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May 25 2023

Victorian retailers exposed to greater market risk by regulated price decision

Victorian electricity retailers will be operating under ongoing financial pressure and greater market risks as a result of the Victorian regulated price cap announced today, according to the peak body for electricity retailers and generators.

The Australian Energy Council’s Chief Executive, Sarah McNamara, said, “Victoria’s energy regulator, the Essential Services Commission (ESC), has amended its wholesale pricing methodology midstream - between its draft and final decision - without proper consultation.

“While we understand the pressure to keep consumer prices as low as possible, it is also incumbent on the regulator to enable retailers, who are exposed to all market risks, to cover their costs. By changing the rules of play so abruptly, rather than in a phased and transparent way, the ESC has just made that a lot harder.

“The Victorian Default Offer (VDO) announced today will hamper the ability of retailers to offer competitive market deals enjoyed by the majority of their customers. Yet at the same time the ESC urges customers to shop around for market offers through the $250 Power Saving Bonus.

“We know that Victorian energy consumers are best served by the delivery of a range of cheap market deals that result from a competitive market. If retailers are less able to compete on price, then that’s bad news for customers.

Ms McNamara also said that the allowed retail operating margin had been further reduced.      

“As with the wholesale changes, we can understand the ESC’s interest in reducing the retail operating margin given cost-of-living pressures, but it is disappointing that the VDO does not reflect the higher costs of operating in Victoria compared to other jurisdictions.”

About the Australian Energy Council

The Australian Energy Council is the peak industry body for electricity and downstream natural gas businesses operating in the competitive wholesale and retail energy markets. AEC members generate and sell energy to 10 million homes and businesses and are major investors in renewable energy generation. The AEC supports reaching net-zero by 2050 as well as a 55 per cent emissions reduction target by 2035 and is committed to delivering the energy transition for the benefit of consumers.

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