Electricity retail prices too high

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Related Project: Energy + Water

August 17, 2016

Electricity tower

Photo: Flickr/ Philippe put

Research by energy economist Bruce Mountain, released this week, confirms that the big three electricity retailers (AGL Energy, Energy Australia and Origin Energy) are charging two to three times more to sell electricity in NSW, VIC, SA and QLD, where the market has been deregulated, than the regulated retailer is charging in the ACT. 

The ultimate promise of the competitive market is that it will lead to lower prices for consumers. This is vitally important for vulnerable consumers, for whom energy bills are a significant proportion of living expenses. The report shows, however, that this promise is not being met.

The report further supports the findings that the retail component of bills is too high in the deregulated, competitive electricity market and it appears that this is either because the cost of competition is high or because competition is ineffective. 

One of the key challenges in deregulated markets is that the onus is on consumers to ensure that they pay the lowest price or find the product that best meets their needs. There is a risk that consumers who ‘set and forget’ their electricity supply arrangements, or are not able to effectively navigate the competitive market, will pay more than they need to for essential energy services. 

That’s why it is very important that the operation and outcomes of the competitive market are effectively monitored, to ensure they are occurring in the long-term interests of consumers. Understanding the pricing of electricity is a complex and specialist area. PIAC will continue its work in monitoring the effectiveness of deregulation to ensure that the needs of consumers are properly protected.

Photo: Flickr/ Philippe put

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