Caps designed to protect power users from excessive price hikes are not working as intended and need refining, the federal energy minister will concede in his first major speech since the election.
A convincing Labor win also has Chris Bowen hopeful Australia can triumph in its bid to co-host global climate talks and muscle out competitor Turkey, with a decision expected soon.
In a wide-ranging address to the Australian Energy Week conference in Melbourne, Mr Bowen will promise changes to the so-called Default Market Offer rules to force retailers to compete harder for customer dollars.
“The DMO was intended to act as a benchmark price to stop the worst forms of price gouging, while leaving the job of putting downward pressure on prices to competition between energy companies,” he will say on Wednesday.
“However, I’ll be frank. I don’t think it’s working that way and reform is needed.”
In several states, regulators enforce caps on what retailers can charge households and businesses to protect the hundreds of thousands of customers unable or uninterested in chasing a better deal.
Caps are reviewed annually to reflect the costs of generation and moving electricity around through poles and wires.
In NSW, South Australia, southeast Queensland, it’s the independent Australian Energy Regulator’s job, while in Victoria, the Essential Services Commission sets benchmark prices.
Changes to AER’s price cap mechanism have not yet been locked in, but could include clamping down on what retailers can claim back from customers on their bills.
Mr Bowen said it was hard to defend price caps when 80 per cent of billpayers could be getting a better deal.
“That’s why we have work underway to deliver a better regulated pricing mechanism which will put downward pressure on electricity bills and also ensure the energy market better utilises the huge uptake of rooftop solar and batteries,” he will say.
Mr Bowen will declare Labor’s thumping election win as a vote of confidence in its energy and decarbonisation policies.
He says it puts Australia in a strong position to secure the rights to co-host the COP31 climate talks alongside Pacific nations.
An announcement is possible at the UN climate meetings underway in Bonn, Germany.
The bid has come under pressure following the federal government’s proposed decision to grant an extension on the North West Shelf gas plant’s operating life.
The project was singled out by Oil Change International in a report showing the United States, Canada, Norway, and Australia are responsible for nearly 70 per cent of projected new oil and gas from 2025 to 2035.
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