The Victorian Government has announced it will force big power companies to give Victorians a better deal on their power bills by legislating a new default offer, which the Australian Energy Council says is fraught with consequences.
The Labor Government says it will abolish standing energy offers and require energy retailers to offer a fairer price for energy – called the Victorian Default Offer.
The new measure is part of the Labour Government’s final response to the bipartisan Independent Review of the Electricity and Gas Retail Markets in Victoria.
The Labor Government is supporting all of the review’s 11 recommendations, including the new default offer, which will be implemented from 1 July 2019.
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The announcement by the Victorian Government comes after enormous pressure from the Federal Government for energy retailers to lower their energy prices by early 2019 or face divestment.
The Australian Energy Council’s chief executive Sarah McNamara said regulating retail markets puts investment in generation at risk, and the savings that come along with a more stable wholesale market.
“A reduction in wholesale price will deliver significantly more savings to consumers than re-regulating the retail price,” Ms McNamara said.
“Putting these savings at risk for political gain is not in anyone’s interest.
“Victoria’s attachment to re-regulation, absent any examination of the costs and benefits to the average consumer, is fraught with unintended consequences.
“To try and help the nearly six per cent of Victorians still on standing offers, the government’s move is likely to make all households worse off over time. That is because re-regulated markets often shrink, reducing the number of really cheap deals available, and forcing smaller retailers out of the market.
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“The industry has been working on measures to make the energy market more transparent, and supports the recommendations in the ACCC report which deliver sustainable savings across the supply chain.
“Today’s decision will also undermine investment in renewables – aside from those bankrolled by Victorian taxpayers – and the development of innovative products which support consumers, because retailers won’t be able to afford those investments.
“We will work with both the Federal and the Victorian Governments to clarify how each of their default offers will work. But neither is likely to fix the ongoing issue.
“The plain fact is that prices have been high because input costs are high. The wholesale market cannot stabilise without a national policy framework and a sensible and co-ordinated approach to regulation at a federal and state level.”