The Guardian • Issue #2055

Energy prices

The market fails again

Australian outback power lines.

Photo: Rae Allen – (CC BY-NC-SA 2.0).

If you have a birthday coming up in July this year, there’s one present you’ll be getting whether you asked for it or not – higher energy prices. The Default Energy Price will go up by around 25 per cent in the eastern states of Australia, from South Australia up to South East Queensland. There are some small differences, but for households, that’s between 21.4 per cent in NSW, and 25 per cent in Victoria, with similar increases for small businesses.

Things are slightly better in Tasmania, where under the last Liberal government in the country, prices are forecast to go up by 12 per cent. Added to this is the fact that the Default Energy Price only applies to “standing offers.” That means what the energy company can offer you if you haven’t already signed up with them or found a better price by searching the market. Power companies are free to charge more than that if you’re already on one of their schemes. As the Australian Energy Regulator carefully explains, bills will vary according to how much electricity you use, where you live, and who your power company is.

So, power prices are going up. What’s going on?

For most of the country, the energy system is a market, run by the Australian Energy Market Operator (AEMO), and “policed” by the Australian Energy Regulator (AER). Clare Savage is the AER chair, and she’s very upfront about what the regulator’s priorities are: “We have to make sure retailers can cover their costs.” That’s really clear. Not much else about Australia’s energy system is.

None of this is how the world has to be. The energy market started in 1998. The AER was set up in 2005. The AEMO was created in 2009. The retailers Clare Savage is so anxious to look after used to be publicly owned utilities. Privatisation gave a short-term blast of cash into state government coffers, and without building any more power generation, unleashed a raft of ticket-clipping middlemen into the power market. Dodgy power companies popped up overnight and door-knocked a lot of consumers into paying more than they had to, with a raft of deliberately complex plans.


In the classic image of the market, the consumer gets to walk around a small market comparing products, like meat or candles. Businesses compete by making better and or cheaper meat or candles than the store next door. What this rosy neoliberal image overlooks is that businesses can also compete by making it next to impossible to compare the different products. That’s why we have information boxes on the side of cereal packets that make shoppers feel like they’re back in high school chemistry classes, phone plans that baffle even seasoned lawyers, and energy plans that can’t be compared with the best will in the world.

There have been timid reforms, because the market is sacred. So it is that the Victorian Labor Party has started a website to help consumers choose the best plan.

That same Victorian government promised to bring back the State Electricity Commission (SEC). They’ve done it, kind of. The old State Electricity Commission was responsible for all the electricity produced in the state. The new SEC will be another power company among many, competing with other companies to buy renewable power from the growing supply of rooftop solar power.

That may well turn out to be a positive step, but compared to the stirring slogan “We’re bringing back the SEC” it’s not the radical change Victorian voters were promised.

Similarly, the default market offer is supposed to make it easier for consumers to compare plans. That’s “easier,” not easy. It’s not in the interests of competing power suppliers for consumers to make easy comparisons, so the power companies do their level best to muddy the waters with a myriad of plans and offers.

Clare Savage’s advice as she did media interviews about the price hikes, was to “shop around,” and to see if you’re eligible for concessions.


So, prices are capped, in a way, but the capped prices are going up by almost a quarter. We also have the cold comfort that prices could be higher if things were different. The Albanese government is congratulating itself on an intervention into the market last December which temporarily imposed caps on bills and offered low and middle income earners a rebate on power bills.

Meanwhile, the Australian Energy Regulator, anxious to look after the retailers, doesn’t seem to want to impose price caps. Monash University Professor Ariel Liebman is suggesting further price caps, as the competition for retail prices “is really not serving Australians very well.”

One culprit is outages at fossil fuel generators and high fossil fuel prices. These might have less of an impact if the whole nation had the policy of reserving gas supplies for domestic consumption.

Massive investment in renewables would certainly have left us less at the mercy of ageing coal-powered generators, but the country which can afford to give more than $250 billion in tax cuts to people who are already wealthy, and $368 billion to submarine manufacturers, cannot spare anywhere near as much for expanding renewables.


We don’t have to use our imagination to see how things could be different. We could remember back before 1998 when a Liberal government set up the market. Australians didn’t have to do all the legwork so they could be rewarded for “shopping around.” They just paid for the power, and if the prices were too high, the government couldn’t hide behind a maze of retailers and associated bureaucracy.

We could also look at the present, to Western Australia. WA did not sell off its power generator. The state also reserves a portion of gas produced for domestic consumption. Consequently, West Australia has the most stable power prices in the country, and has been largely spared the “bill shock” that has plagued the rest of the country.

Australia’s energy is a public good. It needs to be fully publicly owned, and properly funded.

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