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Victorians held to ransom in energy quagmire

MEDIA RELEASE

The Australian Competition and Consumer Commission has released a damning and definitive account of Australia’s energy affordability mess.

The report paints a distressing picture of Australians on low incomes grappling with unsustainable price increases, according to the state’s peak social advocacy body, the Victorian Council of Social Service.

“This is a horror show with no single villain,” VCOSS Acting CEO Mary Sayers said.

“Many players bear the blame for high prices: energy generators, the owners of poles and wires, retailers, and governments across the country who make struggling households pay for environmental programs.”

Among the many parts to the ACCC’s analysis, VCOSS welcomes recommendations to make the retail energy market fairer for people on low incomes.

“Energy retailers need to lift their game. The ACCC has found they’ve been a major contributor to poor consumer outcomes. Pricing is confusing and people who struggle to engage with the market are paying too much,” Ms Sayers said.

“Bills skyrocket when people cannot pay on time. Hardship customers can rarely meet the conditions of pay-on-time discounts, worsening their financial position.”

The ACCC report concludes the cost of selling electricity is particularly high in Victoria, driven by steep customer servicing and marketing costs. Both types of costs need to be tackled if prices are ever to come down.

Specifically, VCOSS welcomes the ACCC’s recommendations to:

  • RESTRICT conditional discounts (e.g. pay-on-time discounts) to no more than the reasonable savings to the retailer from the condition being met
  • REQUIRE discounts used in advertising to only include guaranteed discounts (i.e. discounts that don’t rely on people paying on time or online)
  • ANCHOR discounts to a ‘reference bill’ amount – a similar move could be taken in Victoria using the reference price developed by the Essential Services Commission, depending on the ultimate form the reference price takes
  • DELIVER $43 million in funding to community organisations for energy literacy programs.

VCOSS is pleased the ACCC has recommended it be made easier for “third party intermediaries” (or brokers) to help people switch energy deals and save, but caution people may be worse off if they don’t have access to an independent, government-backed brokerage service.

The ACCC has also recommended Victoria join the National Energy Consumer Framework, to harmonise our regulatory approach with other jurisdictions. While this may reduce customer service costs and help bring down bills, VCOSS doesn’t want to see people lose the unique protections currently provided by Victorian regulations.

Following the Thwaites review, the Victorian Government has already committed to reforms that will help people avoid dodgy deals and access cheaper energy. The ACCC’s recommendations generally align with, and can enhance, these reforms.

Alongside these welcome recommendations, we encourage the Victorian Government to consider the ACCC’s analysis of price regulation, including its recommendation to abolish the “standing offer” (or default energy deal) and replace it with a lower-priced default offer that would be capped by the government.
 

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