Tax on, Tax off: Electricity prices before and after the repeal of the carbon tax November 2014 Disclaimer The energy offers, tariffs and bill calculations presented in this report should be used as a general guide only and should not be relied upon. The information presented in this report is not provided as financial advice. While we have taken great care to ensure accuracy of the information provided in this report, it is suitable for use only as a research and advocacy tool. We do not accept any legal responsibility for errors or inaccuracies. Alviss Consulting Pty Ltd does not accept liability for any action taken based on the information provided in this report or for any loss, economic or otherwise, suffered as a result of reliance on the information presented. If you would like to obtain information about energy offers available to you as a customer, go to the relevant regulator’s website or contact the energy retailers directly.

Tax on, Tax off: Electricity prices before and after the repeal of the carbon tax

May Mauseth Johnston, Alviss Consulting

Canberra, 17 November 2014

© Alviss Consulting Pty Ltd This work is copyright. Apart from any use permitted under the Copyright Act 1968 (Ctw), no parts may be adapted, reproduced, copied, stored, distributed, published or put to commercial use without prior written permission from the Alviss Consulting.

Tax on, Tax off: Electricity prices before and after the repeal of the carbon tax November 2014 Tax on, Tax off: Electricity prices before and after 3 Acknowledgements

This project was funded by grant from the Consumer Advocacy Panel (www.advocacypanel.com.au) as part of its grants process for consumer advocacy projects and research projects for the benefit of consumers of electricity and natural gas.

The views expressed in this document do not necessarily reflect the views of the Consumer Advocacy Panel or the Australian Energy Market Commission.

Several consumer groups and energy advocates have provided assistance through alerting their networks to this project and by forwarding energy bills, as well as other retailer communications, received by consumers. The assistance from the Victorian Council of Social Service, the South Australian Council of Social Service, the Consumer Action Law Centre, the Consumer Utilities Advocacy Centre, Camcare, St Kitts Associates and St Vincent de Paul Society Victoria has been much appreciated.

The St Vincent de Paul Society is also an advocacy partner of this project. Gavin Dufty, Manager of Policy and Research, has provided input into this report and is the project’s spokesperson.

4 CONTENT

Foreword

Executive Summary 9

1. About this project 14

2. Retailers’ obligations, statements and communications 15

3. Methodology and assumptions 21 3.1 Retailers’ estimates based on substantiation statements 21 3.2 Assumptions about consumption levels 24 3.3 Data collection 25 3.4 What bill calculations include/exclude 25

4. Comparison of the impact the repeal has had on bills across the NEM 26 4.1 Standing offers 26 4.2 Market offers 28

5. Jurisdictional analyses 31 5.1 Bill impacts in the ACT 31 5.1.1 Changes to ACT market offers 31 5.2 Bill impacts in NSW 33 5.2.1 Changes to NSW market offers 35 5.3 Bill impacts in South Australia 40 5.3.1 Changes to South Australian market offers 40 5.4 Bill impacts in Tasmania 43 5.5 Bill impacts in Victoria 44 5.5.1 Changes to Victorian market offers 48

Tax on, Tax off: Electricity prices before and after 5 5.6 Bill impacts in Queensland 55

5.6.1 Changes to Queensland market offers 55

6. Issues regarding retailers’ strategies and behaviour 57 6.1 Combining price increases with carbon tax adjustments 57 6.2 Cost savings versus new prices 57 6.3 Reduced discount on market offers 58 6.4 Changes to tariff structures 59 6.5 Changes to supply charges 59

7. Allocation issues and potential windfall gains 61

Conclusion 64

6 FOREWORD St Vincent de Paul Society Victoria (SVdP Society) welcomes this study into the impact of the repeal of the carbon tax on electricity prices across the National Electricity Market (NEM). The SVdP Society has been a long-standing advocate for energy consumers in Victoria and nationally. The SVdP Society Victoria has over 7000 members and volunteers. Across Victoria our members see what poverty looks like in a highly developed nation It is in this context that we are particularly concerned about the access to affordable essential services. In the last year alone, the SVdP Society has assisted over 120,000 households through providing over $10 million in direct assistance. A significant proportion of this assistance goes to pay for utility costs. It is in response to such needs that the SVdP Society decided to obtain a thorough understanding of changes to energy markets and prices, and the impact they have on household bills in order to increase community awareness about these changes and whether there are ways for households to reduce their bills. In partnership with Alviss Consulting, the SVdP Society has systemically monitored residential electricity and gas prices since July 2010. This project, also commonly referred to the Vinnies’ Tariff-Tracking project, has produced numerous reports examining price changes as well as market trends, retail competition and regulatory shortcomings.1 The cost of energy is significant to many Australian households, and especially to those on lower or fixed incomes. We therefore believe it is important to inform households about what is happening in energy markets, when and why prices go up (or down), and how they can minimise their own costs. At the same time, we believe that it is important to represent the interests of residential energy consumers in policy and regulatory debates, in order to influence policy decisions and regulatory arrangements that have an impact on households across the NEM. This study shows that while some households will receive significantly lower electricity bills in 2014/15 due to the repeal, others will experience modest price decreases or none at all. We believe households should be made aware of which category they belong to as well as why. Furthermore, we encourage all consumers that can get a better price reduction from a different retailer to either call their existing retailer and ask for a discount or shop around. For example, we note the report’s findings in relation to Powerdirect and Alinta, which have significantly increased their market offer discounts for new customers in some jurisdictions. We would therefore encourage existing Powerdirect and Alinta customers to request the same level of discounts that they are willing to offer new customers.

1 See www.vinnies.org.au/energy

Tax on, Tax off: Electricity prices before and after 7 The SVdP Society will endeavor to share the information provided in this report with our colleagues, as well as look for opportunities to engage with policy makers and regulators on issues we believe are important for our constituencies. Finally, in relation to the issue of potential non-distributed cost savings due to the repeal (section 7 of the report), we call on the Federal Government to conduct an inquiry into how these monies should be accounted for, collected and distributed. We do believe that the amounts in question can be significant and while we acknowledge that it could be impossible, and impractical, to identify the rightful “owners” of the monies, we do not believe that would justify any windfalls to entities within the energy supply chain or a revenue stream for the government. We are grateful to May Mauseth Johnston of Alviss Consulting for undertaking and involving us in this important study.

