Spilt Milk? AEMC Pushes Simpler Electricity Pricing

Electricity pricing has become so complicated that Australia’s energy rule-maker wants future power plans to be as easy to understand as buying milk.

That’s one of the key messages from a major Australian Energy Market Commission (AEMC) review released last week, which sets out a long-term roadmap for simplifying electricity pricing as rooftop solar, home batteries and electric vehicles become increasingly common.

“Rather than consumers being forced to understand demand charges, export charges, time-of-use windows and locational signals to get the best deal – we want to make their experience more like buying milk,” AEMC Chair Anna Collyer said at Australian Energy Week earlier this month.

The review’s recommendations include measures aimed at reducing so-called loyalty taxes, improved energy plan comparison tools, simpler retail plans and gradual reform of network pricing over the coming decade.

Why Simplify Electricity Pricing?

According to the AEMC, many consumers are finding electricity increasingly difficult to navigate, with a growing number of tariffs, plans and energy services making it harder to compare offers and identify good value.

The Commission says the problem is likely to grow as more households install solar panels, batteries and EVs, creating new opportunities to use, store and manage electricity in different ways.

Its answer is to make electricity pricing simpler for consumers while shifting more of the complexity behind the scenes to retailers and energy service providers.

As the report puts it, consumers should be able to access good value without needing to become electricity pricing experts.

Four Recommendations, One Direction

The review contains four recommendations:

• tackle so-called loyalty taxes that can leave long-standing customers paying more than necessary, requiring energy providers to notify customers if they have been paying more than better available offers, and report on how many customers are affected;
• improve electricity comparison tools as plans and energy services become more complex;
• simplify retail plans by shifting more pricing complexity behind the scenes, and introducing stronger incentives to use/share energy in ways that lower system costs; and
• regularly review consumer outcomes and remove unnecessary regulation.

Of those, the third recommendation is arguably the most significant.

The AEMC wants simpler retail plans, with much of the underlying complexity managed by retailers and energy service providers rather than households. The Commission believes this will make it easier for consumers to benefit from technologies such as solar, batteries and EVs without needing to become experts in electricity pricing.

What It Means For Solar Households

A Clean Earth Solar install.

Solar, home batteries and EV charging sit at the centre of the review.

The AEMC argues that households should be rewarded when their energy use, storage or exports help reduce pressure on the grid and avoid unnecessary network investment.

At the same time, the Commission says the existing framework is coming under increasing strain as more consumers generate and store their own electricity while continuing to rely on the shared grid.

The review has not been without controversy. Earlier modelling published during the consultation process suggested some households could be better off under future pricing arrangements while others could be worse off, prompting debate about how network costs should be shared in a grid increasingly shaped by solar and batteries.

Not everyone will necessarily agree that simpler is always better, either. While many consumers may welcome less complicated plans and tariffs, solar and battery owners often rely on detailed pricing information when weighing up investments and estimating potential savings.

The draft attracted 2,700 submissions in response to the draft proposal, including 1,600 Solar Citizens supporters opposing a proposal to increase fixed daily charges.

Solar Citizens CEO Heidi Lee Douglas welcomed the lack of concrete plans to increase fixed charges in the final report as a sign that people power had won out.

“Households have spent more than 25 billion dollars of their own money installing rooftop solar and batteries because they want lower energy bills, greater energy independence and a cleaner energy future. “They do not want to see energy market rules that undermine those investments or shift more costs onto consumers through higher fixed charges… we’ve shown that when consumers speak, decision-makers listen,” Douglas said.

A Long-Term Roadmap

For now, however, the review is more about setting direction than introducing immediate changes.

Many of the recommendations would require further consultation, rule changes and industry transition periods before taking effect, with the most significant pricing reforms expected to unfold gradually over the next decade.

Whatever shape those reforms eventually take, households considering solar or batteries still need to make decisions based on the market that exists today, not the one that may emerge years from now.

To see what retail plans are available now, check out our electricity price comparison tool.