Maybe not so much. But in Australia, energy markets are regulated or deregulated – and this can have a major impact on your backpocket. And with the cost of living rising, it’s important to understand what determines how much we pay for power. We’ll break down everything you need to know about regulated energy markets in this Canstar Blue guide.
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What does a ‘regulated energy market’ mean in Australia?
You might be familiar with energy deregulation, but what about regulated energy markets? In Australia, a regulated energy market refers to a system:
- in which only state- or territory-owned energy retailers can operate, or
- in which state or territory governments set regulated energy prices.
Western Australia is the only state or territory that regulates both retail competition and prices.
Regulated vs deregulated energy markets
The differences between regulation and deregulation are simple. The state or territory government has a tight grip on energy pricing and competition in a regulated energy market. In a deregulated market, the government lets energy retailers compete by setting their own prices and tariffs.
This is a caveat to this competition, though. Despite deregulation, retailers in New South Wales, south-east Queensland, the Australian Capital Territory and South Australia are required to offer basic plans at prices aligned with the Reference Price or Default Market Offer (DMO). The same occurs in Victoria with the Victorian Default Offer (VDO).
It’s important to note, too, that a ‘deregulated energy market’ doesn’t mean that market isn’t subject to a regulatory framework designed to protect consumers. In Victoria, the Essential Services Commission (ESC) regulates the energy market, while in SEQ, NSW and SA, the Australian Energy Regulator (AER) does the same. The ACT and Tasmanian state governments are the regulators of their local energy markets.
How does energy market regulation differ across Australia?
The energy market comes under state or territory jurisdiction, meaning regulations will vary across borders. In NSW, Victoria, SEQ and SA, energy markets are completely deregulated, and private retailers can enter the market and set their prices. In other states, regulation may exist for price but not competition.
Residential electricity regulation by state and territory
Here’s a breakdown of where regulation occurs for households in Australia. Find more details below the table.
| State | Competition regulation | Price regulation |
|---|---|---|
| Western Australia | Yes | Yes |
| Tasmania | No | Yes |
| Australian Capital Territory | No | Yes |
| Northern Territory | No | Yes |
| Queensland | No | Yes (only outside SEQ) |
| New South Wales | No | No |
| Victoria | No | No |
| South Australia | No | No |
Energy regulation in Western Australia
Western Australia has two types of energy customer on its South West Interconnected System: non-contestable and contestable. Which of those types West Australian households fall into is determined by their energy usage, not the region they live in.
Non-contestable customers use less than 50 megawatt-hours (MWh) a year, so are typically households and small businesses. They don’t have a choice of power provider; these customers are supplied by state-owned Synergy and pay government-regulated electricity rates. Contestable customers use more than 50 MWh a year, so are typically large businesses. They have a choice of about a dozen electricity retailers.
With the exception of a few Perth metropolitan areas, the Western Australian gas market is deregulated. Households have a choice of gas provider and providers are free to set their rates and fees.
Energy regulation in Tasmania
In 2014, Tasmania introduced energy retail competition, allowing more power companies to enter the mix. It wasn’t until 2019, though, that another provider, 1st Energy entered the local market. Several other retailers have since expanded to Tasmania, with Future X Power, Energy Locals, CovaU Energy, Glow Power and GEE Energy also making a move off the mainland.
Residential customers can choose to pay regulated electricity and gas prices with state-owned Aurora Energy or enter a market contract with another retailer. Competition has been good news for Tassie households, as new retailers typically charge less than government-regulated prices to encourage customers to switch.
Energy regulation in the Australian Capital Territory
Electricity competition is deregulated in Canberra, but electricity prices remain regulated. ActewAGL – owned by the ACT Government and AGL – rules the residential retail market with an overwhelming market share.
The ACT Government offers customers two options for electricity and gas contracts: regulated electricity rates set by the government or market retail contracts. Market retailers can set their own deals, which may feature discounts, different conditions and additional fees.
Energy regulation in the Northern Territory
The NT has regulated energy prices for households. The government sets electricity costs, which providers must pass on to consumers. Deregulated pricing is only available to businesses that use more than 750 MWh of electricity a year.
The territory introduced energy retail competition in 2010 but only a handful of providers have expanded into the market. This is likely due to price capping or because only customers with a smart meter have the opportunity to switch. State-owned Jacana Energy continues to dominate the NT market.
Likewise, in the absence of mains gas, a deregulated, competitive market for natural gas doesn’t exist in the NT.
Energy regulation in regional Queensland
Unlike in south-east Queensland, where the energy market is deregulated, things aren’t so black-and-white in regional Queensland – that is, all locations outside SEQ. While technically open to competition, households in Mackay, Townsville, Cairns and other regional locations have access only to Queensland Government-regulated electricity and gas prices.
State-owned Ergon Energy is one of the few energy providers in regional Queensland and the only provider to receive a subsidy from the Queensland Government. Ergon holds the vast majority of the regional Queensland market. Other providers are welcome to set up shop up north but these providers would be required to charge the same prices as Ergon without the advantage of the subsidy or marketshare, which makes the prospect pretty unattractive to rival energy retailers.
New South Wales, south-east Queensland and South Australia
NSW and SA have fully deregulated electricity and gas markets. Queensland is divided, with the south-east deregulated and regional areas regulated. So, in NSW, SEQ and SA, households have a choice of power provider and energy companies are free to set their rates.
However, retailers must also adhere to a government-regulated Reference Price or price cap. This is the DMO we referred to above.
Victoria
It’s a similar situation in Victoria. Households in the Garden State can choose their power company and rates from those offered. Although the energy market is fully deregulated, providers must offer customers a state-regulated plan, known as the VDO. When marketing their other offers, retailers must compare plans to the VDO.
Pros and cons of a regulated energy market
Just as there are two sides to a coin, there are pros and cons to being part of a regulated energy market. We break down the advantages and disadvantages of energy market regulation in Australia.
Pros of a regulated energy market
- Price safety net
- Stable energy prices
- Predictable rate changes
Cons of a regulated energy market
- Little to no price competition
- Retail monopolies
- Little to no incentive to offer discounts
Should you select a regulated energy offer?
The choice is yours! In some states and territories, such as the ACT and Tasmania, regulated price electricity contracts are available. Be aware that these offers aren’t always the cheapest in the market, so do your research to make sure you’re getting a good deal.
Image credit: ChameleonsEye/Shutterstock.com, monte_a/Shutterstock.com
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