Finance Consumer Energy providers granted space to extend virus hardship measures

Energy providers granted space to extend virus hardship measures

Energy retailers have been granted a payment pause to networks, which is intended to support competition. Photo: TND
Twitter Facebook Reddit Pinterest Email

Australians who activated hardship programs from their energy provider should be able to access them for the rest of the year after a major ruling from a key advisory body.

The Australian Energy Market Commission (AEMC) on Thursday declared most energy providers could defer their network bills for six months – giving them the financial breathing space to extend hardship measures for struggling customers.

The decision, which is essentially a six-month moratorium on retailers’ payments to distribution network service providers, could see more than 40 per cent shaved off retail bills until December.

However, eligible retailers would have to eventually repay those costs at 3 per cent interest.

The ruling is the latest step to combat retailers’ concerns over their ongoing viability amid a rise in non-paying customers.

According to the Australian Energy Regulator (AER), more than 20,000 customers joined hardship programs between December 2019 and March 2020 – with household energy debt now sitting at $35 million.

AEMC acting chair Merryn York said the measures would act as a safety net against “financial contagion” that could have crippled a number of retailers.

Failing to introduce the measures would have guaranteed a wave of insolvent providers, she said, and consumers would have paid the price.

“[Reduced competition] would put immense pressure on the remaining businesses to service larger numbers of customers unable to pay their bills during the pandemic – and this could reduce choice and increase prices,” Ms York said in a statement.

“A number of new retailers have entered the market in recent years, and we don’t want to see those competitive gains eroded.”

According to the AEMC State of the Competition Report released in June, there are 31 energy retailers servicing NSW customers; 24 in Victoria; 22 in south-east Queensland; 18 in South Australia; nine in the ACT; and two in Tasmania.

Canstar Blue editor-in-chief Simon Downes told The New Daily the number of providers in most states is starting to reach “unsustainable levels”.

Despite the rampant competition and regulatory changes including the Morrison government’s ‘Big Stick’ legislation, which intended to tackle anti-competitive misconduct, the downward pressure on prices has been “underwhelming”, he said.

“Ultimately, I don’t think people should be overly concerned about the [risk of financial contagion] because they won’t be pushed on to a retailer that they’ve never heard of,” Mr Downes said.

“It’s still down to individual consumers to make sure they’re getting the best price, as although there seems to be a lack of willingness from providers to pass on any savings to households, there are some exceptions.”

Retailers of Last Resort (AGL, Origin, Energy Australia) – providers who cater for affected electricity customers in the event another firm goes under – and government providers are exempt from the scheme.