Call to prevent energy bill shock due to business failure

The Australian Energy Market Commission (AEMC) has called for new measures to prevent consumers’ energy bills from giving them bill shock if their retailer goes out of business.

The recommendation is one of several in the AEMC’s 2020 Retail Energy Competition Review, which this year addresses the potential impacts of COVID-19 on the market.

Under the plan, customers who lose their existing retailer would automatically be placed on a competitive market offer with their new provider, rather than a more expensive standing or default offer, as happens now.

“The risk of a retailer going out of business is greater today due to the extraordinary economic pressure many businesses are facing due to COVID-19,” AEMC chief executive Benn Barr said.

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“We want to make sure that if this happens in the future, consumers won’t be facing higher energy bills through no fault of their own. Our plan would ensure the customer’s new retailer, called the ‘retailer of last resort’, would be prevented from automatically putting their new clients on more costly default offers.

“The best-case scenario is to avoid multiple retailer failures altogether because that would take us back a decade, when customers had the options of only a handful of larger players and had much less choice than they have today.”

The Retail Competition Review also highlighted the vulnerable position of more than a million residential and small business customers in apartment complexes, retirement villages, shopping centres and caravan parks, who receive their energy via private ‘embedded networks’.

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These customers aren’t protected in the same way as regular small customers when it comes to being disconnected and being able to access concession and Ombudsman schemes. This is even more concerning given COVID-19. The Commission has developed a comprehensive package of changes to laws, rules and regulations to protect these consumers and recommends they are implemented.

Retailer profit margins have also declined over the past three years, falling by around a third since 2017−18. This could have placed some retailers in a less secure financial position in the lead-up to the pandemic. Early indications to date are that the ‘Big 3’ retailers are not being impacted by the pandemic to the same extent as smaller retailers due to their higher retail margins and greater access to credit.