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ACCC encourages Australians to compare electricity plans as offers rise above safety net


The Australian Competition and Consumer Commission (ACCC) is calling on households and small businesses to look for cheaper electricity plans in light of recent price hikes that surpass the regulated safety net. These price increases have been noted to range between 10 to 20 percent above the established safety net.

The safety net for electricity prices was designed with the intention of safeguarding disengaged consumers. This framework enforces pricing regulations that restrict the amount energy companies can charge customers under standing offer contracts.

Of the residential customers, approximately 10 percent are currently under standing offer contracts, while the majority, about 90 percent, are subscribed to market offers. It has come to the ACCC's attention that several energy companies have sent letters to market offer customers, notifying them of impending price hikes exceeding the safety net.

ACCC Commissioner Anna Brakey highlights that recent price adjustments have led to many Australians paying more for electricity than necessary, as these increased rates surpass the safety net stipulated in standing offer contracts. Interestingly, the safety net, originally designed to protect disengaged consumers, is now proving to be a more economical option for a significant number of individuals.

Energy companies are mandated to disclose the percentage variance between their offered electricity plans and the regulated standing offer, also referred to as the reference price. This enables customers to make informed comparisons.

Recent correspondence observed by the ACCC, directed at residential customers in regions including New South Wales, Victoria, South East Queensland, and South Australia, contains information concerning price increases:

  • Certain new rates exceed the DMO reference price by 21%, but this discrepancy can be reduced to 4% if payments are made on time.

  • Another Energy Plan is priced 19% higher than the reference price.

  • Due to rate adjustments starting from July 1, 2023, your plan will now be 9% above the reference price.

For an average household with a market plan that now stands 21 percent above the reference price, potential savings of around $400 per year could be achieved by transitioning to the regulated standing offer, assuming average consumption. Similarly, switching to a market offer that is 10 percent below the reference price could result in savings of about $600 per year for the same household and consumption pattern.

Ms. Brakey reiterates that the government-established safety net price for electricity serves as a protection measure, and customers should not be paying more than this benchmark. Given the ongoing challenges posed by high energy costs and the broader increase in living expenses, taking the time to explore cost-effective alternatives is a worthwhile endeavour. 

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Additionally, recent analysis by the ACCC highlights that 90 percent of currently advertised market offers fall below the reference price. Despite this, there exists significant price variation among offers below the reference price, with some smaller retailers providing substantial discounts.

“The case for switching to a different energy company is strong because the cheapest offers in the market appear to be reserved for new customers, rather than existing ones,” Ms Brakey said.

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More Information

What is the difference between a Market Offer and a Standing Offer?

Market offers are designed by energy retailers to attract diverse customers and can encompass various elements such as discounts, time-of-use pricing, and solar feed-in tariffs. About 90 percent of residential customers are currently subscribed to market offers.

On the other hand, regulated standing offers serve as a safety net, ensuring customers who have not explored alternative retailers receive a basic service at a reasonable price. In New South Wales, South East Queensland, and South Australia, this regulated standing offer is referred to as the Default Market Offer (DMO), while in Victoria, it is called the Victorian Default Offer (VDO).


What is DMO and VDO?

Both the DMO and VDO serve a dual purpose by acting as a price cap for standing offers and a reference point for market offers. Retailers are mandated to express the price of market offers as a percentage in comparison to the DMO and VDO, simplifying the process for customers to make meaningful comparisons.

It's important to note that the reference price is based on modelled consumption assumptions and doesn't represent an actual price. The amount customers ultimately pay is contingent upon their actual electricity usage.

Anne Williams 14 Aug 2023