Increase to cap on discounts for paying energy bills on time (Victoria)

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The Essential Services Commission has increased the amount energy retailers can charge Victorian customers who do not make their payment on time to 5.71 per cent. 

The cap applies to ‘pay-on-time’ discounts that are conditional upon the customer paying a bill on or before the pay-by date. 

Each year the commission sets the maximum Victorian energy consumers can be charged for being late with a bill payment. The new cap, applying to contracts commencing on or after 1 July 2022, rose from 3.1 per cent to 5.71 per cent due to a significant increase in the debt risk premium being carried by energy retailers. The increase in the cost of debt is driven by local factors and global factors, including rising inflation, increasing interest rates and global supply-side restrictions due to the war in Ukraine. 

What is the pay-on-time discount cap?

A pay-on-time discount is a discount that is conditional upon the customer paying a bill on or before the pay-by date. Under clause 95(1) of the Energy Retail Code of Practice, any pay-on-time discount in a market retail contract is capped at the amount specified in a guideline published by Essential Services Commission (the ESC).

What is the current level of the cap?

The maximum pay-on-time discount cap, applicable to any market retail contract entered into from 1 July 2021 to 30 June 2022, is 3.10 per cent.

When does the new cap apply?

The new pay-on-time discount cap, applicable to any market retail contract entered into from 1 July 2022 to 30 June 2023, is 5.71 per cent.

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