Consumer Action Law Centre welcomes the opportunity to comment on the Essential Services Commission’s (ESC) Consultation Paper on the review of the Victorian Default Offer (VDO) for 2023-24.
On balance, we consider that the VDO has been, and continues to be, successful in its objective to provide, “…a simple, trusted and reasonably priced electricity option,” for people who are unable or unwilling to engage in the electricity market. Given the increase in wholesale energy prices over the past year, and broader cost-of-living pressures currently impacting the community, it is critically important the VDO continues to deliver against this objective in the coming regulatory period.
While acknowledging that elevated wholesale electricity prices will see an increase in the 2023-24 VDO, we consider that community expectations demand that the VDO be set at no more than necessary to ensure bills remain affordable, particularly in a period when more Victorians will likely struggle to afford the cost of their electricity use.
Related to this, we note reports that electricity futures prices have fallen since the Federal Government’s recent intervention into the energy market.2 We would expect to see this downward pressure on wholesale prices flow through to household bills and to be reflected in the 2023-24 VDO. When making its decision on the 2023-24 VDO, we urge the ESC to give precedence to the impact of any price rise on Victorians, particularly people on low incomes or in vulnerable circumstances, rather than the viability of particular energy retailers.
The issues raised in the consultation paper present an opportunity to minimise any increases in the coming regulatory period. With respect to the Australian Energy Market Operator’s (AEMO) June 2022 intervention into the wholesale market, we are of the view that there should not be a direct pass through of associated costs to consumers.
We consider that the ESC must have regard to how any costs incurred can be more fairly shared between retailers and consumers, including through assessment of retailer’s capacity to absorb at least some of these costs. We also recommend that any further costs associated with AEMO’s intervention into the wholesale market which are currently unknown should be accounted for in the 2024-25 VDO, rather than through a variation to the 2023-24 VDO.
Read the full submission PDF.230127 ESC VDO 2023-24 consultation paper