Competition and Consumer (Industry Code – Electricity Retail) (Updated Model Annual Usage and Total Annual Prices) Determination 2024

Administered by Department of the Treasury

Legislation au F2024L00617 In force Legislative Instrument

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EXPLANATORY STATEMENT

Competition and Consumer Act 2010

Competition and Consumer (Industry Code – Electricity Retail) Regulations 2019

Competition and Consumer (Industry Code – Electricity Retail) (Updated Model Annual Usage and Total Annual Prices) Determination 2024

Issued by authority of the Australian Energy Regulator

Purpose and operation

The Australian Competition and Consumer Commission (ACCC) recommended the Australian Energy Regulator (AER) be given power to set maximum standing offer prices for electricity supplied to small customers. It also recommended electricity retailers be required to discount all their offers from a reference price set by the AER. The Competition and Consumer (Industry Code – Electricity Retail) Regulations 2019 (the Regulations) give effect to these recommendations.

Part 2 of the Regulations prescribes a mandatory industry code for the purposes of Part IVB of the Competition and Consumer Act 2010. Under the code:

  • standing offer prices for small customers must not exceed a price determined by the AER
  • small customers must be told how a retailer’s prices compare with the AER-determined annual price
  • the most prominent price-related feature in an advertisement must not be a conditional discount, and any conditions on other discounts must be clearly displayed.

Part 3 of the Regulations confer price setting functions to the AER. Specifically, the AER is required to determine:

  • how much electricity a broadly-representative small customer of a particular type in a particular distribution region would consume in a year and the pattern of that consumption (the model annual usage)
  • a reasonable total annual price for supplying electricity (in accordance with the model annual usage) to small customers of that type in that region (the DMO price).

This Legislative Instrument sets out the AER’s determinations under Part 3 of the Regulations:

  • Clause 5 sets out the AER determined per-customer amount of electricity supplied in specified distribution regions to small customers.
  • Clause 6 sets out the AER determined timing or pattern of the supply of electricity in specified distribution regions to small customers.
  • Clause 7 sets out the AER determined reasonable per-customer annual price for supplying electricity in specified distribution regions to small customers.

The determinations made by the AER under the Legislative Instrument commence on 1 July 2024.

This Legislative Instrument revokes the Competition and Consumer (Industry Code – Electricity Retail) (Model Annual Usage and Total Annual Prices) Determination 2024 dated 23 May 2024, and replaces that determination in accordance with section 17(4) of the Regulations to correct a technical error.

Background

In the final report of its Retail Electricity Pricing Inquiry (REPI), the ACCC noted that standing offers, which were originally intended as a default protection for customers who were not engaged in the market, were unjustifiably high and have been used by retailers as a high-priced benchmark from which their advertised market offers are derived. The ACCC found that the standing offer is no longer working as it was intended and is causing financial harm to customers.

The ACCC recommended that, in non-price regulated jurisdictions, the standing offer and standard retail contract should be abolished and replaced with a default offer. Designated retailers, as defined in the National Energy Retail Law (NERL), should be required to supply electricity to customers under a default offer on request, or in circumstances where the customer otherwise does not take up a market offer.

The ACCC further recommended the AER be given the power to set the maximum price for the default offer in each jurisdiction.

The ACCC noted the default offer price will have two benefits:

  • to act as a cap on the price of standing offers to limit the ‘loyalty tax’ that is levied on disengaged customers.
  • to be used to set a reference bill amount, which all discounts must be calculated from.

This is the sixth annual DMO price determination published by the AER.

Consultation

In making this Legislative Instrument, the AER undertook several steps to consult with affected stakeholders in the market.

  • On 5 October 2023 it published an Issues Paper and received 22 responding submissions.
  • On 24 October 2023 it held workshops with groups of retailers to discuss the Issues Paper.
  • On 27 October 2023 it held an online stakeholder forum attended by approximately 90 stakeholders. Presentations from the forum were published on its website.
  • On 13 February 2024 it published an additional consultation paper on the Net System Load Profile approach and received 12 responding submissions.
  • On 19 March 2024 it published a DMO draft determination and received 16 responding submissions.
  • On 25 March and 26 March 2024 it held workshops with select retailers to discuss methodology outlined in the DMO draft determination.

In addition, the AER held numerous bilateral meetings with a range of stakeholders throughout the process outlined above.

It has had regard to the submissions and information received through consultations and the advice from the consultant in making the determination.

The consultation documents and all public submissions to this process are available on the AER's website DMO 6 page.

 

Statement of Compatibility with Human Rights

This Legislative Instrument has been prepared in accordance with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011: see Appendix A.