Gavin Dufty Manager, Policy and Research, SVdP

8 Executive Summary Leading up to the carbon tax repeal, households were regularly reminded about how much this tax was adding to their energy bills and that savings of 9%, or $200 per annum for electricity alone, would occur if repealed.1

This report shows that there is no ‘magic number’ and household savings on electricity bills vary significantly.

Average reductions

For households using 6,000 kWh per annum, the average price reduction to customers on standing offer contracts across the NEM is $160 (or 8%). For customers on market offer contracts, the average price reduction is $110 (or 6%).2 The jurisdictional differences are, however, significant. Table 1 below shows that households in the ACT (on the regulated rate) would receive a reduction of 12% while South Australian households would receive a 4% reduction.

Table 1 Annual price reductions for households using 6,000 kWh/annum (single rate) by network area

Standing / Standing / regulated offers % regulated offers $ Market offers % Market offers $ ACT - ActewAGL 12% $165 10% $155 NSW - Essential 6% $145 6% $135 NSW - AusGrid 9% $160 5% $100 NSW - Endeavour 9% $160 5% $90 SA - SAPower 4% $110 4% $90 Tas - Aurora 9% $150 8.5% $140 Vic - Citipower 9% $170 6% $100 Vic - Powercor 8% $180 5% $95 Vic - SP Ausnet 8% $175 5% $90 Vic - Jemena 8% $175 5% $90 Vic - United 8% $175 6% $100 Qld - Energex 8% $175 7% $140

1 Australian Government, Department of Environment, Repeal of the carbon tax – Impacts on house- holds and businesses, Fact Sheet which estimated that electricity bills in 2014-15 would on average be $200 less than they would have been with a carbon tax in place at http://www.environment.gov.au/system/files/ pages/59388d77-a9b5-4e4c-87b7-d732baf7c45b/files/factsheet-impacts-households-and-businesses_0. pdf and Prime Minister Abbott’s statement on 15 October 2014: “When this bill is passed, this Government estimates that power prices will go down by 9 per cent” available at http://www.abc.net.au/news/2013-10- 30/tony-abbott-carbon-tax-gas-electricity-bills/5050348 2 See section 4 for more detail about offers and calculations.

Tax on, Tax off: Electricity prices before and after 9 Differences and more differences

Jurisdictional differences were expected. A common explanation offered was that the carbon tax made up a smaller proportion of the total bill in Tasmania and South Australia than in, for example, the ACT.3

Similarly, households’ actual consumption levels are unlikely to be the same as the assumed average. However, it is not as easy as looking at cost savings by jurisdictions, or across different consumption levels, to make sense of the average 10% (or $200) estimate.4 Some of the reasons for this are:

SS For jurisdictions with more than one network area there are significant differences to the reductions in bill depending on geographic location. In Victoria, for example, households in the northern part of inner city Melbourne (i.e. the suburb of Carlton) will experience an average decrease of 6% in 2014/15.5 Households in the inner northwestern suburb Flemington, on the other hand, will experience an average decrease of 5%.6

SS There is a difference between standing (or the regulated rate in some jurisdictions) and market offers. The NEM average reduction to standing offers is 8% while the NEM average reduction to market offers is 6%.

SS There tends to be a difference between jurisdictions where retail prices remain regulated and jurisdictions that have deregulated. That is, the difference in reduction between standing offers and market offers is typically less (albeit with some exceptions) in jurisdictions where the standing offers are still regulated.

SS There are significant differences between the reductions offered by the various retailers within each network area or jurisdiction.

SS Some retailers offer different cost reductions to existing customers compared to price reductions for new customers.

Overall, most electricity customers have received price reductions, but for many households the price reduction is significantly lower than the averages estimated by the Government.

An inadequately informed community

Due to extensive and ongoing messages about the savings that the repeal of the carbon tax would create, it is understandable if the community’s interest and expectations are high. Furthermore, as it is important that consumer confidence in energy markets does not erode further, we believe consumers need, and deserve, better information about the impact the repeal of the tax has had on their bills. We do not believe that the ‘substantiation statements’ or the ‘notices to customers’ that we have examined as part of this project adequately explain the impact the repeal has had on electricity costs.

As illustrated by the three examples from Dodo, Lumo and Click below, the information provided in the ‘substantiation statements’ was of a very general character.

Dodo’s statement:

“Residential electricity customers in Victoria/New South Wales/ South Australia

A residential customer using 6,500 kWh of electricity a year will receive an approximate saving from

3 Several commentators have provided reasons for why the reductions will be lower in some jurisdic- tions compared to others. See for example, The Conversation, Carbon tax axed: how it affects you, Australia and our emissions, 15 July 2014, The Canberra Times, Canberra to save more than most from carbon tax repeal, 19 July 2014 and www.news.com.au, Carbon tax scrapped: how the changes will affect Australian consumers, 15 July 2014. The claim that Tasmanians would receive the lowest reduction now appears to be wrong. 4 See Fn 1 5 Based on market offers in Citipower’s network area. 6 Based on market offers in Jemena’s network area.

10 the Carbon Tax Removal of $130 per year before any discounts and concessions are applied.”7

Lumo Energy’s statement:

“The carbon tax was repealed with effect from 1 July 2014. This has led to the reduction in our costs which we will pass on to our customers. We estimate that on average, each customer in each class set out below, will save approximately the following amount between 1 July 2014 and 30 June 2015.”8 (Note: only part of table included below)

State Fuel Customer Type Reduction Vic Electricity Residential 8.2% Commercial 10.7% Gas Residential 6.4% Commercial 9.5% SA Electricity Residential 7.3%

Click Energy’s statement:

“Based on Click’s assumptions regarding customer volumes, seasonal usage profiles, pay on time discounts and tariff types, the estimated annual saving of New South Wales (NSW) customers that is attributable to the removal of carbon tax repeal [sic] is 7.5% for residential customers”.9

In our view, both the Federal Government and retailers, through the Energy Retail Association of Australia, have a role to play in ensuring that consumers are adequately informed about the impact the repeal of the carbon tax has had on their bills.

