The consumer watchdog says a household could save up to $415 a year on power bills if its call for a big boost to competition in the electricity sector is implemented.
The Australian Competition and Consumer Commission (ACCC) has declared the national electricity market is broken and says it needs to be reset.
A lack of competition and policy mistakes have added significant costs to power bills, the ACCC said.
“It is clear that most households are paying far too much for electricity. In addition, some of the most vulnerable in our community are forced to struggle through freezing winters and scorching summers with many others also having difficulty paying their bills,” ACCC chairman Rod Sims said.
He has recommended changes to the way people are charged for power, saying retailers have made the price structures confusing and difficult to compare.
Mr Sims said many customers are paying an excessively high charge to their power retailer and said the standard price should be a new default offer which is consistent across all retailers so it is easier to compare.
He said customers who hadn’t shopped around had “been taken advantage of”.
“We are now going to end that, by having the Australian energy regulator set the price for those who don’t engage in the market,” he said.
Mr Sims said that would make it much easier to compare offers.
“So when a customer sees a discount of 20 per cent from one player and 15 per cent from another they have every confidence the 20 per cent discount is the better offer.
“They don’t have that confidence now,” he said.
The ACCC also wants a crackdown on comparison websites so that offers are recommended on the best outcome for the customer and not the commission paid.
Mr Sims said his recommendations would bring down prices by between 20 and 25 per cent for the average household or about $290 and $415 per year.
Energy market too concentrated: report
The Grattan Institute’s Tony Wood said there was no doubt Australia’s energy market was too concentrated.
The ACCC found this concentration resulted in a lack of competition, which has kept power prices high.
“In this case, I think the ACCC is absolutely right,” Mr Wood, the think tank’s energy program director, said.
“Some of that has happened through past mergers and acquisitions, some through government ownership and some through plants closing down and leaving the existing ones with a high market power.”
Mr Wood said the ACCC report also showed retailers had failed to stop misleading customers, despite pressure from the Federal Government.
“I think it’s one thing that’s going to have to be tightened up,” Mr Wood said.
“Weird advertising, confusing advertising, strange discounts no-one can understand, effectively penalties for paying about 24 hours late, big penalties.
“These things are fundamental practices that need to be fixed at the same time as some sort of benchmark or comparative rate that makes it much easier for consumers to see whether they’re getting a good deal or not.”