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The Australian Energy Regulator (AER) today said it was raising default market offer (DMO) price caps, which is essentially the maximum retailers can charge households and businesses on default offers.
As a result, default offers will increase by more than $220 per year in New South Wales, more than $160 in Queensland and more than $120 in South Australia.
The AER said the rise in the DMO was necessary given that wholesale costs for retailers have risen substantially as a result of unplanned outages, fuel costs and “peaky demand”.
AER Chair Clare Savage said the decision to raise prices was “difficult” considering millions of Australians were already struggling with a soaring cost of living.
“In setting these new DMO prices, we understand the significant impact they will have on some consumers who may already be struggling with cost of living pressures,” Savage said.
“We have given scrutiny to all factors affecting the DMO calculation and have set safety-net prices that reflect the current conditions and underlying costs to retailers.”
The regulator said the DMO was equally about protecting the consumer as it was about ensuring that energy retailers could stay in business.
“Setting the DMO is not about setting the lowest price. We are required to set a price that will allow retailers to recover their costs, earn a reasonable margin and support retailers to compete and offer better deals and products in a competitive retail environment,” Savage said.
“If a large number of retailers are unable to recover their costs and are forced to exit the market – as we have seen recently in the United Kingdom – that will add more cost to consumers.
“Our safety net DMO price will continue to protect consumers from unjustifiably high prices and will continue to provide the reference point from which consumers can shop around for a better deal.”
Labor Minister Chris Bowen said the rise in prices was the result of “bad policy” by former governments.
“This is bad news for Australians who buy electricity in the markets impacted by today’s decision. Higher prices are a result of nine years of policy failure,” he said.
“Now, of course, there are international factors at play here and, of course, geopolitical circumstances are impacting on Australian markets in many ways.
“But the fact of the matter is the lack of energy policy, the lack of investment in new energy, the lack of investment in renewable energy, and the lack of transmission over the last nine years means that Australians are paying more for electricity than they should be.”
Households on the DMO only comprise about 10 per cent of the total market (around 550,000 customers), but today’s rise is anticipated to be passed on by retailers in time.
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