- General Reports
Australian Energy Update 2019
The Commonwealth Department of Environment and Energy has published its the Australian Energy Update 2019 – September 2019. In the foreword, the Department notes that the way we supply and use energy in Australia continues to change. This change includes the type of energy we use, how we use it and where it comes from.
The report notes that energy consumption rose by 1% for the reporting period of 2017 to 2018. Australia’s energy consumption for the year was higher than the average growth of 0.6% a year over the past 10 years. The Australian economy grew by 2.8% to reach $1.8 trillion.
There was a 2% energy productivity improvement (economic output/ energy consumption). Coal use is falling but still dominates the electricity generation mix. 60% of electricity generation was from coal and coal consumption was 21% lower than the 2008-09 peak. The report authors noted that “the decline was all from a reduction in brown coal following power plant closures, with black coal consumption increasing.” The report noted that there was a 23% growth in solar generation.
You can view the report here.
ACCC enquiry into the National electricity market – 2019 report.
The Australian Competition and Consumer Commission is undertaking a seven-year enquiry to monitor outcomes in the National Electricity Market as reforms are progressed to improve electricity affordability. Various pricing related reforms came into effect on 1 July 2019. These reforms included the implementation of a Default Market Offer (DMO) (in NECF) and the Victorian Default Offer.
The ACCC observed some positive outcomes from the pricing regulation reforms including that prices for many standing offer customers have fallen, often significantly. Further, the ACCC noted that retailers are moving away from advertising conditional discounts based on ‘inflated and inconsistent base rates.’
The ACCC noted that energy affordability continues to be key concerns for Australians, with households and businesses having felt the pressure of rising energy costs over a number of years.
You can view the full report here.
- Pricing Regulation
AER Position Paper- Default Market Offer Price 2020-2021
The AER has published a position paper on the DMO for 2020-2021 and interested parties are invited to make submissions on this Position Paper by 18th October 2019.
The DMO limits the price that retailers can charge electricity customers on default contracts known as standing offer contracts. The DMO is set by the AER each year. The DMO does not apply to all customers nor to all states. The DMO currently applies to small business and residential customers on flat-rate tariffs in areas where there is no other price regulation – in South Australia, New South Wales and South East Queensland.
The DMO came into effect on 1 July 2019. The AER notes that as a consequence of the DMO “the median standing was 7-11 per cent lower in July 2019 than in October 2018, before the DMO was introduced.”
In this position paper, the AER sets out three options for the adjustment of the DMO. Option One is to adjust the DMO to reflect forecast changes in retailers’ input costs. Option Two is to use a cost-based ‘bottom-up’ approach of determining the forecast efficient cost of each component of the retail cost stack, with added allowance for retail costs and competition. Option Three is to establish criteria to determine a new DMO price in relation to observed market offers, i.e. applying a fixed percentage to the median market offer.
The proposed timeline for implementation is below.
You can view the position paper here.
