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Dec 08 2022

Retailers Performing Under Financial Pressure

Electricity retailers are under extreme financial pressure and are being squeezed by regulated price caps, according to the peak body for electricity retailers and generators.

The Australian Energy Council’s Chief Executive, Sarah McNamara, said that, and the overall deteriorating retail market conditions, were the key messages from the ACCC’s Electricity Market Inquiry Report released today.

“Retail margins have dropped by a third from a year ago and continue to fall, sitting now at just 2 per cent of the household bill.  This is because the lower costs from efficiency gains have already been passed through to customers.

“While increased efficiency is good news, the ACCC’s report highlights that the current environment means retailers are finding it harder to manage their exposure to volatile prices.

“If retailers are unable to recover a reasonable margin, there are consequent impacts on competition in the market, through lost innovation and the withdrawal of well-priced offers.

“That is an alarm bell for customers in the longer term. The ACCC’s report is clear: regulated price caps are limiting retailers’ ability to manage their underlying costs, and that is adding to their financial pressures.

“Regulated prices provide a safety net for consumers but also must reflect the real risks and full costs of doing business for retailers. We have already seen six retailers exit the market since May and we don’t want to see any more,” she said.

Ms McNamara echoed the ACCC’s concerns that the Australian Energy Regulator and the Essential Services Commission might not reflect the true cost of hedging in regulated retail prices.

“The role retailers play in hedging risk in the highly volatile wholesale market for their customers is a critical one, made even more so by the current difficult conditions. The ability of retailers to deliver lower prices and better outcomes for their customers into the future relies on the regulated price accurately reflecting a retailers’ efficient costs."

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