The VDO and higher prices

Letter to the Editor, by Sarah McNamara, Chief Executive Australian Energy Council. Published in The Age

Contrary to the views of Emma King, the CEO of the Victorian Council of Social Service (Opinion, 6/5), the Victorian government’s proposed Victorian Default Offer will lead to higher energy prices for a significant proportion of consumers.

Customers are confused by the offers in the marketplace and the industry supports targeted reforms to make it easier for customers to find a cheaper deal. However, a low default price is likely to see the offers that are currently priced below the cap disappear. About 50 per cent of the offers in the market are cheaper than the proposed default. If you are on one of these deals, you will pay more.

It is also incorrect that finding a cheap energy deal ‘‘requires a PhD, a tonne of patience and a day off work’’. The government’s own comparison website is an excellent and fast tool for finding cheaper deals.

The government has committed to implement a regulated price in the Victorian market, and the industry accepts this position. But it must do so in the least risky manner for consumers.

The Australian Competition and Consumer Commission, which advocated for its own default price, said in its submission to the Essential Services Commission that it had concerns for competition and the long-term interests of consumers based on the proposed VDO. Even St Vincent de Paul expressed concerns that the VDO’s unintended consequences might ‘‘concentrate market power and increase the price for all consumers’’.

The VDO must be set at a level that reflects the true cost of delivering electricity to Victorian homes and businesses and enables retailers to compete and offer really cheap deals.