Strategic retailers and confused consumers

One retail approach that made it impossible for consumers to identify the impact of the repeal on their bill was the application of price increases and carbon tax adjustments in the same price reset. One retailer’s reason for delaying the introduction of price increases from July to September (when they adjusted for the repeal) was to ensure that customers only receive one price change.10

In some cases, the bill impact of decreases to the consumption charges has also diminished due to increases to the fixed supply charge. While several retailers decreased their daily fixed supply charge for new market offers, others increased theirs. Momentum, Red and Alinta all introduced significant increases to their fixed supply charges in some network areas. Momentum is the retailer with the greatest increases, with the fixed supply charge increasing by as much as $150 per annum in one Victorian network area (Jemena).

In Victoria, South Australia and NSW, where the retailers set their own prices for standing offers as well as market offers, there may be a significant difference between the cost savings retailers pass through to existing customers and the price they offer new customers in a post carbon environment. For example:

SS In Victoria, Alinta increased its pay on time discount for new customers to 25% while existing customers on Alinta’s “Fair Go” offer continue to receive a 15% pay on time discount. In South Australia they increased the discount to 20% (up from 15%).

SS Powerdirect’s guaranteed discount off consumption charges for new customers went up from 22% to 26% in Victoria and from 7% to 13% in NSW.

7 Dodo’s substantiation statement 8 Lumo’s substantiation statement 9 Click Energy’s substantiation statement 10 As per information on electricity bill from Alinta to customer in South Australia

Tax on, Tax off: Electricity prices before and after 11 SS People Energy’s pay on time discount (off consumption charges) increased from 25% to 35% in Victoria.

SS Lumo increased its pay on time discount (off the bill) from 20% to 22% in Victoria and from 12% to 15% in South Australia.

Origin, on the other hand, reduced its pay on time discount for new customers in NSW and Queensland. In NSW, Origin’s market offer (Daily Saver Plus) contained a pay on time discount of 10% in July 2014. On the 4th of August, however, this discount was reduced to 7%. This is the same discount that is offered to customers post the carbon repeal price reset that took effect 15 September.

In Queensland, Origin’s market offer (again the Daily Saver Plus) offered a pay on time discount of 5% in July 2014. Post the carbon repeal price reset (that took effect 15 September), however, this discount was reduced to 3%.11

Furthermore, while non-conditional discounts allow us to apply discounts to the retailers’ rates and determine whether households are paying more or less compared to before, conditional discounts (such as pay on time discounts) do not allow us to make that comparison. As raised in a report by Alviss Consulting and the St Vincent de Paul Society in December 2013:

“Only the retailers know what their customers ended up paying but nothing would stop them from claiming that higher (conditional) discounts reflect the reduction in wholesale costs, lower network charges or the repeal of the carbon tax, to give a few examples.”12

It certainly looks like some retailers have decided to pass on lower wholesale prices, due to the repeal of the carbon tax, as conditional pay on time discounts. After all, the cost of late paying customers (e.g. the cost of debt) is clearly nothing near the 20% to 35% pay on time discounts now offered in South Australia and Victoria.

Potential windfall gains

The repeal of the carbon tax effects all energy consumed since 1 July 2014. For customers on a quarterly billing cycle that do not have a smart meter it is, however, impossible to determine actual consumption post 1 July unless all meters were manually read on that day. As July is a particularly cold month in many parts of Australia, we can fairly assume that July energy consumption is higher than, for example, that of May.

To examine this potential issue we analysed the bills of one Canberra household. They show that ActewAGL has no knowledge about when the total consumption of 4,200kWh actually occurred within the three month long period. To estimate the daily consumption ActewAGL simply divide total consumption by the number of days (89 in total). Then, in order to allocate what consumption occurred before and after the repeal, they multiply daily consumption by the number of days (in this case it was 67 days prior to 1 July and 22 days post 1 July).

Based on this methodology, ActewAGL determined that the customer had been overcharged by $29 for electricity consumed between 1 and 22 July 2014 due to the repeal.

However, if we assume that 40% of total consumption actually occurred post 1 July, the customer would be under compensated by $12. The question therefore becomes who keeps the windfall?

11 When we checked the fact sheets on Origin Energy’s website on 3 September 2014, Origin listed two sets of fact sheets, one was the current offer and the other was the offer that took effect on 15 Sep- tember. The current offer stated that it took effect on 1 July 2014 and contained a 3% pay on time discount. However, when we compared that to the Factsheet that we had downloaded from Origin’s website in July, Origin appears to have altered the discount at a later stage. Our saved Origin fact sheet also states that it was effective from 1 July and the pay on time discount is listed as 5%. 12 Gavin Dufty and May Mauseth Johnston, The National Energy Market – Is there a devil in the retail? December 2013, p 23

12 This would be a smallish amount for the individual household ($12) but ActewAGL has approximately 150,000 residential electricity customers and $12 per household would equate to $1.8 million. If the customers do not receive the money someone else keeps it.

The vast majority of homes, and small businesses, in the NEM do not have smart meters installed and someone in the supply chain, and most likely retailers, can end up with a significant windfall. This raises issues in relation to how these savings should be accounted for and how they could be redistributed (noting that it would be impossible to know which individual consumers used more kWh than the retailer estimated post 1 July 2014).

Lessons for the future

We believe this study can provide a strong lesson for the implementation of future decisions where government policies directly impact on customers’ energy bills. Just as the GST is a line item on bills, other taxes, levies or policy decisions (such as mandated smart meter roll outs) should be itemised. We recognise that it may be more politically expedient to “hide” unpopular policy costs from the electorate, but as policies can and do change, itemising these costs are necessary to ensure market transparency and promote consumer confidence.

