Report

Affordability in retail energy markets

5 Sep 2019
Description

This report provides a high-level analysis of energy affordability in New South Wales, Queensland, South Australia, the Australian Capital Territory, Victoria and Tasmania with a focus on the affordability of energy for low income households. It also provides an early analysis of the effect of the Default Market Offer arrangements introduced by the Australian Government in July 2019. These regulations, which are administered by the AER, place a cap on what retailers can charge customers on electricity standing offers in New South Wales, South East Queensland and South Australia.

In a departure from our usual practice of presenting this data as part of our Annual report on compliance and performance of the retail energy market, this year we have presented this data in a standalone form. The data contained in the report indicates some modest improvements in energy affordability over the past year, although energy is still difficult to afford by historical standards.

We know that paying energy bills is a major concern for many Australian households, especially those on low incomes. Our report shows that low income households on a typical market offer spent 4.8 to 7.6 per cent of their disposable income on electricity and 2.6 to 5.5 per cent on gas.

For customers on standing offers the cost of their energy is typically even higher. For example, for a low income household in South Australia, the difference between annual electricity bills on the median market offer relative to the median standing offer is $532. This translates into a difference between spending 9.9 per cent or 7.6 per cent of their disposable income on electricity.

We encourage households, where possible, to seek out the best possible deal they can for their circumstances. EnergyMadeEasy – our independent and free of charge price comparison website – provides the information you need to compare the various offers in your area so you can see if you would be better off under a different deal. Choosing the right deal can make a big difference to your energy bills.

Overview:

  • The main purpose of this report is to look at how energy affordability changed over the period 2017 to 2019.
  • Chapter 2 helps set the scene. It provides an overview of how we characterise energy affordability and highlights the gap that has emerged between the rise in energy prices and income growth. We also look at measures being taken to help address energy affordability.
  • Chapter 3 provides a description of how we measure affordability, including a discussion of the key inputs for our analysis. These include income, gas and electricity offers for standing and market customers as well as energy usage. Chapter 4 discusses trends in these key inputs from 2017 to 2019 across the regions covered by this report.
  • In chapter 5 we bring this work together to show how energy affordability has changed over the past three years. Chapter 6 focuses on trends over the past three years in the use by retailers of conditional discounting as a tool for advertising energy offers. While the discounts look attractive, they have the potential to cause financial stress where customers don’t, for whatever reason, meet the conditions they need to get the discounts. These conditional discounts can act like a penalty for households with limited capacity to pay.
  • To allow the reader an ‘at a glance’ snapshot of key information by region, including, amongst other measures, affordability, customer numbers, average usage and average annual bills, chapter 7 contains easy to read jurisdictional ‘dashboards’.
Publication Details
Language: 
English
License Type: 
CC BY
Published year only: 
2019
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Subject Areas
Geographic Coverage
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