Electricity companies would be prevented from slugging consumers who don't shop around a "loyalty tax" under a proposed major shake-up of power prices aimed at lowering stubbornly high bills.
The Australian Energy Market Commission has also proposed radical reforms that would enable retailers to charge customers a simple subscription fee for electricity, similar to the way people pay for a phone bill or an insurance premium.
Consumers have traditionally paid for power based on how much they use it.
But amid the rollout of smart meters that allow those prices to be varied according to when — or how intensely — power is used, there have been growing complaints about the over-complication of bills for many households.
In a proposed revamp of electricity prices, released today, the AEMC has said the system is failing too many consumers and big changes are needed to make it simpler, fairer and more affordable.
The commission has flagged reforms that would require retailers to "charge all customers on the same plan the same price" in a bid to stamp out what it said was the application of loyalty taxes.
These refer to the practice by retailers such as power companies of charging long-term or loyal customers more than new ones.
Anna Collyer, the AEMC's chair, said the existing system relied too heavily on customers being able or willing to hustle for the best price.
Putting onus on retailers
Those who did not, or could not, often ended up paying "significantly" more for the same service as someone who was new to a retailer.
"We want to move beyond discount wars where customers need to constantly shop around," Ms Collyer said.
To that end, the commission also recommended a model under which retailers would compete to serve customers who had not "actively" chosen a plan.
It would be done through an auction to encourage the competition and be designed to stop disengaged customers from being rolled on to expensive standing offers.
[Chart]The draft report from the AEMC, which sets the rules that govern the national electricity market covering Australia's eastern seaboard, comes at a pivotal time.
According to the commission, not only were tariffs changing rapidly as smart meters were added to more homes — so, too, was the way consumers interacted with the grid.
It noted the explosion in the popularity of rooftop solar in Australia, which had the highest rate of uptake anywhere in the world.
By 2040, it projected one in every two Australian homes would have solar panels, while one in every four would have batteries and an electric vehicle, or EV.
Such profound shifts were providing a massive opportunity for customers with the technology, the commission noted.
"The way we use energy is changing rapidly," said Ms Collyer, who noted such clean tech could help slash energy bills for the people who owned it.
In a separate report last week, for example, the AEMC found homes that full electrified — or ran everything from their cooktop to their car on electricity rather than fossil fuels — could cut their energy costs up to 90 per cent.
A burning case for change
Equally, however, it said there was a risk that households unable to install such kit could be left behind and even punished by the existing pricing structures.
This was because those customers would have to pick up an ever increasing share of the costs of maintaining the vast network of poles and wires that supplied electricity to homes.
Customers with solar panels and batteries, by contrast, were often able to avoid many of the network charges recovered through typical consumption tariffs.
"The pricing framework that worked well in the past will likely not work as well in the future system," the AEMC noted in the draft report.
"If we do nothing, some consumers would unfairly pay higher shares of network costs, contributing to declining equity, higher overall costs and an increased proliferation of interventions."
As well as a crackdown on loyalty taxes, the AEMC has also suggested fundamental changes to the way retailers offer their services to consumers.
Ms Collyer said she wanted the power companies to take a leaf out of the books of their peers in other industries, such insurance, telecommunications or even entertainment.
In entertainment, for example, companies such as Netflix charged their subscribers a flat monthly fee for a level of service, regardless of how much they streamed.
"We want retailers offering products that genuinely suit different customers, for example, a simple monthly subscription for people who want certainty or flexible plans for people who want to actively manage their energy use," she said.
"We want to see real differentiation based on customer needs."
Energy 'no longer easy'
To help householders make better sense of the retail electricity market, the AEMC has also pushed for improvements to information that's available to the public.
Chiefly, this includes the Australian Energy Regulator's price comparison website "Energy Made Easy", which observers say has been struggling to adequately compare the increasingly complex offers in the market.
"Consumers tell us they can't find the products they want, and when new products do emerge, it's very difficult to compare them," Ms Collyer said.
"Whether you're interested in a virtual power plant or a simple subscription plan, you should be able to compare your options and find what suits you best."
The commission said getting electricity pricing on a fairer and more sustainable footing would be essential as Australia moved deeper into its energy transition.
By early next decade, it said practically every home would have a smart meter, allowing retailers to offer innovative products to the widest possible market.
It said implementation of its reforms would begin next year but take a decade to finish.
The draft report will be open to submissions until February 13, with a final report to be published "in early 2026".
