Submission to the Senate Select Committee into Fair Dinkum Power

Retail price competition and deregulation has resulted in a market that requires consumers to become, and remain, highly engaged in the electricity market in order to pay a reasonable price for their electricity. PIAC supports allowing engaged consumers to make full use of competitive market offers and new technologies to derive the most benefit.

However, many consumers are unable to engage with the retail energy markets, due to low energy literary and/or technological barriers, or other priorities and issues that relate to their personal circumstance. Energy policy and regulatory frameworks must balance appropriate levels of protections so consumers continue to enjoy energy supply now while enabling the innovation and investment needed for the future.

To this end, PIAC has a number of priorities for reforms:

• Improve the use of demand response (DR) – DR solutions can be implemented more quickly than other generation or network investments and comes with lower investment risk, which leads to cost savings for all consumers. Yet, when compared to energy markets with effective mechanisms for demand response,  the amount of demand response in the NEM is trivial.
• Introduce default market offers – A strong default mechanism creates an incentive to innovate in a manner that will better serve customers though differentiation in service, rather than just price. The current process to develop a Default Market Offer is an opportunity to reshape the market to support better and more equitable outcomes for consumers in delivering an essential service. PIAC fundamentally rejects the notion that a strong default mechanism designed to constrain consumer bills to a relatively efficient price is somehow anathema to market competition and innovation.
• Accelerate the take-up of cost-reflective network pricing – Cost reflective network pricing represents a positive way for consumers to respond to price signals by strategically managing their electricity use, generation and storage in a manner that benefits them. To ensure that consumers with high peak electricity usage have time to adjust to cost reflective tariffs, a transition path that involves incremental increases in the cost reflective component of a tariff is needed.
• Improve support for low-income and vulnerable households – The first choice an energy consumer is entitled to make is: whether they wish to become engaged with the supply of their essential energy services at all. It must be possible for consumers to remain disengaged from their energy options and still receive a fair and affordable energy supply. Consistent with this, there must be effective safeguards and protections in place to ensure that those consumers who do not wish to, or are not able to, engage with the electricity market continue to receive fair and affordable energy supply.