Australia is transitioning to a new energy future. As our energy system transitions, the Australian Government’s priority is affordable electricity for all Australian households and businesses and ensuring there is enough electricity generation to reliably supply households and businesses.
A major package of measures was announced on 23 October 2018 to save Australian families hundreds of dollars a year off their power bills, though a new 'price safety net', action to stop customers being ripped off by energy retailers and by improving competition.
New support for reliable power will be achieved by requiring energy companies to sign contracts guaranteeing enough energy to meet demand. The Australian Government will work with state and territory governments through the Council of Australian Governments (COAG) Energy Council to ensure these contracts are in place.
Price safety net
The government has recently implemented the Competition and Consumer (Industry Code – Electricity Retail) Regulations 2019 (the Code) to bring down electricity prices.
From 1 July 2019, the Code sets a price cap on standing offer prices in electricity distribution regions where prices are not already subject to price regulation, and require retailers to use a common reference point to allow for easier comparison of electricity offers.
This follows the announcement by the government on 20 August 2018, that it would implement a default market offer for retail electricity standing offers as recommended by the Australian Competition and Consumer Commission (ACCC) in its Retail Electricity Pricing Inquiry final report. The government also announced it would adopt the ACCC’s recommendation to use the new default rate as a reference point in advertising.
These reforms are needed to improve, among other things, competition and transparency in the retail sector to deliver better price outcomes for consumers and address barriers to effective consumer engagement.
- Sets a price cap on some standing offer prices in electricity distribution regions where prices are not already subject to price regulation. This will reduce exorbitant costs for standing offer customers.
- Requires most retail electricity offers to be compared to the price cap to ensure consumers are able to easily determine the relative value and cost of electricity plans
- Confers new functions on the Australian Energy Regulator to determine the price cap and representative usage in each price-deregulated distribution region.
The Code will be introduced by a regulation change under the Competition and Consumer Act 2010.
The Australian Government consulted on the Code from 23 February 2019 to Tuesday 12 March 2019.
More information on the consultation process is available at the Department of the Environment and Energy website.
Stronger protections for energy consumers
The Australian Government will introduce legislation to implement a strong regime to crack down on poor market practices. The legislation will:
- empower the ACCC to recommend a range of enforcement remedies where unacceptable outcomes have been identified
- empower the Treasurer to issue contracting orders on advice from the ACCC, that will require electricity companies to offer electricity financial contacts to third parties
- empower the Federal Court to order divestiture of assets following an application by the Treasurer on advice from the ACCC (as a last resort)
- enhance the Australian Energy Regulator’s (AER) information-gathering powers
- support the COAG Energy Council agenda through Commonwealth legislation if required
The government has submitted rule changes to the AEMC to better protect customers, including placing limits on the penalties customers can face when they don’t pay on time
The government will also propose an ambitious agenda for the COAG Energy Council including:
- introducing a market cap on generation ownership
- increasing transparency in the wholesale contract market
- introducing higher penalties for breaches of the National Electricity Law and related laws, of up to $10 million
- increasing the AER’s powers to investigate market manipulation and impose appropriate remedies
More reliable electricity
Underwriting new generation investments
The Australian Government is establishing the Underwriting New Generation Investments (UNGI) program to create an ongoing mechanism to support targeted investment that will lower prices, increase competition and increase reliability in the system.
The program will provide financial support to firm generation capacity as part of the government's commitment to lowering electricity prices and increasing reliability in the system. It will be technology neutral, providing a level playing field to enable the best and lowest cost generation options to be supported. All technologies allowed under Australian law will be eligible under the program, including greenfield and brownfield projects, such as upgrades or life extensions of existing generators.
The program’s objectives are to:
- reduce wholesale electricity prices by increasing competition and supply
- assist commercial and industrial customers and smaller retailers to access affordable energy supply arrangements
- improve reliability by increasing the level of firm and firmed capacity in the system
The multi-phased program will be open over 4 years to June 2023. Each phase will be tailored, based on expert advice, so as to be fit for purpose in delivering on the program’s objectives. More information on the UNGI process is available at the Department of the Environment and Energy website.
Retailer Reliability Obligation
The Australian Government will support a reliable energy system by requiring companies to hold contracts or invest directly in dispatchable energy to meet demand. This will give households and businesses confidence that enough generation will be available to meet their electricity needs.
The Australian Energy Market Operator (AEMO) predicts that over the next 10 years there will be supply shortfalls in Victoria, New South Wales and South Australia if the market does not respond to fill the gaps.
The Energy Security Board (ESB) has been working to deliver a mechanism that ensures the reliable supply of energy for households and businesses in the National Electricity Market (NEM).
A Retailer Reliability Obligation is a long-term solution that will encourage investment in the right types of technology to ensure reliability. The obligation will be set to deliver the right level of dispatchable energy or ‘on demand’ sources (coal, gas, pumped hydro and batteries) needed in each state.
The Commonwealth is committed to working with the states and territories, through the COAG Energy Council, to progress the implementation of the obligation.
Australian Competition and Consumer Commission Australian Government
Final Report of the ACCC Electricity Supply Prices Australian Government