ACCC chairman Rod Sims said electricity retailers had been inflating standard prices so they could advertise bigger headline discounts without really cutting prices.
ACCC chairman Rod Sims said electricity retailers had been inflating standard prices so they could advertise bigger headline discounts without really cutting prices.

Plan in motion to set a default power price

PUTTING a cap on power prices could actually increase household bills, the state's pricing regulator is warning as the Morrison government prepares to green light the idea.

Energy Minister Angus Taylor has indicated the government will adopt the national consumer watchdog's plan to set a default power price - the maximum energy retailers could charge per kilowatt hour.

But NSW Independent Pricing and Regulatory Tribunal fears such a move would only push down prices in the short term and lead to lazy customer behaviour with less households shopping around for the best deal.

"In the short term a default tariff could help disengaged customers from paying excessive prices," the tribunal's latest report states.

"However, over time it is likely to result in less customers actively shopping around in the market as the benefits from switching fall.

"In turn, this smaller market for active customers would lead to less vigorous competition and innovation, with fewer retailers competing in this market."

The tribunal instead recommends a benchmark that would not be enforced but would allow customers to easily work out if they were paying too much.

 

In a landmark report released in July the Australian Competition and Consumer Commission proposed introducing default tariffs and new rules to require all discounted offers to use that default price as the reference point.

It found the proposed default tariffs would save NSW households on standing offers at least $105 a year.

ACCC chairman Rod Sims said electricity retailers had been inflating standard prices so they could advertise bigger headline discounts without really cutting prices.

"We have got to take the obscenity, the fluff, out of these standing offers," Mr Sims said.

Ahead of a major speech in Sydney today, Mr Sims told The Daily Telegraph he "confident" the default price would be implemented "because of what I hear ministers".

Mr Taylor said the government was actively working to implement a number of the ACCC recommendations.

"Setting a competitive default price for electricity is one of the most effective measures to drive down power bills," he said.

"Establishing a common benchmark price will also increase transparency and customers switching."

The ACCC's report made 56 recommendations to reduce prices, including backing the Coalition's now-defunct National Energy Guarantee plan, killed off in August under pressure from government MPs opposed to the emissions reduction commitments.



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