Tax on, Tax off: Electricity prices before and after 13 1. About this project

On 1 July 2012 the federal government introduced a carbon tax that was based on a fixed carbon price for the first three years. On 17 July 2014 the tax was repealed. The tax caused extensive public debate and its removal was a key election promise by the Coalition prior to the federal election in September 2013. Figures estimated by Treasury show that household costs on average will be $550 less in 2014/15 than they would nave been with the tax in place.13 In relation to electricity, they have estimated that households will pay $200 less on average.14

The purpose of this project is to produce a report that demonstrates the impact of the repeal of the carbon tax on residential electricity bills across the NEM. Furthermore, Alviss Consulting has partnered with the St Vincent de Paul Society to provide an independent consumer voice on the impact of the repeal, raise issues consumers should be aware of, and provide reasons and explanations for differences between jurisdictions.

Structure of this report:

Section 2 Discusses the relevant legislative obligations on energy retailers, as well as examining retailers’ substantiation statements and communications to customers.

Section 3 Outlines the methodology, as well as assumptions, used for the analysis presented in this report.

Section 4 Presents a comparative analysis of the impact the repeal has had on bills across the NEM. It analyses changes to standing offers and market offers using a fixed consumption level (6,000 kWh per annum) for all jurisdictions.

Section 5 Contains the various jurisdictional analyses. For each of the six NEM jurisdictions, the analyses show changes to standing and market offer bills based on consumption levels typical for each jurisdiction. The purpose of this section is thus to investigate likely bill impacts for each jurisdiction, rather than comparing jurisdictional differences (as per section 4).

Section 6 Discusses issues regarding retailers’ strategies and behaviours that emerged from the above bill analyses.

Section 7 Examines allocation issues and potential windfall gains. It highlights that retailers do not have the ability to accurately determine exactly how much a household consumed before and after 1 July within a billing cycle. This can result in windfall gains for the retailers.

Conclusion The concluding section of this report summarises reasons for why there is no ‘magic number’ that can illustrate the impact of the repeal of the carbon tax on households. It also offers advice on how government policy decisions impacting on the cost of an essential service can be implemented more transparently.

13 Australian Government, Department of Environment, Repeal of the carbon tax – Impacts on house- holds and businesses, Fact Sheet available at http://www.environment.gov.au/system/files/pages/59388d77- a9b5-4e4c-87b7-d732baf7c45b/files/factsheet-impacts-households-and-businesses_0.pdf 14 Ibid

14 2. Retailers’ obligations, statements and communications

Since the Clean Energy Legislation (Carbon Tax Repeal) Act was passed on 17 July 2014, electricity and gas retailers have had a legal obligation to pass through the cost savings attributed to the repeal of the carbon tax to consumers. The ACCC states that:

“All suppliers of regulated goods must pass through all their costs savings directly or indirectly attrib- utable to the carbon tax repeal to customers. Suppliers of regulated goods that do not pass through all carbon tax costs savings are engaging in price exploitation, which is against the law.”15

Businesses that retail electricity and gas were thus required “to provide a carbon tax removal substantiation statement to the ACCC of their estimated cost savings from repeal”.16 In addition, gas and electricity retailers were required to provide a statement for their customers.

The ‘substantiation statements’ had to be submitted to the ACCC by 18 August 2014, as well as being published on their own websites. The deadline for communicating their ‘statements for customers’ was 15 September 2014.

For their statements, retailers could choose whether they estimated cost savings for the 2014/15 financial year as an average annual percentage or as an average annual price. The ACCC explained these two options as:

“Cost savings on an ‘annual average percentage price basis’ are the average annual cost savings cus- tomers will receive expressed as a percentage of what the annual price would have been if the carbon tax remained on foot.

Cost savings on an ‘annual average dollar price basis’ means an average annual cost savings custom- ers will receive now that the carbon tax has been removed compared to the situation if the carbon tax remained on foot.”17

However, the legislation did not stipulate what the percentage or dollar saving was coming off.18 As such, some of the substantiation statements showed estimated percentage saving off bills (including fixed supply charges), others showed estimated dollar savings per annum, while others showed estimated reduction to the unit price of energy. Furthermore, as the legislation did not stipulate whether these cost savings should be GST inclusive or exclusive, some retailers made it inclusive and some made it exclusive, and the majority did not state whether the amounts were inclusive or exclusive. Table 2 shows the retailers’ estimated average cost savings for residential electricity consumers across the NEM.

15 https://www.accc.gov.au/business/carbon-tax-repeal/requirements-for-suppliers-of-regulated-goods 16 See https://www.accc.gov.au/business/carbon-tax-repeal/our-role-in-carbon-tax-repeal 17 https://www.accc.gov.au/business/carbon-tax-repeal/requirements-for-suppliers-of-regulat- ed-goods/faq-for-suppliers-of-regulated-goods#what-is-nbsp-cost-savings-on-an-annual-average-percent- age-price-basis- 18 Paragraph 2(a) under Division 2B of Clean Energy Legislation (Carbon Tax Repeal) Bill 2014

Tax on, Tax off: Electricity prices before and after 15 Table 2 Retailers’ estimated average cost savings as per substantiation statements

