Victoria’s energy regulator has warned power companies not to blame sharp price hikes on a moderate increase in costs to the state’s default tariff, as consumers prepare for bill increases this summer.
With the Victorian Default Offer (VDO) set to rise by 7.8 per cent in January, the state’s Essential Services Commission (ESC) says it is concerned that some electricity retailers will point the finger at the regulator to justify much higher rate increases.
The regulator says it has already heard reports of some retailers increasing costs by more than 30 per cent in the new year.
While the VDO acts as price cap for households that do not engage in the energy market and remain on standing offer contracts, customers on market contracts can still be charged more than the default offer.
ESC Acting Chair, Sitesh Bhojani, claims that retailers engaging in this form of marketing could be misleading consumers through false representation.
“Setting market offers is a business decision for each energy retailer, and is not related to the Victoria Default Offer,” Mr Bhojani said.
The ESC has, by way of precaution, notified all electricity retailers operating in Victoria that it is watching closely how they justify their price changes.
Mr Bhojani says that further action will be taken in the event a retailer misrepresents its reasons for increasing its prices.
“Retailers should be aware we will be making further enquiries, and should we identify potential breaches of the Australian Consumer Law regarding the provision of false or misleading information we will refer the matter to Consumer Affairs Victoria,” he said.
We are concerned at reports some retailers are justifying big post-Christmas electricity rises on an unrelated moderate rise in the energy safety net (the Victorian default offer). Email firstname.lastname@example.org if it’s happening to you https://t.co/0sxAYVX0da pic.twitter.com/dxrzin6lR9
— ESC Victoria (@EssentialVic) December 23, 2019
So, what should you expect from the VDO price increase?
The VDO price increase has been set at 7.8 per cent, just six months after the new default tariff was introduced in Victoria. This is scheduled to come into effect on January 1, 2020.
The Commission credits this hike to rising wholesale and network prices and says it only applies to those customers on standing offers, or those who switched to the default offer after July 1, 2019.
“There is no connection between this and the setting of market offers by retailers and any customers on market contracts who are being given this excuse, should email a complaint to the commission,” Mr Bhojani said.
However, Canstar Blue Editor-in-Chief, Simon Downes, said it’s likely most retailers will pass on similar price increases to their customers on market offers.
“It would be good to think the market is competitive enough that some retailers will take this opportunity to keep prices low and attract new customers, but the reality is that most will pass on a similar price increase to that of the VDO,” Mr Downes said.
“Although it’s a default price cap for households that do not shop around, the VDO was a competitive offer when first introduced in July and it seems unlikely that the cheapest market offers will get any better than the 15% below the VDO we currently see.
“It’s important to check your energy bills for price changes this January and don’t settle for the VDO price or close to it. There are still significant savings to be had if you compare offers, and with any luck we’ll see some retailers take the initiative and come up with some compelling deals in the new year.”
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