 


Appendix A

 

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Competition and Consumer (Industry Code – Electricity Retail) (Updated Model Annual Usage and Total Annual Prices) Determination 2024

The Determination is compatible with the human rights and freedom recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of legislative instrument

This Legislative Instrument sets out the AER’s determinations under Part 3 of the Competition and Consumer (Industry Code – Electricity Retail) Regulations 2019 (the Regulations). Specifically:

  • Clause 5 sets out the AER determined per-customer amount of electricity supplied in specified distribution regions to small customers.
  • Clause 6 sets out the AER determined timing or pattern of the supply of electricity in specified distribution regions to small customers.
  • Clause 7 sets out the AER determined reasonable per-customer annual price for supplying electricity in specified distribution regions to small customers.

The determinations made by the AER under the Legislative Instrument commence on 1 July 2024.

The Regulations confer price setting functions on the AER.

Human rights implications

The Legislative Instrument is prepared under the Regulations. The Regulations regulate business conduct and do not engage any of the applicable rights or freedoms.

Conclusion

The Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

Overview

The Competition and Consumer (Industry Code – Electricity Retail) (Updated Model Annual Usage and Total Annual Prices) Determination 2024 was enacted to address the issue of unjustifiably high standing offer prices for electricity, which were harming small customers. This Legislative Instrument was issued by the Australian Energy Regulator (AER) and gives effect to recommendations made by the Australian Competition and Consumer Commission (ACCC). The primary objective of this legislation is to ensure that small customers are provided with fair and reasonable electricity prices, thus protecting them from financial harm caused by excessively high standing offer prices. The Determination mandates that small customers must be informed of how their retailer's prices compare with a reference price set by the AER, and it prohibits the most prominent price-related feature in advertisements from being a conditional discount. Furthermore, any conditions on other discounts must be clearly displayed. The AER is required to determine a model annual usage and a reasonable total annual price for supplying electricity to small customers in specified distribution regions, with these determinations commencing on 1 July 2024.

Scope and Application

The Competition and Consumer (Industry Code – Electricity Retail) Regulations 2019 apply to electricity retailers within the electricity supply industry, specifically focusing on their pricing practices and contractual obligations to small customers. These Regulations are instrumental in enforcing the mandatory industry code established under Part IVB of the Competition and Consumer Act 2010, ensuring that electricity retailers comply with set standards, including maximum standing offer prices, transparent advertising, and clear disclosure of discount conditions. The Regulations extend across the Commonwealth, impacting electricity retailers operating in non-price regulated jurisdictions. The Australian Energy Regulator (AER) has the authority to set maximum standing offer prices and determine reasonable total annual prices for small customers. This determination is crucial for maintaining fair pricing practices and preventing the financial harm identified by the Australian Competition and Consumer Commission (ACCC). The regulations ensure small customers receive accurate information about pricing and do not face unfairly high prices due to misleading offers.

Key Provisions

The Competition and Consumer (Industry Code – Electricity Retail) Regulations 2019, as amended by the Competition and Consumer (Industry Code – Electricity Retail) (Updated Model Annual Usage and Total Annual Prices) Determination 2024, establish a mandatory industry code for the retail electricity market in Australia. Under the code, which is part of the Competition and Consumer Act 2010, the Australian Energy Regulator (AER) has been given specific powers to set the maximum standing offer prices for electricity supplied to small customers, and to determine a reasonable total annual price for supplying electricity to these customers. The standing offer price for small customers must not exceed a price determined by the AER, and small customers must be informed how a retailer’s prices compare with the AER-determined annual price (section 55). Additionally, the most prominent price-related feature in an advertisement must not be a conditional discount, and any conditions on other discounts must be clearly displayed (section 56). The AER is required to determine the model annual usage, which is the amount of electricity a broadly-representative small customer in a particular distribution region would consume in a year and the pattern of that consumption, and the DMO price, which is a reasonable total annual price for supplying electricity to small customers in that region (section 57). The Regulations impose several obligations on electricity retailers. Firstly, they must ensure that their standing offer prices for small customers do not exceed the maximum price set by the AER (section 55). Secondly, retailers are required to inform their small customers how their prices compare with the AER-determined annual price, ensuring transparency in pricing (section 56). Additionally, the Regulations mandate that the most prominent price-related feature in advertisements must not be a conditional discount, and any conditions on other discounts must be clearly displayed to prevent misleading or deceptive conduct (section 56). Finally, the Regulations require the AER to determine the model annual usage and the DMO price, which must be used as a benchmark for setting prices for small customers (section 57). Failure to comply with the provisions of the Regulations can result in significant penalties. Under the Competition and Consumer Act 2010, a corporation found to have contravened the Act can be subject to substantial pecuniary penalties, with the maximum penalty for serious or repeated contraventions being up to $10 million for corporations (section 12GA). Additionally, individuals involved in the contravention can be subject to personal penalties, with maximum fines of up to $300,000 and imprisonment for up to two years for serious or repeated contraventions (section 131). Furthermore, the Act allows for the Australian Competition and Consumer Commission (ACCC) to seek injunctive relief or other court orders to enforce compliance with the Act (section 131). The AER also has the authority to issue directions to electricity retailers to comply with the Regulations, and failure to comply with such directions can result in further penalties.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.