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The ACCC fires a missile at the energy industry - what does it mean for you?

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The ACCC delivered its long-awaited report on electricity prices on 11 July. Weighing in at 398 pages with 56 recommendations for change, it’s dug into every corner of what it paints as a pretty broken industry. So what does all this mean for you?

Got solar?

The ACCC finds that feed in tariffs tend to exceed the costs that solar exports save retailers. While it stops short of recommending any changes, it may put pressure on State-based regulators who were thinking of mandating minimum levels that were higher than they would naturally be. At Energy Locals we’re hugely supportive of solar customers and the benefit they deliver to Australia’s energy market, which is why we already have higher-than-average FiTs.

Thinking of new solar?

If you’re thinking of getting solar for the first time or are moving house and want to install it, you might want to do it within the next two years. The ACCC has recommended that the certificate scheme that provides a subsidy for new solar installations is scrapped from 2021. This would increase the cost of a system by around 30%, although if manufacturing costs continue to decline then the impact may not be as great.

What’s the discount off?

The report is scathing over the way in which retailers have used discounts to confuse customers and the premium that’s been paid by ‘inactive’ customers who have paid Standing Offer (default) prices. As you know, we don’t play those games and we’re pleased to see the ACCC recommending that Standing Offers are binned. In their place would be lower-priced default offers with the rates set by the Australian Energy Regulator.

Discount small print

It’s recommended that any discounts that may be offered are based on the default tariff. More importantly, the sneaky game of advertising headline discounts that are actually conditional on all sorts of behaviour is to be outlawed.

Compare some of the market

You’ve seen adverts for comparison companies that promise to find the best deal. The ACCC has found that these companies don’t compare the whole market - just part of it - and that they can be highly partial when recommending an offer (i.e. who pays them the most). At Energy Locals we don’t waste our customers money on these websites. If the ACCC gets its way, in the future comparison sites will need to declare that they earn a commission and will be required to offer the product that best matches a customer’s situation. This is good but the ACCC could have gone much further and required these sites to compare all offers.

Network costs

Within our tariffs we include the cost of the poles & wires, which are a regulated price. The ACCC finds that networks have been ‘gold plated’ in recent years and calls on the State governments to write down the value of these assets in Qld and the Essential region of NSW. In other parts of NSW it suggests that the government funds rebates that will be paid via lower network prices. In our view, the damage has already been done and whether network prices remain high or whether they’re reduced by an injection of public money, it’s coming out of our pockets one way or another.

Did your phone ring red hot?

Customers who join Energy Locals tell us that some retailers call them relentlessly when they find out they’re leaving (over a dozen times in one example). The ACCC wants the ‘losing’ retailer to only find out that you’re leaving on the day that your switch is complete. They’re also keen to let customers speed up their transfer by submitting their own meter reading.

Wholesale energy prices

After finding that the wholesale energy market is controlled by too few players (who in many cases also have large customer bases) the ACCC wants a ban on any company buying their way to more than 20% share of the generation market. There are some exclusions to this though, and those already over 20% won’t have to change. While the report recommends an increase in the civil penalties for dodgy bidding behaviour by those who run power stations, in the past it’s been hard for the authorities to pin down this behaviour. While we were hoping to see a harder line taken in this area, it’s encouraging to see a recommendation for the government to commit to purchase the output of new generation, which will give greater certainty to investors that are currently hesitant about the state of the market. Such a move should increase new capacity and help to reduce prices.

So what?

With all these changes, what can you expect to see on your bill? The ACCC predicts an average saving of 25% across the board if all 56 recommendations are implemented by the government. As an Energy Locals customer you already benefit from the areas that are within any retailer’s control (ie discounting and transparency). Other changes - especially the big ticket items relating to network costs and wholesale prices - are likely to have the biggest impact, but only time will tell whether the government is willing to force these changes into an industry that has already been quoted in the press as being highly cautious. Given the feast they’ve enjoyed for the years leading up to this report, they have good reason to be.