Vic SA NSW Qld ACT Tas AGL* 8.9% 5.2% 7.8% 8.2% Origin* 7% 6% 8% 8% 11.5% Energy 7.2% 6.3% 8.9% 8.3% 11% Australia^ Red 2.401 c/kWh 2.379 c/kWh 2.383 c/kWh Energy ^^ or $145 or $159 or $179 Dodo^^^ $130 $130 $130 $170 Click 10.2% 7.5% 8.8% Power- 12.4% 5.9% 8.4% 9.2% direct* Lumo+ 8.2% 7.3% 8.7% 8.6% Simply+ 8% 8% 10% 9% Momen- 2.1844 c/ 2.1844 c/ 2.1844 c/ tum** kWh or 0 kWh or 0 kWh or 0 QEnergy++ 9.11% 9.11% 9.11% Alinta 2.29 c/kWh 2.29 c/kWh ActewAGL* $222 People 2.881 c/kWh Energy Aurora 9.4% Pasific 0.24% Hydro+ Powershop# 0 * AGL , Origin, Powerdirect and ActewAGL state that this is off customer’s bills ^ Energy Australia’s states that this is off customers’ bills and includes GST ^^ Red Energy states that the dollar saving is GST inclusive ^^^ Dodo states that these savings are based on an annual consumption of 6,500kWh + Lumo and Simply and Pacific Hydro’s statements do not state what these discounts are off. Simply states that the amounts are GST exclusive (but the document contains no amounts). ** Momentum’s estimated reductions are NEM wide and customers that are on contracts that did not contain a carbon pass through provision will not receive a reduced price ++ QEnergy’ estimated reductions are NEM wide. # Powershop stated that savings of approximately $146 per annum have already been passed on

Apart from the somewhat confusing reporting format, most retailers provided plain statements stating estimat- ed savings. The three examples from Dodo, Lumo and Click below illustrate the level of information that was typically provided in these statements.

Dodo’s statement:

“Residential electricity customers in Victoria/New South Wales/ South Australia

16 A residential customer using 6,500 kWh of electricity a year will receive an approximate saving from the Carbon Tax Removal of $130 per year before any discounts and concessions are applied.”19 Lumo Energy’s statement:

“The carbon tax was repealed with effect from 1 July 2014. This has led to the reduction in our costs which we will pass on to our customers. We estimate that on average, each customer in each class set out below, will save approximately the following amount between 1 July 2014 and 30 June 2015.”20 (Note: only part of table included below)

State Fuel Customer Type Reduction Vic Electricity Residential 8.2% Commercial 10.7% Gas Residential 6.4% Commercial 9.5% SA Electricity Residential 7.3%

Click Energy’s statement:

“Based on Click’s assumptions regarding customer volumes, seasonal usage profiles, pay on time discounts and tariff types, the estimated annual saving of New South Wales (NSW) customers that is attributable to the removal of carbon tax repeal [sic] is 7.5% for residential customers”.21

Four retailers, Powershop, Red Energy, Momentum and Pacific Hydro, however, provided more conditional statements.

Powershop: Foreshadowed the repeal and passed on costs early

Powershop stated:

“Not long after the introduction of the carbon tax, we identified that the carbon tax was unlikely to remain and that this would be reflected in lower costs to us. We then passed on actual and expected cost savings by introducing a guaranteed discount of at least 15% for all customers and absorbing the network increases we incurred in January 2014. These savings represent approximately $298 per customer. We are therefore already passing on savings greater than the cost savings attributable to the carbon tax repeal.”22

Powershop customers also received an email with the subject line: “Powershop has increased your dis- count…and has gone Carbon Neutral” on 29 August 2014.23 The email contained a link to the substantiation statement as well as stating that:

“Powershop is introducing bigger discounts, and for you that means a further 3% off. On 1 Sep- tember 2014 Powershop will introduce these new “Carbonator” products that provide a further 3% discount, beyond what was previously offered, to make our prices even cheaper. This further discount is guaranteed until at least 31 December 2014, and we hope to permanently reduce our pricing after that. We always want to be offering the best deals in market.”24

19 Dodo’s substantiation statement 20 Lumo’s substantiation statement 21 Click Energy’s substantiation statement 22 From Powershop’s substantiation statement 23 As part of the data collection for this project, we encouraged consumer advocates to forward infor- mation about their retailers’ communications regarding the repeal (see discussion on methodology in section 3). 24 Email provided by Powershop customer

Tax on, Tax off: Electricity prices before and after 17 On Powershop’s website one customer provided her thoughts about Powershop’s carbon tax statement:

“What rubbish! lol if you could afford to absorb the increases then you could afford to absorb them now! I don’t think anyone ever expected the electricity companies to pass on the savings to their cus- tomers. Bit of a joke really. I wonder what the other companies have put in their statements?”25

The company’s reply to the customer followed:

“Thanks for your comment. You seem to have assumed that Powershop simply absorbed the cost impact of the Carbon Tax, but it had real cost impacts for us and they’re reflected in the numbers we have quoted in our statement.

However it’s also the case that, as the repeal of the Carbon Tax became more certain, those cost impacts began to reduce. Because Powershop is committed to offering our customers the best pos- sible deals in market we started passing these savings through to our customers. We did this through introducing our guaranteed discounts and absorbing network costs.

It’s because of this commitment that we have announced this week a further 3% increase in our dis- counts. And remember those discounts apply to the whole bill.

We remain committed to ensuring Powershop offers some of the cheapest Power in the market. After these discounts we believe we still will. But, because we have no lock in contracts or exit fees, the option to switch to another retailer is always available.”26

Momentum: Contracts without a carbon cost

Momentum stated:

“Momentum Energy estimates that, on an average annual dollar basis, its cost savings that have been, are, or will be, directly or indirectly attributable to the carbon tax repeal and that have been, are being, or will be, passed on to its customers supplied through the National Electricity Market are:

• 2.1844c/kWh for customers who have entered into contracts that include a carbon pass through provision; and

• zero for customers who have entered into contracts that do not include a carbon pass through provision.”27

One Victorian Momentum customer received the following message attached to his bill (via email):

“The Federal Government has passed the Carbon Tax repeal legislation.

Momentum offers customers the choice of a clean energy plan that does not attract a carbon charge, or a standard energy plan which passed through a carbon charge.

25 http://blog.powershop.com.au/?attachment_id=118 26 Ibid 27 From Momentum’s substantiation statement

18 The impact of the Carbon Tax Repeal legislation will depend on which energy plan customers are on. Visit www.momentumenergy.com.au/carbonrepeal for more information and how to identify your plan type.

