On 1 July 2020, we introduced new rules to protect residential and small business consumers from unexpected energy price increases. There are two situations where retailers can increase prices more than once a year.
Energy price certainty exemptions
On 1 July 2020, we introduced new rules to protect residential and small business consumers from unexpected energy price increases.
These rules mean energy retailers are only allowed to increase prices once a year.
For many customers, this will happen on a set date one month after network tariff prices change (usually on 1 August each year). Customers on fixed-price contracts will only experience any price increases on the anniversary of their initial fixed-price period expiring. Retailers must clearly communicate to customers when their prices may change.
Retailers can decrease their prices at any time.
Exemptions to the price certainty rules
There are two situations where retailers can increase prices more than once a year:
- 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 us following an application from a retailer.
The intent of these exemptions is to allow retailers to offer innovative products that are not compatible with limiting price increases to once a year.
A retailer wanting to apply 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 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, pricing linked to the wholesale market prices), 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.
Retailers can also apply to us for an exemption.
In considering an application, we have regard to a range of factors, including the extent to which the proposed product meets the objectives of our price certainty rules.
We consider each application on a case-by-case basis. We take into account rationale and evidence submitted by a retailer to demonstrate that compliance with the price certainty rules would lead to an outcome that is inconsistent with our policy intent and would have substantial negative unintended consequences for customers.
Decisions will be guided by our overarching statutory objective to promote the long-term interests of Victorian consumers, as set out in the Essential Services Commission Act 2001. We also have regard to the objectives set out in the Electricity Industry Act 2000 and Gas Industry Act 2001 to promote protections for customers, including in relation to customers who are facing payment difficulty.
We have approved the exemptions below.
We made a decision, pursuant to section 52C(c) of the Energy Retail Code, to exempt AGL’s proposed products, AGL New Home Plan and AGL New Home Builder Plan, from the requirement to restrict price increases to once a year.
How to apply
Price increases outside a licensed retailer’s control
Retailers are also permitted to pass on price increases in the following circumstances:
- retailers can increase market contract prices outside of 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
- retailers can pass on the effect of a network tariff reassignment to a customer at any time (as long as the tariff increase does no more than give effect to that reassignment) and excludes contracts for multi-site premises from the once-a-year price increase rule.
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.
Retailers are also required to notify the commission of the product(s) offered that are subject to these exemptions, and report additional information to us regularly.
Retailers must complete a tariff review for customers who are experiencing payment difficulty and who are eligible for tailored assistance. This is to establish whether there is another contract more appropriate to the customer’s circumstances.