The Morrison government is trumpeting a breakthrough to deliver lower power prices, saying customers on standing offers could secure savings worth hundreds of dollars after 1 July.
The Australian Energy Regulator has released a draft default market offer, which effectively caps prices for electricity consumers on standing offers, and can act as a comparison for other households and small business customers.
The regulator says its ruling, if adopted, would lead to “reductions in median standing offer prices in all distribution zones” of up to $218 for residential customers on flat-rate tariffs.
The move to set a default market offer follows a recommendation from the Australian Competition and Consumer Commission, which found that standing offers marketed by energy companies were unjustifiably high, and recommended that in non-price regulated jurisdictions, the standing offer and standard retail contract should be abolished and replaced with a default offer.
Victoria has already announced it will implement a default offer, so the new ruling, if it comes into force, will apply to households and small businesses in New South Wales, South Australia and South East Queensland – about 750,000 residential customers.
The government is under acute political pressure to deliver on its promises of relief on power prices. Implementing the proposal will require legislation, which has not yet been passed.
Pressing ahead with pricing reform follows the government having to pull its heavily criticised “big stick” package from the parliament because Labor and the Greens had the numbers to insert an amendment which would have prohibited the commonwealth from providing taxpayer support to new coal plants.
While some Liberals had serious reservations about that package, the step back prompted internal criticism from the Nationals.
The withdrawal of the package, which would have created a divestiture power to break up energy companies if they engaged in price gouging, followed an intense lobbying effort by the energy sector and by business associations deeply concerned about the heavy-handed market intervention.
Energy companies have already expressed concern that price regulation of the type the government proposes could have unintended consequences.
But the energy minister Angus Taylor has said pricing reform is essential. “For too long, the energy companies have been taking advantage of loyal Australian families and small businesses who have been paying the highest electricity prices on the market.”
He said the Victorian government was pursuing its own scheme, but the savings needed to be comparable to the proposed federal regulation or “the commonwealth with take further action to ensure Victorian electricity customers are put first”.
The government is also expected to outline new measures on climate change imminently.
It has telegraphed for some months a plan to top up the Emissions Reduction Fund, a vestige of the Direct Action scheme, and there has been an internal push to increase funding for the Clean Energy Finance Corporation and the Australian Renewable Energy Agency.
There has also been a push from Liberal MPs for the prime minister to unveil new measures to drive emissions reduction in households and businesses.