There are regulatory constraints on when, how often, and by how much retailers can increase their prices. Here's everything you need to know.
Retail energy price controls are managed by the Essential Services Commission (ESC) in Victoria, and by AEMO in other parts of the National Energy Market (NEM), including QLD, NSW, ACT, SA and TAS.
For Victorians, there are strong controls on how often price increases can be charged to existing customers. The rest of the NEM does not have the same level of controls in place.
NEM price change rules (excluding Victoria)
The National Energy Retail Rules govern the sale and supply of energy (electricity and natural gas) from retailers and distributors to customers in the National Energy Market (NEM) including New South Wales, Queensland, South Australia, Tasmania and the Australian Capital Territory. Energy pricing and price change falls under these rules.
Price changes in retail energy contracts are driven by a range of factors including variations in wholesale energy costs, network costs, environmental policy costs and retailer costs. Retailers roll up all these costs into the bills they present to energy consumers, so retail pricing must accommodate all these underlying charge components, and typically will be subject to change whenever these underlying components change.
Network costs change on a regulated schedule, once a year, with new network pricing coming into effect on 1 July each year. This drives an annual retail price change for every plan and every retailer from 1 July each year. Many retailers also use this annual price change event to modify or completely overhaul their plans.
Wholesale costs, environmental policy costs or retail costs can change at any time of the year, and retail market offer contract prices can change in response to these costs at any time, so long as the terms of the market contract allow for this, and provided the consumer is validly notified.
Standing offer contract prices cannot be changed more often than once every six months.
Retailers must clearly communicate to customers when their prices may change, including a minimum 5-day notice of any price change.
Victorian price change rules
On 1 July 2020, the ESC introduced rules to protect energy consumers in Victoria from unexpected energy price increases, meaning energy retailers are only able to increase prices once a year. Retailers can decrease pricing at any time.
Annual network price changes come into effect on 1 July each year, which is also the date when retailers publish new pricing to be offered to new customers.
The standard annual price change date for existing variable rate electricity customers in Victoria is one month after network tariff prices change, on 1 August each year.
Fixed rate customers will experience their price change on the anniversary date of their fixed-price period.
Retailers must clearly communicate to customers when their prices may change, including a minimum 5-day notice of any price change.
Exemptions to price certainty rules
There is some scope for exemption from the price certainty rules, intended to support retailers in offering innovative products that are not compatible with limiting price increases to once a year. Retailers can gain exemption from these rules and increase prices more than once a year only if:- if the retailer’s product qualifies for a standing exemption, which are specified in the Energy Retail Code, or
- if an exemption has been granted by the ESC following an application from a retailer.
An application for an exemption must clearly demonstrate to us that the product is innovative and that:
- it better meets specific customer needs
- it enhances the efficiency of the energy system, or
- is part of a Victorian Government program or policy.
Standing exemptions
Standing exemptions allow retailers to offer energy products that do not comply with the price certainty rules in the following circumstances:
- where a tariff that continually varies in relation to the spot price of energy – for example, wholesale pass-through pricing, or
- where a customer pre-purchases a specified quantity of energy – for example, buying 1,000kWh of electricity for $200.
Retailers do not need to apply if their product meets one of the above criteria for a standing exemption.
Additional requirements
Retailers offering contracts under any of the exemption categories specified above must comply with additional requirements in the Energy Retail Code, including making customers aware when signing up that:
- the product that the tariff(s) may increase more than once a year
- the basis on which the tariff(s) may change
- the estimated frequency of changes
- other contracts are available where prices will only increase once a year.
Price increases outside a licensed retailer’s control
Retailers are also permitted to pass on price increases outside the usual 12 month cycle if:
- an uncertain or unforeseen event occurred that was sufficiently significant that it caused the commission to vary a Victorian Default Offer price determination
- the price change is due to a network tariff reassignment to a customer at any time