Reforming Energy Costs in VIC: the Energy Legislation Amendment (Victorian Default Offer) Bill 2019

Tuesday 26 February 2019 @ 12.07 p.m. | Legal Research

On 19 February 2019, the Minister for Energy, Environment and Climate Change, Ms D’Ambrosio, introduced the Energy Legislation Amendment (Victorian Default Offer) Bill 2019 (VIC) (‘the Bill’) to the Victorian Legislative Assembly.

The Bill is the Victorian Government’s final response to recommendations in the bipartisan Independent Review of the Electricity and Gas Retail Markets in Victoria (‘the Review’). The Review investigated energy retail prices and consulted with numerous consumers in the industry. The final report was handed down on 13 August 2017. The Review found that deregulation of the electricity and gas retail markets and competition has not benefited customers, and intervention was required in order drop prices to protect low income customers.

The Bill

The Bill will:

  1. Introduce the Victorian Default Offer (‘VDO’) for electricity and gas retail markets
  2. Reform legislation in regards to energy retail contracts
  3. Give the Essential Services Commission (‘the ESC’) new functions to monitor and report on the competitiveness of the retail energy market

The Minister in her second reading speech said:

“The VDO will be a simple, trusted and reasonably priced option that will safeguard consumers unable or unwilling to engage in the energy retail market.”

The VDO will be a service that is offered unconditionally by energy retailers.

For electricity retailers, the VDO is scheduled to be implemented from 1 July 2019 for residential customers and small businesses. The Bill will also abolish standing energy offers, with customers on higher standing orders will automatically be transferred to cheaper VDOs. Other consumers will also have the option to switch to the VDO if they so choose. The methodology and pricing of the VDO will be advised by the ESC following terms of reference received from the Assistant Treasurer.

In a media release by the Victorian Chamber of Commerce and Industry, Chief Executive Mark Stone AM said:

"This new legislation will directly benefit around 46,000 small business customers that remain on costly standing offers. Almost 300,000 small businesses could benefit from new information that will make comparing energy offers and discounts straightforward... Following passage of the legislation, customers on standing offers would automatically be transferred to cheaper default offers from 1 July 2019, and other customers would be able to switch onto the Victorian default if it represents a better deal for them."

The media release also says:

"According to the Essential Services Commission, around 17 per cent of small business electricity customers are on standing offers compared to around 9 per cent of residential electricity consumers."

In addition to setting future VDOs, the ESC will also be given powers to decide terms and conditions of energy retail contracts to ensure the Review’s recommendations are met. Furthermore, they will be given a new function to monitor and report on the competitiveness of the Victorian electricity and gas retail market.

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