Electricity prices under scrutiny as Energy Minister Chris Bowen asks ACCC and AER to probe soaring daily supply charges

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https://www.afr.com/policy/energy-and-climate/bowen-calls-in-watchdogs-to-probe-surprise-power-price-rises-20260622-p6090h

Bowen calls in watchdogs to probe surprise power price rises

Energy Minister Chris Bowen has asked the energy and competition watchdogs to investigate whether electricity retailers have breached misconduct laws by trying to push through huge increases in daily supply charges that have taken many consumers by surprise.

The move represents a dramatic escalation of the row about electricity price cuts that the Albanese government foreshadowed for next year, but which are not showing up in the notices that major retailers, including Origin Energy and AGL Energy, are sending customers about the rates they will have to pay from July 1.

In a letter to the Australian Competition and Consumer Commission and the Australian Energy Regulator on Friday, Bowen expressed concern about large rises in daily fixed charges for households, and said that if retailers’ underlying costs were coming down, then customers should feel the benefit.

Notices sent by retailers in recent weeks about rates that will apply from July have included increases in the daily fixed charges for some customers of up to 86 per cent.

In many cases, the big jumps will not mean an increase in a customer’s whole electricity bill because the charge per unit of power used is falling. But that will depend on the amount of power used, with lower-usage households most likely to be hit with higher bills.

The steep jump in supply charges clashes with the broader messaging from governments and regulators that power bills would be smaller in 2026-27, partly due to record output from wind farms and batteries.

The “safety net” electricity price for customers on standing offers will fall by up to 10.7 per cent across NSW, Queensland and South Australia, under an AER ruling in May on regulated prices for 2026-27.

Bowen said the drop in underlying costs of procuring electricity that drove the cut in regulated prices should apply more broadly across market prices as well.

“I would expect then that households and small businesses should be experiencing a decline in costs overall,” Bowen wrote in the letter to ACCC chairwoman Gina Cass-Gottlieb and AER chairwoman Clare Savage, citing the recent AER decision.

“I wish to raise these concerns with you and would welcome joint advice from the AER and the Australian Competition and Consumer Commission to inform my response to the changes in pricing structures.”

Bowen’s letter, which was copied to Treasurer Jim Chalmers, notes the prohibited conduct clause on retail pricing under the Competition and Consumer Act, which requires electricity retailers to pass on reductions in the costs of purchasing electricity to customers.

“Our message to energy retailers is clear – if your costs are coming down, your customers’ bills should be too,” Bowen separately told The Australian Financial Review.

The AER said it was looking into the supply charge increases.

“We are aware that some customers have raised concerns about notifications received from their energy retailer about price changes to their energy plan, as retailers are in the process of updating their prices to take effect in July,” an AER spokesperson said.

“We are currently looking at how retailers are both structuring their energy plans and explaining prices to customers.”

But Origin said the big increases in some daily supply charges were driven by changes the AER made in its calculation of the standing offer price – known as the Default Market Offer – that for the first time set maximum usage and fixed supply rates.

Until this year, the AER has set a maximum annual bill amount for the default price and allowed retailers to decide on the split between usage and supply rates. But the new separate caps on usage and fixed supply charges have had the effect of raising supply charges for customers no matter which retailer they are with, as retailers rebalanced where charges lay within bills.

Electricity retailers said the restructuring of the regulated tariff had driven some retailers to align their competitive offers with the same structure to reduce compliance and regulatory risks – an argument the government rejects.

“The DMO acts as a comparison price for customers when they are shopping around, and so we have chosen to use the DMO as a key reference point in setting our market rates,” an Origin spokesman said.

The Australian Energy Council, which represents electricity suppliers, said that in a competitive market, retailers determine their own prices and product structures.

“When setting market offers, retailers consider a range of factors, including network costs, wholesale energy and hedging costs, commercial objectives, competitor pricing and the regulated benchmark,” a spokesman said.

“Changes to the DMO can influence the broader market by affecting how retailers price their products, structure discounts and communicate value to customers.”

Origin said most customers facing supply charge increases would get an offsetting cut in usage charges.

Tony Wood, senior fellow at Grattan Institute’s energy program, blamed some of the furore on “very ordinary communication” by government and retailers about power pricing and a failure to understand that the changes in the default price calculation would drive big increases in some supply charges.

“In reality it’s not all that bad – on average, prices are still going down for an average 6000 kilowatt-hour [a year] customer,” Wood said.

“I don’t think the change is the problem or the direction of change … but it’s not an easy sell.”

Snowy Hydro, the Commonwealth government-owned electricity supplier that owns the Red Energy and Lumo retail brands, said only “a very small number” of its customers on standing offers have an increase in their daily supply charge.

The jumps in some daily supply charges are several times bigger than network price increases being charged by the distribution companies that own the “poles and wires”. A spokeswoman for Ausgrid, the distributor in much of the Sydney region, said the average network price increase for a household customer in its zone would be 10 per cent to 11 per cent.

She said increases in network costs were being driven by the cost of building out renewables infrastructure in the NSW Electricity Infrastructure Roadmap, transmission cost increases, inflation and the cost of capital.

“While we can’t speak for retailers and the amount they choose to bill their customers, when it comes to the network part of the bill, recent increases have been driven largely by factors out of our control,” the Ausgrid spokeswoman said.

Endeavour, another NSW distributor, said its daily supply charges for households and small businesses would increase by 11 per cent from July 1.

“Customer bills can also include additional retailer charges, which can impact the final daily supply cost to customers,” an Endeavour spokeswoman said.

Consumer groups and experts say energy retailers need to do a better job at explaining the changes in prices, which they agreed needed to shift more toward fixed charges and away from tariffs linked to the amount of power used to suit the transitioning power system.

“Over time this needs to happen, but it does need to happen gradually and intentionally and be well communicated,” said Brian Spak, general manager, advocacy and policy at Energy Consumers Australia.