market offer.
For residents in NSW, the residential flat rate standing offer price will drop between 3.4 per cent ($66) and 5 per cent ($137). In Queensland, it will drop by 7.2 per cent ($155), and in South Australia it will increase by 1.4 per cent ($33).
Victorian households will see default prices drop by an average of 5 per cent for households, or around $84 a year.
The government’s Solar Sharer Offer will also kick in, offering three hours of free power to households with smart meters in NSW, SA and southeast Queensland.
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