Federal government to change power price rules to push costs lower
The federal energy minister will announce changes to how benchmark power prices are set, aimed at cutting back how much energy retailers can hit consumers to cover costs like advertising, on Wednesday.
The changes could spark pushback from energy retailers, as the minister points to possible new "restraints" on costs being passed on to consumers through power bills.
Energy Minister Chris Bowen will use a speech in Melbourne on Wednesday to flag the looming changes to the 'default market offer', which acts as a benchmark power price in New South Wales, South Australia and south-east Queensland.
The DMO places a cap on what customers can be charged, while retailers are encouraged to offer more competitive deals.
It has been rising faster than energy ministers would like, including lifts of up to 9.7 per cent in NSW this year.
The Australian Energy Regulator pointed out that the main driver of the price hikes was administrative costs within retailers — like advertising and the cost of managing customers.
Both state and federal ministers pushed back on that price hike when it was released as a draft in March, urging the regulator to consider the revenue and profits retailers were making.
But the price hikes went ahead largely as first proposed.
Chris Bowen is now announcing plans to change rules to try and rein in those costs.
"The DMO was intended to act as a benchmark price to stop the worst forms of price gouging while leaving the job of putting downward pressure on prices to competition between energy companies, " he will say on Wednesday.
"However, I'll be frank. I don't think it's working that way and reform is needed.
"The vast majority of bill payers, some 80 per cent, could be getting a better deal. It's difficult to defend the DMO, when the customer is required to do the deal hunting."
Mr Bowen will point to Victoria, which has its own energy regulator setting a different default market offer to other states, as a more ideal model.
"The reformed pricing mechanism will bring (NSW, SA and south-east Queensland) closer in line with other jurisdictions like here in Victoria, which this year has seen significantly smaller bill increases compared to DMO regions," he will say.
"The government will consult on the design … but changes could include stripping out the DMO's competition allowance and putting further restraints on what retailers can claim back from customers in their bills."
The Australian Energy Council has previously pushed back on suggestions that 'retail costs' are to blame for price hikes, arguing that retail margins are already "notably tight".
Chris Bowen will also use Wednesday's speech to talk up Australia's prospects of securing hosting rights for the COP31 climate summit in 2026.
The minister is also pressuring Australia's sole rival for hosting rights, Türkiye, to drop out of the race.
Australia is bidding to host the conference in partnership with the Pacific, and has the support of Pacific leaders and many European leaders too.
Mr Bowen visited Türkiye last year, while travelling to the COP29 summit, to personally lobby officials over the bid.
But Türkiye's president, Recep Tayyip Erdoğan, used the conference in Azerbaijan to confirm his country's hopes to host the conference.
Mr Bowen will call on Türkiye to step aside and allow Australia to take on the hosting rights unchallenged.
"We've been working hard with our international partners and Türkiye to resolve the bid," he said.
"That won't have been obvious, because we've kept those discussions private out of respect for Türkiye. It was legitimate for Türkiye to wait for the results of our election, given the opposition's position.
"But given our election, and the strong support for our bid from our group, we are now hopeful for a resolution before too long."
The minister will determine Australia's 2035 emissions target in September, a key milestone for Australia heading towards COP31.
It will be released concurrently with the government's long-term Net Zero Plan that will step out Australia's pathway to net zero emissions by 2050.
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