Welcome news: ACCC review into electricity retail margins

PIAC has welcomed the Federal Government’s announcement of a review into retail electricity prices in the National Energy Market, to be undertaken by the Australian Competition and Consumer Commission (ACCC).

PIAC has repeatedly called for a review into retail prices as growing evidence has emerged that the retail component of household electricity bills is significantly higher in deregulated retail markets compared to regulated markets. This was confirmed recently by a Grattan Institute report into electricity and gas retail prices in Victoria.   

The terms of reference task the ACCC with assessing;

• the key cost drivers of retail electricity pricing;
• the existence and extent of any entry barriers in retail markets;
• the impact of vertical integration;
• whether there is any behaviour preventing or limiting competition or consumer choice; and
• the profitability of electricity retailers and whether these profits are commensurate with the risk retailers face;
• wholesale market price, cost and conduct issues relevant to the inquiry.

An interim report is due in 6 months and the final report by 30 June, 2018.

While PIAC is supportive of this review we are concerned that gas retail prices have not been included. Gas pricing has come under scrutiny in recent weeks due to the opaque nature of the pipeline and wholesale gas industries. Gas pricing has only recently been de-regulated across the NEM, and the ACCC review would provide a timely opportunity to assess how effective this has been.

This review comes at a critical time as the impact of ineffective competition leads to consumers, particularly those who are vulnerable, paying more for their energy. We know that consumers who ‘set and forget’ their electricity supply arrangements, or are not able to navigate the complexities of the competitive market, are paying more than they need to for essential energy services. While competition has the potential to reduce bills, it must take into account the essential nature of this service and ensure that the market benefits all consumers equally.