We are required to prepare a formal ’statement for customers’ and communicate it to you in accord- ance with the Carbon Tax repeal legislation. Our ’statement for customers’ will be available for you to read on our website at www.momentumenergy.com.au/carbonrepeal after 18 August 2014 and no later than 15 September 2014.”28

In the link to the ‘statement for customers’ Momentum finally made it clear that its standard market offer prod- uct ‘SmilePower’ did not attract a carbon charge:

“SmilePower customers have benefited from a clean energy product thatdid not attract a carbon charge. Our parent company, Hydro Tasmania, ensures that the equivalent amount of renewable ener- gy used by SmilePower customers is fed directly into the National Electricity Market.

There are no cost savings for SmilePower customers that are attributable to the Carbon Tax repeal. This means there will be no changes to SmilePower rates.”29

However, it was not necessarily obvious to customers that they did not pay for carbon if they were on Momu- mentum’s ‘SmilePower’ contract prior to the repeal. Momentum’s Price and Product Information Statement (PPIS) did not reveal this, rather their PPIS effective on 29 November 2013 simply stated:

“SmilePower is more than just renewable energy generated from nature. It is renewable energy with exceptional rates and flexibility of 12, 24 or 36 month contracts. So it’s sure to make you smile.”30

Red Energy: Changed its price on 1 July

Red Energy stated:

“Red Energy passed on to its electricity customers in Victoria an average saving of 2.401c/kWh from 1 July 2014, being its forecast saving arising from a reduction of its wholesale cost of electricity due to the repeal of the carbon tax.”31

Similar statements were made in relation to gas as well as other jurisdictions (New South Wales and South Australia). Red Energy did change its rates on 1 July 2014 (along with many other retailers) and existing customers received bills stating “From 1 July your rates exclude the impact of carbon tax due to its repeal.”32 They also stated on their Price and Product Information statements for market offers available from 1 July 2014 that:

“These electricity rates will remain fixed until 31 December 2014 regardless of any changes to the wholesale energy market including any changes as a result of the repeal of the Carbon Tax.”33

28 Email from Momentum to customer 4 September 2014 29 www.momentumenergy.com.au/system/files/documents/ACCC/Statement%20for%20Customers. pdf 30 Momentum Energy, Price & Product Information Statement, Victoria, 29 November 2013 31 Red Energy’s substantiation statement 32 Bill provided by Victorian gas customer 33 Red Energy, Price and Product Information statement, Residential offer: Living Energy Saver, 1 July 2014

Tax on, Tax off: Electricity prices before and after 19 Pacific Hydro: Envisaged the repeal

Pacific Hydro stated:

“Pacific Hydro commenced retailing electricity to the small and medium sized business customers and residential customers in April 2014. Energy Tariffs offered to customers between April and the Carbon Repeal date included a relatively small carbon component due to the expectation that the carbon price would be repealed. Following the carbon repeal, Pacific Hydro determined new “carbon free” tariffs for all customers in this class.”34

Strategic behaviour versus market transparency

We believe the examples discussed above show that there is a fine balance between retailers’ right to strate- gically position themselves within a competitive market and ensuring that customers are adequately informed. July is typically a time when many retailers increase their prices, and the decision by Red Energy to include the cost saving of the repeal before the repeal actually occurred would have made Red Energy’s offer look highly competitive compared to many other retailers. We note that Red Energy’s Price and Product Information Statements did state that this price would not change if the carbon tax was repealed, but we question how easily consumers would have realised that the comparatively higher price charged by other retailers would only be temporary (and ultimately refunded).

In relation to retailers claiming that their prices were already so low that they will not be able to pass on further cost savings, we question whether this is in line with the legislation. Even if the retailer can prove to the ACCC that they did absorb the carbon tax for a while (and that they foreshadowed its repeal) we do believe such strategies are questionable conduct. If Powershop, for example, had played it straight with its customers, it could have introduced the “carbonator product” prior to the repeal, making it clear that they would not pass on the cost of carbon to their customers. Momentum, at least, included a line item on their “smilepower” bills that stated that the carbon cost for the bill was zero. That said, they could have easily been more transparent if they included this information in their product offerings as well.

The result of all four retailers’ strategies is that consumers were not necessarily comparing “apples with ap- ples” when shopping around for a better energy offer prior to the repeal.

34 Pacific Hydro’s substantiation statement

20 3. Methodology and assumptions

3.1 Retailers’ estimates based on substantiation statements

As discussed above, the retailers presented their estimated average bill reductions in various formats and with various degrees of intelligibility. In order to assess the retailers’ estimates (as per substantiation statements) against actual tariff changes, we have thus been required to interpret these statements and make certain assumptions in regards to what the discounts are off and whether amounts include or exclude GST.

Table 3 Interpretation and methodology to calculate bill impacts based on retailers’ state- ments

Their statement Our assumption / methodology AGL Provided % off bill for each jurisdiction % discount applied to bill inclusive of GST for each network area Origin Provided % off bill for each jurisdiction % discount applied to bill inclusive of GST for each network area Energy Provided % off bill for each jurisdiction % discount applied to bill inclusive of GST Australia for each network area Red Energy Provided figure for carbon component c/kWh figure deducted from initial (c/kWh) as well as ($/annum) for each consumption rate inclusive of GST in each jurisdiction network area (for jurisdiction with more than one network area, the jurisdictional average % was applied) Dodo Provided one combined figure for $ figure deducted from initial bill (incl. the carbon component ($/annum) for GST) for customers with this consumption households using 6,500 kWh in Vic, NSW level in each network area (for jurisdiction and SA, and a separate figure for Qld. with more than one network area, the jurisdictional average % was applied) Click Provided % reduction for each jurisdiction % discount applied to bill inclusive of GST for each network area Powerdirect Provided % off bill for each jurisdiction % discount applied to bill inclusive of GST for each network area Lumo Provided % reduction for each jurisdiction % discount applied to bill inclusive of GST for each network area Simply Provided % reduction for each jurisdiction % discount applied to bill inclusive of GST for each network area Momentum Provided one NEM-wide figure for carbon c/kWh figure deducted from initial component (c/kWh) to be applied where a consumption rate exclusive of GST in each carbon charge previously had been passed network area (for jurisdiction with more on than one network area, the jurisdictional average % was applied) QEnergy Provided % reduction for NEM and % discount applied to bill inclusive of GST Queensland for each network area Alinta Provided one figure for carbon component c/kWh figure deducted from initial (c/kWh) in SA and Vic consumption rate exclusive of GST in each network area (for jurisdiction with more than one network area, the jurisdictional average % was applied)

