Review of retail competition in NSW – Final Report
Today the AEMC released its final report on the effectiveness of competition for small electricity and natural gas consumers in New South Wales (NSW).
We have found that competition in NSW retail energy markets is delivering discounts and other benefits to small consumers with more than 60 per cent of electricity and gas consumers already on market contracts.
Consumers have a choice of retailer and a choice of product or service, and many are taking advantage of the choices they have.
AEMC Chairman, John Pierce, said the Commission is confident that competition in NSW is sufficiently robust to promote choice and provide benefits to consumers.
"Consumers are voting with their feet and switching to competitive market contracts in large numbers, and our competition review clearly points to opportunities to make it even easier for more people to understand and compare different retailer offers.
"Substantial discounts are available right now depending on where consumers live, how much energy they use and how they prefer to manage their bills," Mr Pierce said.
"Around 60% of small NSW electricity consumers and 70% of small natural gas consumers have chosen a competitive offer, and 21% of electricity consumers and 14% of natural gas consumers switched their retailer in 2012 in pursuit of a better deal.
"In these competitive retail markets, the regulated price is not the best price, as customers are finding every day when they switch to market offers.
"It’s important to remember the reasons for recent power price increases. Price pressure has come from outside the retail sector and was largely due to the regulated network sector.
"The regulated price is no longer needed in this environment of effective competition, -- removing retail price regulation is expected to lead to more innovation, product choice and competitive pricing.
"Maintaining consumer protections is a key part of our recommendations.
"We are also recommending ongoing market monitoring of competition in NSW, with the ability to reintroduce retail price regulation if needed in the future," Mr Pierce said.
The review’s final report proposes a package of measures to enhance competition, including removing retail price regulation, improving information for consumers, maintaining consumer protections, and ongoing market monitoring.
"We will be releasing a supplementary report at the end of the month with recommendations to give consumers information and support to find a deal that suits their needs" Mr Pierce said.
Key points
- Promoting consumer choice
- The regulated price is not the best price. Substantial discounts are available in the market right now depending on where consumers live, how much energy they use, and how they prefer to manage their bills.
- We are confident that competition in NSW is sufficiently robust to promote choice and provide benefits to consumers. In our report, we recommend removing retail price regulation and expect it will lead to more innovation, product choice and competitive pricing.
- Maintaining consumer protections
- We recommend ongoing market monitoring of the state of competition. This should be accompanied by the ability to reintroduce retail price regulation if required.
- The National Energy Customer Framework (NECF), which the NSW government enacted on 1 July 2013, provides protections for consumers, such as requiring energy retailers to offer hardship programs and regulating some contract terms and conditions. In implementing NECF, the NSW government chose to provide some additional protections that will continue should retail price regulation be removed. For example, under the NSW NECF modifications, limits are imposed on who may be charged early termination fees.
Next steps
We will release a supplementary report by the end of October 2013 with recommendations to give consumers information and support to find an energy plan that suits their needs.
The supplementary report is focussed on making it easier for consumers to understand and to compare offers.
In preparing the supplementary report, the AEMC has undertaken thorough social research and consulted widely with consumer groups, retailers, small business, and people working on behalf of vulnerable consumers to identify community needs in terms of the information and tools to participate in retail energy markets.
For information, contact:
AEMC Chairman,
John Pierce (02) 8296 7800
Media: Communication Manager, Prudence Anderson 0404 821 935 or (02) 8296 7817
3 October 2013