Electricity Pricing Reforms

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Electricity Pricing Reforms

The government has announced it is backing 20 changes to the electricity market which is the biggest change in the industry for 20 years.

Most people who use a lot of electricity, don't shop around for power, or who sometimes pay their bills late, should see lower power prices. But those who use gas, or who have their own home-solar systems, could end up paying more as plans that reward low electricity usage are phased out.

The changes, which include new regulations designed to bolster competition, stem the Electricity Price Review that the Government ordered last year.

No More Winbacks

One of the biggest changes will temporarily ban electricity companies from offering discounts to win back customers who have given them notice that they intend to switch suppliers. This is to counter the concerns that the existing retailer can wait for customers to threaten to jump ship before offering them a competitive price.

Removing Prompt Payment Discounts

Electricity companies will be also encouraged to stop offering Prompt Payment Discounts. Energy Minister Megan Woods said the "prompt payment discounts" really amounted to "hidden late payment penalties" for those who didn't get them.

Removing Low User Plans

Also, in what appears to be the most controversial change, the Government plans to phase out the requirement for electricity companies to sell plans that offer a low fixed daily charge and a higher variable charge for power used.

About 60 per cent of residential consumers were on a low-user tariffs, but the Government has ordered officials to develop proposals to phase them out. Households that consume less than about 8000 kilowatt-hours of electricity a year can expect to pay more than they current do, depending on how little power they use.

In its final report, the Electricity Price Review acknowledged this could discourage people from installing solar systems or insulating or double-glazing their homes. But it said the low-user plans "unintentionally shift costs to households with low incomes and high electricity consumption".

Wholesale Market Changes

Woods said new rules would force large power companies to sell electricity to independent retailers through the wholesale market "at affordable rates".

It is understood the Government is backing a recommendation that would force the generators to buy and sell electricity in the wholesale market at an agreed spread.

That "market-marketing" requirement emerged as a main issue within the industry when the Electricity Price Review published an earlier paper in February.

"Right now, our electricity system is dominated by a small number of big 'gentailers' – companies that generate and sell electricity," Woods said. "It can be too hard for small and independent retailers to compete and survive, meaning fewer choices for consumers and less innovation in the market."

The Electricity Price Review recommended against going further by forcing the separation of electricity generators from retailers.

Woods said the reforms would "level the playing field" for consumers, and the Government would check "in our second term" that the expected savings were passed on to them.

Best Option Now

The Government has a variety of measure to tackle "energy hardship" and improve the information available to consumers about switching retailers.

Of course instead of waiting for the changes, you can use our free, online comparison calculator right now to see if you’re currently getting the best rate on your energy costs. Contact us today for more details!