Millions of Australian households may be paying higher electricity bills than necessary, with a report by the Australian Competition and Consumer Commission (ACCC) indicating potential annual savings for those who actively manage their energy plans. This situation is prompting new regulatory changes set to take effect from July 2025, aiming to address practices like "loyalty penalties" and limit price increases. Concurrently, the energy market is evolving with the increasing adoption of smart meters and the introduction of initiatives designed to manage peak demand and offer new consumption models.
Potential Savings and ACCC Findings
An analysis by the ACCC, detailed in its Electricity Market Inquiry report, suggests that over 2 million Australian households could be paying more than required for electricity. The report found that households remaining on the same energy plan for over three years paid an average of $221 more annually compared to those who updated their plans each year.
The ACCC identified that approximately 2.5 million customers are paying prices at or above the default offer, which is a legally mandated capped plan provided by electricity retailers. Many customers are reported to miss out on cheaper plans by not opting into a default offer. Additionally, existing non-default deals can transition to higher rates after 12 months, a practice the ACCC refers to as "loyalty penalties."
ACCC Commissioner Anna Brakey stated that switching plans, either with an existing retailer or a new one, is an effective method for consumers to reduce costs. Retailers are currently required to disclose potential savings on the first page of quarterly bills if a customer were to switch to their cheapest available plan.
For the 2025-26 financial year, default offers are set at $1675 in Victoria and $1965 in Sydney, with higher rates observed in regional New South Wales. Since 2022, default offers in NSW and Victoria have increased by approximately $250. The ACCC report also indicated that 400,000 customers are currently paying more than 10 percent above the default offer. Government platforms such as Energy Made Easy for NSW and Victorian Energy Compare facilitate the comparison of retail offers for consumers.
New Regulations and Government Policy
State and federal energy ministers have approved new rules slated to become effective from July 2025. These regulations will introduce prohibitions on:
- Price increases occurring more than once per year.
- Late-payment fees deemed excessive.
- "Loyalty penalties," which will prevent retailers from charging more than the default offer when an annual plan rolls over.
Energy Minister Chris Bowen affirmed these changes, stating they are intended to ensure plan benefits extend for the entire contract duration and to prevent unexpected price adjustments.
The Albanese government has allocated $7 billion in subsidies to help mitigate rising power costs. However, Treasurer Jim Chalmers announced in the current month that the $300 power bill subsidy would not be extended, indicating a shift from direct cash support for cost-of-living relief. In 2022, the government had made a commitment to reduce power bills by $275 by 2025.
Future Energy Initiatives and Market Evolution
From July 2026, new federal regulations will mandate power companies to offer three hours of free power daily to all Australian households through the 'Solar Sharer' program. This initiative will be available to homes and apartments, irrespective of whether they have solar panels, provided they possess a smart meter and opt into the new plans.
Parallel to these regulatory changes, a major Australian energy retailer, AGL, has launched a voluntary rewards program. This scheme offers bill discounts to customers who reduce their electricity consumption during periods of high demand.
- Customers with smart meters can receive a $5 credit for cutting power use by 10% for one hour during a "peak event."
- A $10 credit is offered for a 30% reduction in consumption during a "two-hour event."
The program is accessible to eligible customers in south-east Queensland, New South Wales, Victoria, and South Australia.
This initiative is set against a backdrop of increasing electricity demand driven by population growth, electrification, and the expansion of data centers. While rooftop solar installations contribute to demand satisfaction, the grid can experience strain during evening peak hours following sunset. AGL has stated that participants in its program can both reduce their bills and contribute to grid stability during high-demand periods.
Gavin Dufty, National Director of Energy Policy and Research at St Vincent de Paul, characterized offers such as AGL's as indicative of a broader market shift towards a services-based model, moving beyond primary kilowatt-hour usage. He attributed the ability for energy companies to offer more sophisticated deals to the widespread adoption of smart meters, which track consumption in near real-time.
A report by St Vincent de Paul and Alviss Consulting suggests the national electricity market is at a "pivot point" due to accelerating smart meter deployment. The report found that nearly two-thirds of customers in the national electricity market (eastern seaboard) now possess a smart meter, with Victoria achieving 100% smart meter penetration and the ACT at 39%. The Australian Energy Market Commission has ruled that all households will have a smart meter by the end of the decade. These advanced meters have facilitated changes, including almost one million homes on time-of-use tariffs, which charge varying prices based on consumption time. This allows consumers to access more information about their usage and can encourage investments in solar panels and batteries.
Historical Context and Solar Benefits
The changes in the electricity market follow years of substantial price increases. Average electricity prices in Australia have risen by 98% compared to 2009 levels, with the ACT experiencing a 138% increase over the same period. Gas prices have also increased, with an average rise of 134% since 2009, and more than tripled in Victoria.
Customers with solar panels continue to experience lower power bills compared to those without, with an average annual difference of $800. This benefit persists despite decreasing returns from feed-in tariffs for solar exports. Currently, one in three Australian homes has a rooftop solar installation.