Tax on, Tax off: Electricity prices before and after 21 Their statement Our assumption / methodology ActewAGL Provided figures (incl GST) for the carbon $ figure deducted from initial bill (incl. GST) component ($/annum) for households for customers with this consumption level using 8,000 kWh in each jurisdiction People Energy Provided one figure (c/kWh) for carbon c/kWh figure deducted from initial component consumption rate exclusive of GST in each network area (for jurisdiction with more than one network area, the jurisdictional average % was applied) Aurora Provided % reduction for Tasmania As this reduction was passed through from 1 July, % discount applied to bill inclusive of GST as of January 2014 Pasific Hydro Provided % reduction for each jurisdiction % discount applied to bill inclusive of GST for each network area Powershop Statement did not foreshadow any specific No reductions calculated or applied reductions

Based on the assumptions and methodology outlined above, we applied the following % discounts to bills or usage components inclusive of GST.

Table 4 Percentage discounts off bill or consumption used for the analysis presented in this report

Vic SA NSW Qld ACT Tas AGL 8.9% off bill 5.2% off bill 7.8% off bill 8.2% off bill for market for market for market for market and standing and standing and standing offers and offers offers offers 9.41% off usage for regulated offer Origin 7% off bill 6% off bill 8% off bill 8% off bill for for market for market for market market offers and standing and standing and standing and 9.41% offers offers offers off usage for regulated offer Energy 7.2% off bill 6.3% off bill 8.9% off bill 8.3% off bill 11% off bill Australia for market for market for market for market for market and standing and standing and standing offers and offers offers offers offers 9.41% off usage for regulated offer

22 Vic SA NSW Qld ACT Tas Red Energy Zero Zero Zero reduction for reduction for reduction market and market and for market 9% off usage 7% off usage and 9.3% for standing for standing off usage offers offers for standing offers Dodo 5.4% off bill 5% off bill 5.8% off bill 8% off bill for for market for market for market market offers and standing and standing and standing and 9.41% offers offers offers off usage for regulated offer Click 10.2% off bill 7.5% off bill 8.8% off bill for market for market for market and standing and standing offers and offers offers 9.41% off usage for regulated offer Powerdirect 12.4% off bill 5.9% off bill 8.4% off bill 9.2% off bill for market for market for market for market and standing and standing and standing offers and offers offers offers 9.41% off usage for regulated offer Lumo 8.2% off bill 7.3% off bill 8.7% off bill 8.6% off bill for market for market for market for market and standing and standing and standing offers and offers offers offers 9.41% off usage for regulated offer Simply 8% off bill 8% off bill 10% off bill 9% off bill for for market for market for market market offers and standing and standing and standing and 9.41% offers offers offers off usage for regulated offer Momentum Zero Zero Zero reduction reduction reduction for for market for market market and and 8.3% and 6.7% 8% off usage off usage off usage for standing for standing for standing offers offers offers

Tax on, Tax off: Electricity prices before and after 23 Vic SA NSW Qld ACT Tas QEnergy 9.11% off bill 9.11% off bill 9.11% off bill for market for market for market and standing and standing offers and offers offers 9.41% off usage for regulated offer Alinta 8.9% off 6.4% off usage for usage for market and market and standing standing offers offers ActewAGL 11.3% off usage for market and standing offers People 10% off Energy usage for market and 10.9% off usage for standing offers Aurora 9.4% off January 2014 bill for market and standing offers Pasific 0.24% off bill Hydro for market and standing offers Powershop Zero reduction for market and standing offers

3.2 Assumptions about consumption levels

All bill impact analysis presented in this report is based on the single, or flat rate, tariff. Bill impacts for house- holds with controlled off-peak load or a time varying tariff are thus not covered by this analysis.

In order to compare the impact the repeal of the carbon tax has had on electricity bills across the NEM, this comparison (section 4 below) assumes an annual consumption of 6,000 kWh per annum. We note that this consumption level is representative for South Australia but lower than average in the ACT, Queensland, Tas- mania, as well as most of NSW, and higher than average for Victoria.

24 The more detailed analysis investigates bill impacts within each of the jurisdictions. As this analysis aims to provide a better understanding of price changes due to the repeal of the carbon tax within each network area, we have used consumption levels that are representative for each jurisdiction. The following consumption levels have been applied: SS ACT: 8,000 kWh/annum

SS NSW: 7,200 kWh/annum

SS South Australia: 6,000 kWh/annum

SS Tasmania: 9,060 kWh/annum

SS Victoria: 4,800 kWh/annum

SS Queensland: 8,000 kWh/annum

3.3 Data collection

New tariff data has been collected on an ongoing basis between 18 July and 15 October 2014. Most of the data has been sourced from retailers Price and Product Information Statements, as well as directly from retailers’ websites. Another information source used, was the statements available from the Australian Energy Regulator’s Energy Made Easy website.

In order to compare post repeal tariff data to offers prior to the repeal, we have used datasets collected through the Vinnies’ Tariff-Tracking Project. The latest update of the Vinnies’ Tariff-Tracker was based on tariffs available across the NEM in July 2014, and these are the offers we have compared the post carbon prices to. In relation to South Australian standing offers, the Tariff-Tracker has not included all retail standing offers to date. The South Australian standing offer analysis is therefore only based on the incumbent retailer’s standing offer (AGL).35

It is important to note that a methodology based on comparing retail offers has its limitations when it comes to comparing cost reductions for customers on market contracts. Offers are available to new customers and do not always reflect what existing customers pay. Collecting data about customers’ actual bills would have required an extensive survey beyond the scope of this project. We therefore decided to supplement the comparison of published market offer rates with as many actual bills that we could easily, and readily, collect. The bills, as well as other retailer communications to their customers regarding the repeal of the carbon tax received for this project, have thus been sourced through various consumer groups and their networks.

