A series of major reforms over the past 25 years have established sophisticated energy markets in Australia that are delivering benefits for consumers across Australia.
Spotlight on competition
The COAG Energy Council has put in place annual reviews of energy retail competition as well as price trends, both of which help monitor market development and identify areas for further review and analysis.
The 2015 retail competition review finds that competition is well established in energy markets and consumers are finding significant savings by switching retailers and energy deals.
Australian Energy Market Commission (AEMC) surveys show most Australian energy consumers are today satisfied with their level of customer service and value for money but some groups are still better informed than others. This consumer research shows better informed energy consumers are more confident in shopping around and more able to take advantage of opportunities being created by new technology in our transforming market.
Consumer choices driving market change
The AEMC is implementing the Power of Choice reforms initiated by the Council to increase options for families and businesses to minimise future energy price rises.
Power of Choice is all about opportunities for consumers to make informed choices about how they use energy; and incentives for efficient investment so community demand for energy services can be met by the lowest cost combination of demand and supply options.
Effectively managing energy demand contributes to reducing the cost of supply. A shift in use away from peak periods or a general reduction in consumption can delay investment in generation, poles and wires, reducing overall cost and ultimately lowering prices for everyone.
This market development program helps facilitate the ability of consumers to make the choices that suit their individual circumstances best and encourages technological innovation; energy conservation and efficiency; peak demand shifting; fuel substitution; and local generation.
The network reform program developed over the past three years has been extensive. By July 2017 the prices people pay will reflect the different ways they use electricity and the costs of providing it to them.
The Australian Energy Regulator (AER) is implementing new network rules (made in 2012) which affect the costs which make up to 50% of people’s bills. Prices are starting to fall following AER determinations which take into account business efficiency benchmarks. The AER is also now required to release comparative reports on network business performance.
The way we pay for power is changing to keep pace with modern lifestyles. When prices reflect how much it costs to use different appliances at different times, consumers will be able to make more informed decisions in the face of changing energy products and services and increasingly competitive energy deals.
New cost-reflective network rules (made in 2014) mean consumers who reduce demand at peak times could save money and help reduce the need for further network investment – reducing costs for everyone over time.
Metering and consumer information
The COAG Energy Council requested that the AEMC develop a new framework for establishing competition in metering to support greater access to new technologies which can help consumers take control of their electricity use.
This work follows new rules initiated by the Council for customers to access their electricity consumption data from their retailer or distributor in an understandable format and in a timely manner. These initiatives, building on more cost-reflective tariffs are another step forward in expanding the information and tools people need to better manage their bills.
One of the COAG Energy Council’s most important reform elements is the current implementation of the National Energy Customer Framework (NECF). The NECF includes the National Energy Retail Law and the National Energy Retail Rules which have increased protections for consumers.
There are now requirements for energy retailers to develop customer hardship policies for people in financial difficulties and new rules to give customers comprehensive information on energy costs and options before energy contracts are entered into. It has also helped expand the capacity of retailers to compete with each other across state borders.
The NECF has been progressively introduced, along with modifications in some states and territories to address particular geographic or customer related issues.
Rapid advancements in technology have enabled widespread adoption of distributed (local) generation; smart metering; connected home appliances and services; and emerging off-grid game-changers like storage.
The boundaries between what needs to be subject to economic regulation and where competition is working to benefit consumers are being redrawn as consumers use better information and comparison shopping to participate confidently in the transforming energy market.