Submission to AER on Default Market Offer Pricing 23-24

PIAC made a submission to the Australian Energy Regulator (AER) in response to their Issues Paper on Default Market Offer (DMO) Pricing 2023-24.

PIAC continued to advocate for a more widely applied default protection reflecting efficient cost to serve. We recommended the AER consider the implications of the current and future energy market and how the DMO can be improved to offer better price protection to consumers, and discipline for the retail energy market.

In relation to the process setting DMO prices for 2023-24, PIAC recommended the AER should prioritise support for energy affordability. We argued the AER has scope to alter aspects of its previous approach, particularly where it has intentionally ‘balanced’ the interests of consumers with an objective to provide additional headroom to retailers. We specifically highlighted opportunity to:

• Remove cost of customer acquisition and retention from inputs included in cost to serve
• Alter the calculation of retail ‘allowance’ so that it is expressed as a proportion of retail cost to serve, rather than a proportion of the entire cost stack
• Improve the accuracy of wholesale cost modelling, prioritising outcomes for consumers where there are trade-offs between accuracy and transparency.