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Josh Frydenberg lashes power retailers over ‘social licence’

By Ben Potter and  Angela Macdonald-Smith / APR / 15 June 2018

Main Image: “It’s pretty hard to argue that the market is working as intended in the best interests of customers,” said Energy Australia chief executive Catherine Tanna.

More energy retailers moved to hold or slightly trim their prices as Energy Minister Josh Frydenberg threatened more regulation and lashed them for losing customers’ trust by providing poor value for money.

Mr Frydenberg told customers to go to the Australian Energy regulator’s Energy Made Easy website – rather than commercial comparison sites such as iSelect which charge commissions – “and save hundreds of dollars a year just as I did”.

Lumo Energy and Red Energy, which are owned by the federal government via Snowy Hydro, cut electricity tariffs in Queensland by 2.2 per cent for households and 4.4 per cent for small business, saving typical customers $36 a year and typical firms $200.

The government-owned retailers cut electricity tariffs in South Australia – the state with the highest prices – by 1.5 per cent for households and 2 per cent for small business, saving typical customers $32 a year and $78 respectively. They held NSW electricity tariffs flat and raised gas prices by 1.8-2.5 per cent in SA and NSW.

Electricity customers have lost trust in their retailers and confidence that the market can work in their long-term interests. Photo: Glenn Campbell

“Energy retailers have a social licence to operate. They have an obligation to Australian families and businesses to ensure that people are paying no more for their power bills than they have to, but this report is a damning indictment of the behaviour of the companies.”

Mr Frydenberg said it was not good enough to impose a “loyalty tax” on customers who did not shop around by leaving them on high standing offers, which can cost up to $832 a year more than market offers. The government has asked the AEMC to formalise in a new rule an agreement by the companies last year to alert customers when their discounts expire.

Ms Tanna said some of the criticisms were justified. “It’s pretty hard to argue that the market is working as intended in the best interests of customers when the prices go up as they did last year,” she said.

“We actually understand that customers find it hard to identify the best deal for them. We agree with a lot of the AEMC findings and we’re trying to address those issues here.”

Energy Minister Josh Frydenberg has threatened more regulation and lashed retailers for losing customers’ trust by providing poor value for money. Photo: Alex Ellinghausen

Earlier on Friday EnergyAustralia managing director Catherine Tanna pointed to the “first tangible sign” of easing pressure on household power bills as the retailer fell into line with major rivals AGL Energy and Origin Energy with modest cuts to some tariffs.

EA is reducing electricity tariffs for Queensland homes by 3.8 per cent from July 2, and 7.2 per cent for small business. In SA, prices will be held flat for both electricity and gas, while in NSW, electricity prices will be trimmed by 0.2 per cent for homes, with steady gas prices.

‘Social licence’

Despite the falls Australians still pay the highest retail electricity prices in the world, and Mr Frydenberg said a report by the Australian Energy Market Commission showing that consumer trust in energy companies had plummeted was a “wake-up call”.

He said the government would be open to any recommendations for further regulation from the Australian Competition and Consumer Commission’s report on retail electricity due this month, but did specify reforms.

Go to the government’s ‘Energy Made Easy’ website “and save hundreds of dollars a year just as I did”, says Energy Minister Josh Frydenberg. Photo: Louie Douvis

$48m-$50m hit

EA’s price changes will mean a saving of more than $80 for the average residential customer in Queensland and of about $470 for a small business customer.

In NSW, EA is trimming usage and supply charges by 3 per cent for the 80,000 customers on its “Secure Saver” offer which guarantees no increases in return for customers sticking with their account for two years.

EA said its marginal cuts in electricity tariffs in NSW meant it would take on $48 million-$50 million of costs rather than pass them on to customers – similar to the $56 million Origin indicated it would absorb under its new tariffs.

Ms Tanna said the AEMC’s criticism that retailers were not changing quickly enough probably related to the practice of some rivals of shifting customers onto the standing tariff automatically when market offers end, something that EA doesn’t do.

Ms Tanna wouldn’t comment on whether EA’s retail margins would increase or shrink under the revised tariffs but said EA was absorbing some higher costs on behalf of customers.

Iain Graham, CEO of Lumo and Red, said a reduction in wholesale energy prices with new renewable energy coming online had allowed the companies to deliver savings to their customers despite cost pressures elsewhere in the supply chain.

 


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