Friday, 20 September 2019 Sydney
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Guide for energy retailers on new Retail Code::

 

Energy retailers in South East Queensland, New South Wales and South Australia must comply with obligations under a new Electricity Retail Code from July 1 this year, including by advertising electricity plans in a way that makes it easier for consumers to compare prices and offers.

A new ACCC guide released today details how retailers in these regions should apply the new code in relation to their customers.

The Code introduces a cap on ‘standing offer’ prices that are often excessively high, to automatically bring down the cost of electricity to customers on these offers, many of whom cannot or do not access alternative market offers. The cap will be set annually by the Australian Energy Regulator (AER).

The Code also mandates that any prices and discounts must be calculated and advertised against an independently set benchmark known as the ‘reference price’, meaning 20 per cent off with one retailer is also 20 per cent off the same price as another retailer in the same region.

It also bans conditional headline discounting, meaning that conditional discounts must not be the most conspicuous price advertised, and requires all conditions to be clearly stated.

“These new rules, based on recommendations by the ACCC, increase transparency in advertising of electricity offers, and put consumers in a stronger position by enabling them to trust retailers’ advertised discounts and find a better deal,” ACCC Commissioner Cristina Cifuentes said.

“Current discounting practices confuse consumers and large discounts off inflated standing offers do not always result in lower electricity prices for consumers,” Ms Cifuentes said.

The ACCC’s March 2019 report found prices and bills have been increasing despite a steady rise in advertised discounts. This is because retailers generally advertise discounts from their own standing offer rates, making it difficult for consumers to compare offers.

In addition, retailers often advertise large conditional discounts and many consumers end up paying a much higher price when those conditions are not met. These ‘penalties’ provide an excessive benefit to retailers.

“I urge consumers to review their electricity deals after 1 July, and to shop around for the best deal,” Ms Cifuentes said. 

The ACCC guide explains:   

  • which retail electricity offers are covered by the code
  • how the cap on standing offer prices works
  • how price and discounts must be compared to the benchmark (or ‘reference price’)
  • other regulatory requirements that operate concurrently with the code
  • the consequences of non-compliance with the code.

The ACCC will enforce the code and monitor compliance.

As part of its ongoing monitoring of electricity prices, the ACCC will report on the effects of the code on the retail market and whether consumers are generally receiving a better deal.

For further information see: Electricity Retail Code.

Consumers are encouraged to visit the AER’s independent price comparator website, Energy Made Easy, to help find a better energy deal.

Background

On 20 August 2018, the then-Treasurer, the Hon Scott Morrison MP, directed the ACCC to hold an inquiry into prices, profits and margins in relation to the supply of electricity in the National Electricity Market.

The current inquiry follows the ACCC’s Retail Electricity Pricing Inquiry June 2018 report into the supply of retail electricity and the competitiveness of retail electricity prices in the National Electricity Market which contained 56 recommendations. This included that:

  • standing offers should be replaced with a default offer set by the AER (Recommendations 30 and 49)
  • all advertised headline discounts must be guaranteed discounts, and be calculated against a reference bill set by the AER (Recommendations 32 and 50)

The Australian Government announced in August 2018 that it would introduce a Default Market Offer. The Council of Australian Governments Energy Council agreed to adopt a reference bill. These were implemented through a mandatory industry code under the Competition and Consumer Act 2010.