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Tech & Science Victoria's default power prices are set to rise, so what does that mean for consumers?

08:40  27 november  2019
08:40  27 november  2019 Source:   abc.net.au

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Power prices are set to rise for a small number of Victorians , but most consumers will have to wait until January to see if their bills will increase.

Victoria ' s energy price regulator, the Essential Services Commission, has allowed the default power offer rate to increase by 7.8 per cent from 1 Power prices are set to soar for hundreds of thousands of customers as they are stuck on expensive default plans. More than 120,000 families and 43,000

Some Victorian consumers will see their bills go up next year. (ABC News: Natasha Johnson)© Provided by Australian Broadcasting Corporation Some Victorian consumers will see their bills go up next year. (ABC News: Natasha Johnson)

Power prices are set to rise for a small number of Victorians, but most consumers will have to wait until January to see if their bills will increase.

The Essential Services Commission on Monday announced electricity prices would rise by an average of $110 a year for domestic consumers on the state's default offer for 2020, and $465 a year for a typical small business on a default offer.

But that comes after prices dropped when the default price was first introduced in July.

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So what does this latest announcement mean for Victorian consumers? And what is the default offer anyway? And how do you even know if you're on it?

We've asked the experts what these changes mean for consumers.

How do I know if my power prices are rising?

The Grattan Institute's energy program director Tony Wood said people on a default power offer are generally those who in the past 15 years "have never sought a better offer from the market, have never accepted a better offer from, you know, people coming to the door or on the phone making offers".

"These are consumers who have stayed with whatever deal they got when the Government first privatised and introduced competition into the electricity sector."

He said these deals were originally called standing offers and the number of people on them had been dropping.

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Find the best electricity offers with Victoria ' s independent Victorian Energy Compare application. The Power Saving Bonus will provide all Victorian households a incentive if they seek out a better energy The Victorian Government has set the Victorian Default Offer to apply from 1 July 2019.

"The percentage has come down from 100 per cent, which is what it was when it first started to around about 5 per cent today," Mr Wood said.

The energy expert explained the default offer was introduced earlier this year for these customers when concerns were raised that prices charged to customers on standing offers were much higher than other offers from electricity retailers on the competitive market.

"It is not surprising in a sense that retailers, particularly new retailers who were keen to get customers, were prepared to offer better deals and that means lower prices than existing deals," he said.

"So people looking for a better deal, got a better deal."

The Essential Services Commission, which sets the default offer, said other people who may be on that power deal included anyone who had moved house and had their electricity connected by a real estate agent or anyone who was on a market deal that had expired.

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How much will prices rise by?

The Essential Services Commission announced that the average domestic customer on a default offer will see their electricity bill increase from around $1,400 a year to $1,500 a year, while a typical small business customer will see a price rise from around $5,900 a year to around $6,400 a year.

But in its announcement, the commission said customers would still have lower bills than what they had before the default offer was introduced in July.

"We estimate that the annual bill for a typical domestic customer on the VDO in 2020 could be around $200 to $300 per year lower than prior to the introduction of the VDO," it said.

Essential Services Commission chairperson Kate Symons said wholesale electricity costs were driving the rise in prices for default electricity offers.

"Wholesale costs have increased significantly due to expectations of a hot summer in 2020, the perceived risks of outages in some generation assets and the impact of drought on hydroelectricity generation capacity," she said.

Ms Symons said consumers who were facing price hikes could still check the market for better deals from retailers.

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The price of electricity, already triggering shock from consumers and businesses in many parts of The costs will be borne by consumers , and the average household electricity bill will rise to more than 0. "So it means that they are faced with huge costs, no increase in income supplements, and

"It should be remembered that those customers can do better than the Victorian Default Offer, there are actually better market offers available, but if a customer wants a simple and reasonably priced option they can trust the VDO," she said.

Will other consumers also see their power bills increase?

Mr Wood said in Victoria, energy retailers usually announced their prices for the year on January 1.

He said retailers would be considering these cost increases.

"Some of them may indeed decide to pass on that full cost increase and their customers will expect to see that from the 1st of January," he said.

"But equally some of them may decide they can absorb some of that because of other cost efficiencies."

Mr Wood said the situation was similar to when the Reserve Bank changes interest rates.

"We wait to see what our bank is going to do for our mortgage, the same thing applies here," he said.

"We should be waiting to see whoever our retailer is, what they do."

What do the retailers say?

The Australian Energy Council, which represents electricity retailers, said Monday's announcement would not impact most consumers.

"Most Victorians are on competitive deals rather than the regulated offer, so [the] decision will not impact their bills," its chief executive, Sarah McNamara, said in a statement on Monday.

"Our message is to stay on or switch to a market deal with your retailer rather than rely on the regulator setting the VDO because it will save you money."

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