A proposal to slash Victorian power bills by forcing energy companies to offer a no-frills “basic service offer” is meeting fierce resistance from renewable energy retailers, who have leaped on a recent warning by Australia’s competition watchdog that it will drive smaller operators out of business.
The Australian Competition and Consumer Commission has warned the Andrews government that there are “significant risks” in adopting a basic service offer, including that “it may lead to some retailers exiting the market, leading to fewer options for consumers”.
The regulator argued in a report late last month that the recent emergence of innovative strategies such as demand management – rewarding customers to power down at peak time – will do more to cut bills than a government-imposed flat rate.
Advocates for the disadvantaged also fear the proposal could eventually push up power prices for those who can least afford it, with St Vincent de Paul Society urging the Andrews government to tread carefully before re-regulating Victoria’s electricity retail market.
Gavin Dufty is head of policy at St Vincent de Paul and said there was a risk that the basic service offer would gradually rise in cost over time.
It would also make the state’s $2.24 billion investment in smart meters all but redundant, he said.
“Why would you have a basic service offer when the government made us spend about $2.5 billion on smart meters. What’s the point? You’ve just got a stranded asset,” Mr Dufty said.
“We keep looking at it and seeing all these unintended consequences.”
The government has sat on the idea of a basic service offer – the key proposal of a m
ajor report into Victoria’s electricity retail market, led by former Labor deputy premier John Thwaites – for a year.
Handed down in August 2017, the report found competition in the electricity market
had delivered few benefits for consumers, and that retailers had profited from confusion and apathy about energ
y deals by putting their most loyal customers on more expensive default offers.
It recommended forcing retailers to replace their default offers with a basic service offer at a cheaper price set by the Essential Services Commission.
But smaller retailers and renewable energy providers are warning the proposal could have the unintended consequence of curbing the extraordinary boom in renewables projects under way in Victoria.
Some are threatening to leave the state if the Andrews government adopts the Thwaites review’s key recommendation.
“Under a basic service offer, we won’t survive,” said Nicholas Frances Gilley, chief executive of solar retailer DC Power Co.
“We would no longer invest in Victoria under a basic service offer,” said Ed McManus, chief executive of renewable energy generator Meridian and retailer Powershop.
DC Power Co is the first energy company to use the Turnbull government’s crowd-funded equity legislation to launch as a retailer, and has gathered about 17,000 shareholders ahead of its planned launch in October.
Its new shareholders are households who have solar panels and are seeking to cut ties with big retailers such as AGL, Origin and Energy Australia.
Among them is Ash Cooke, a truck driver with a five-kilowatt solar system on the roof of his Craigieburn home.
Mr Cooke became fed up with his retailer after they twice failed to tell him there was a fault with his solar inverter, which stopped him feeding power back into the grid and being paid the solar feed-in tariff.
“Energy retailers are not interested in telling people if their solar is not working because they’re only interested in selling power to you,” Mr Cooke said.
Victorian Premier Daniel Andrews said on Sunday that the government had not reached a decision on imposing a basic service offer.
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