The Australian Energy Market Commission (AEMC) today released its final report to the Victorian Government and the Ministerial Council on Energy (MCE) recommending removal of energy retail price regulation for Victorian residential customers from 1 January 2009.
The report completes the AEMC's review of energy retail competition in Victoria and reflects the conclusion of its December 2007 report that retail competition in Victoria is effective for both electricity and gas.
AEMC Chairman, Dr John Tamblyn, said the removal of retail price regulation in Victoria would further extend the benefits of competition to consumers by enabling them to choose from a wider range of price and service options than is currently the case.
"Where competition is providing choice and efficient outcomes for energy consumers there is no need for retail price regulation" Dr Tamblyn said. "Rather, maintaining price regulation in an effectively competitive market adds unnecessarily to retail costs and distorts effective functioning of the market to the detriment of energy consumers".
Together, effective energy retail competition and the strong Victorian consumer protection regime provide a sound basis for removal of retail price regulation Dr Tamblyn said. However, the AEMC has recommended a number of improvements to consumer protection in the light of the proposed removal of price regulation.
In its final report the AEMC has recommended:
- Replacing the Government's current reserve power to regulate energy retail prices with a conditional power to regulate those prices only if an AEMC review finds competition is no longer effective and that price regulation is the appropriate response.
- Enabling the Government to request such a review quickly in relevant circumstances.
- Maintaining the obligation for retailers to offer to supply and sell energy to residential customers.
- Requiring all retailers to determine and publish the standing offer prices and other terms and conditions that apply to their obligation to supply and sell energy.
- Requiring the Essential Services Commission of Victoria (ESC) to issue guidelines regarding the format in which retailers are to publish standing offer prices.
- For ease of reference and comparison, requiring the ESC to collect and publish on its website details of all retailers' current standing offer tariffs.
- Introducing a regime for the ESC to monitor and report publicly on these standing offer prices for a period of at least 3 years after retail price regulation ends.
- Undertaking a consumer awareness program to assist Victorians to understand the changes and to inform them of the opportunities offered by the competitive energy retail market.
"The capacity for the Government to respond quickly if an AEMC review identifies a material deterioration in competition would reassure consumers" Dr Tamblyn said "but the AEMC does not expect the need to arise in the highly competitive Victorian energy retail market".
Dr Tamblyn said the requirements for retailers and the ESC to publish standing offer tariffs, the price monitoring regime and the ESC's annual performance reports will keep the Government and the community well informed about the future performance of the retail market.
The AEMC's review of the Victorian retail gas and electricity markets was initiated by an agreement of the Council of Australian Governments and a direction of the MCE. It will be followed by similar reviews in other States and Territories.