Bowen demands answers as power giants hike fixed charges on bills

Electricity companies will be forced to justify increases in supply charges on household bills after Energy Minister Chris Bowen escalated concerns about sudden pricing changes to federal regulators.

While power bills are set to fall across most of eastern Australia from July 1, increases in energy retailers’ daily supply charges – fixed fees to stay connected to the central power grid – threaten to dilute some of these savings.

The majority of customers being warned of higher fixed-cost components of their bills will also receive a reduction in their usage-based charges, meaning their overall bills will still come down.

However, in a letter to the federal energy regulator and consumer watchdog, Bowen raised concerns that “material” increases in daily supply charges may not be warranted, pointing out that the underlying cost of sourcing electricity was supposedly falling across much of the supply chain.

Bowen said the government’s message to energy retailers was clear: “If your costs are coming down, your customers’ bills should be, too.”

The intervention comes as consumers across most parts of the eastern seaboard are in line for power bill relief this year – in some cases amounting to hundreds of dollars a year – following falls in the wholesale cost of electricity driven by strong contributions from renewable energy generators and giant battery systems. From July 1, regulators’ changes to “default market offers” will lower the maximum amounts that retailers can charge customers on standard-offer contracts in New South Wales, Queensland and Victoria.

Those changes also act as a reference point for retailers as they assess their next pricing cycles for all their customers.

Power retailers insist fixed supply charges are rising on many people’s bills this year as a direct result of changes to the way the energy regulator’s default market offer has been structured.

Historically, the regulator had set a representative annual benchmark bill amount, leaving retailers the flexibility to determine how that total amount was reached through their own daily charges and usage rates.

For the first time this year, however, the regulator has set out maximum usage and supply charges. This has led to retailers raising supply charges for customers as they rebalanced fixed and variable components.

Fixed supply charges, which vary depending on a customer’s retailer and distribution zone, range from a daily cost as little as 54¢ to more than $2.50, according to financial comparison website Canstar’s database.

As some customers receive notifications of daily supply charge increases of more than 70 per cent, households that do not use a lot of energy may find themselves worse off. “For some households the devil could still be in the details of your next bill,” Canstar data insights director Sally Tindall said.

“If you run a busy, high-energy household, the deep cuts to usage rates are likely to eclipse the higher fixed fees. However, for low-energy users these new daily supply charges could mean your bills may actually rise.”

The Australian Energy Council, which represents electricity suppliers such as AGL, Origin Energy, Alinta and EnergyAustralia, said that in a competitive market, retailers determined their own prices and product structures.

“When setting market offers retailers consider a range of factors, including network costs, wholesale energy and hedging costs, commercial objectives, competitor pricing and the regulated benchmark,” a spokesman said.

“Changes to the default market offer can influence the broader market by affecting how retailers price their products, structure discounts and communicate value to customers.”

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