Rising energy prices create affordability problems

More Australian households are experiencing difficulty paying their power bills according to the Australian Energy Regulator’s (AER) annual report on the performance of the retail energy market.

AER Board member Jim Cox said the report provides important data on the way rising energy prices are being felt in homes across the country.

“Prices increased for most customers in 2017-18. Customers in the ACT had the largest increase for customers on market offers of 22.6 per cent while customers on standard offers in South Australia experienced the largest increase of 22.1 per cent.

“Energy became less affordable in 2017-18. South Australian low income households on standard offers have the least affordable energy in the National Electricity Market – with 11.2 per cent of a low income household’s disposable income being spent on electricity,” Mr Cox said.

The Annual Report on Compliance and Performance of the Retail Energy Market 2017-18 found that the number of disconnections increased by 7172 over the previous year. More electricity customers (1.1 per cent of customers) and gas customers (0.7 per cent of customers) are going into hardship programs offered by retailers. But fewer people that enter into hardship programs complete them successfully than in the previous year (22 per cent for electricity and 17 per cent for gas).

“Around 5 to 8 per cent of customers switch retailers each quarter”, Mr Cox said. “The best way for customers to save money is to shop around for a better deal using our Energy Made Easy price comparison web site.

“However, too many customers remain on expensive standing offers. Our work on a default market offer will provide these customers with savings. The related reference bill mechanism will also help reduce the complexity for customers in comparing market offers.”

The Tier One “Big Three” energy companies – AGL, Origin and Energy Australia – dominate the retail energy market (they serve 69 per cent of residential electricity and 86 per cent of residential gas customers) but smaller retailers are beginning to gain more market share.

Mr Cox urged customers who are having difficulty paying their bills to seek help.

“This report shows that more Australian households are experiencing difficulty paying their gas and electricity bills. It is vital that people ask for assistance before debt gets out of hand. Retailers are required by law to offer assistance to customers who find themselves in hardship.”

“Retailers are required to work with customers to negotiate a realistic payment plan. Customers should also work with retailers and advisors such as financial counsellors to ensure that they are receiving all the concessions and financial assistance that they are entitled to. Customers who are adhering to a retailer’s hardship plan cannot legally be disconnected”, he said.

Some retailers provided the AER with inaccurate performance data during the year.

“Many individuals and organisations that rely on our data for advocacy work were disadvantaged when we were required to remove inaccurate data form our website for part of the year.

“Businesses have assured us that they have improved their systems to prevent a repeat of these mistakes. We will be vigilant in monitoring their performance and taking action where necessary”, said Mr Cox.

Issued date: 
13 December 2018
AER reference: 
NR 39/18
AER Media 0466 409 921 media@aer.gov.au