The AEMC today published its advice to the COAG Energy Council recommending that a reference price be set to help customers compare retail offers on a like for like basis.
At its October meeting, the COAG Energy Council asked the AEMC to assess the potential customer and competition impacts of setting a “hard cap” default offer. Our advice outlines the benefits and risks associated with a hard cap on prices for customers on standing and market offers. It focusses on New South Wales, South Australia and South East Queensland where the proposed default offer would apply.
The Commission recommended that a reference price (sometimes called a comparison rate) be introduced to help customers compare standing offers and market offers. The additional transparency provided by a reference price would also remove the incentives for retailers to set high standing offers simply to advertise a so-called larger discount.
At the COAG Energy Council meeting on 19 December 2018, Ministers agreed to the adoption of a reference bill in network regions that do not have a regulated standing offer price by 1 July 2019.
The Commission will provide advice in its 2019 Retail energy competition review on targeted actions to help customers on standing offers compare and select a deal that suits their needs.
Media: Prudence Anderson, Communication Director, 0404 821 935 or (02) 8296 7817
Background: market and standing offers
Market offers are set by energy retailers. Retailers have flexibility in designing market offers for customers; including how they set prices, discounts, incentives, different billing periods and additional fees and charges for flexible service arrangements.
Customers who don't sign up to a market offer are put on a retailer's standing offer where:
- prices are generally higher than for market offers
- prices can't change more than once every six months
- discounts can't be applied.
In general, standing offers are used as a benchmark against which retailers may offer discounted prices.