In relation to customers on standing offers, or the regulated rate, on the other hand, the new rates published by the retailers will be the same rate as existing customers now pay.

3.4 What bill calculations include/exclude

All bill calculations and amounts presented in this report are GST inclusive. Furthermore, as some custom- ers have controlled off-peak load or a time varying tariff, it should be noted that all tariffs and bill calculations presented in this report are based on the single rate or flat tariff.

Market offer discounts, guaranteed and/or conditional upon bills being paid on time, have been included in some of the market offer analysis (section 4.2) but other incentives such as Direct Debit discounts and “wel- come credits” have not been included. Finally, the bill calculations do not include penalty fees for late payment or other contract conditions.

35 The South Australian market offer analysis, however, includes 12 retailers.

Tax on, Tax off: Electricity prices before and after 25 4. Comparison of the impact the repeal has had on bills across the NEM

4.1 Standing offers

An analysis of residential standing/regulated offers before and after the repeal of the carbon tax shows that ACT customers have received the greatest percentage decrease to their electricity bills when assuming an an- nual consumption of 6,000 kWh per annum.36 However, the greatest saving occurs in Victoria and Queens- land, where households on average save $175 per annum in electricity costs due to the repeal of the carbon tax. Households in South Australia receive the lowest reduction at just over $100 per annum (or 4.4%).

Chart 1 shows decreases to the annual cost of standing/regulated offers post the carbon repeal for house- holds using 6,000 kWh (single rate) per annum in all of the six NEM jurisdictions.37 The columns show the annual amounts and the rhombus shaped markers show percentage decreases.

Chart 1 Reduction to annual bills (standing offers) by jurisdiction

ACT NSW SA Tas Vic Qld 0 0 -­‐20 -­‐2 -­‐40 -­‐60 -­‐4 -­‐80 -­‐6 $ -­‐100 % -­‐8 -­‐120

-­‐140 -­‐10 -­‐160 -­‐12 -­‐180 -­‐200 -­‐14 $ %

Chart As NSW and Victoria consist of several network areas with different prices households within these jurisdictions have received different price reductions. Households in country NSW (Essential’s network area) have only received a 6% price reduction compared to almost 9% in other parts of the state. In Victoria, house- holds in central Melbourne (Citipower) have also received a price reduction of 9%, while the price reduction for households in eastern Victoria (SP Ausnet) is closer to 7%.

36 6,000 kWh per annum has been used to facilitate NEM comparison only. Households in the ACT, Tasmania and Queensland typically use more than this per annum while Victorian customers typically use less (due to the high penetration of gas). 37 For NSW and Victoria, the standing offers are calculated using the three incumbents/major retailers (AGL, Origin and Energy Australia) average standing offers as well as the average across all network areas. AGL’s standing offers have been used for South Australia while the regulated offers have been used for the remaining jurisdictions.

26 Chart 2 shows decreases (%) to annual standing/regulated offers post the carbon repeal for households using 6,000 kWh (single rate) per annum across the twelve NEM network areas.38 The black line indicates the NEM average.

Chart 2 Percentage decreases (standing offers) by network area and NEM average

ACT -­‐ ActewAGL NSW -­‐ Essen8al NSW -­‐ AusGrid NSW -­‐ Endeavour SA -­‐ SA Power Tas -­‐ Aurora Vic -­‐ Ci8power Vic -­‐ Powercor Vic -­‐ SP Ausnet Vic -­‐ Jemena Vic -­‐ United Qld -­‐ Energex 0

-­‐2

-­‐4

-­‐6

-­‐8 Reduc&on (%) (%) Reduc&on -­‐10

-­‐12

-­‐14

Similarly, chart 3 shows dollar decreases to annual standing/regulated offers post the carbon repeal for households using 6,000 kWh by network areas and the NEM average.39 It shows that the NEM average for households using 6,000 kWh per annum is a $160 reduction to the annual electricity bill while customers in Tasmania, South Australia and country NSW (Essential) will receive less than the average amount.

38 For NSW and Victoria, the standing offers are calculated using the three incumbents/major retailers (AGL, Origin and Energy Australia) average standing offers. AGL’s standing offers have been used for South Australia while the regulated offers have been used for the remaining jurisdictions. 39 Ibid

Tax on, Tax off: Electricity prices before and after 27 Chart 3 Reduction to annual bill (standing offers) by network area and NEM average

ACT -­‐ ActewAGL NSW -­‐ Essen8al NSW -­‐ AusGrid NSW -­‐ Endeavour SA -­‐ SA Power Tas -­‐ Aurora Vic -­‐ Ci8power Vic -­‐ Powercor Vic -­‐ SP Ausnet Vic -­‐ Jemena Vic -­‐ United Qld -­‐ Energex 0 -­‐20 -­‐40 -­‐60 -­‐80 -­‐100 -­‐120

$ per annum -­‐140 -­‐160 -­‐180 -­‐200

4.2 Market offers

Charts 2 and 3 above show that the average NEM reduction to standing offer bills is 8% or approximately $160 per annum. However, after many years of full retail competition, as well as the deregulation of retail offers in Victoria, South Australia and NSW many residential customers have been switching retailers and are currently on market offers. Charts 4 and 5 analyse average reduction to market offers (including market offer discounts) in each of the network areas.40 As some retailers have more customers than others, it must be noted that these are average reductions offered by retailers and not average reductions received by custom- ers.

40 These calculations are based on annual bills for households using 6,000 kWh per annum and include all market offer discounts (guaranteed and pay on time discounts) as per contract in July 2014 (not per contract for new customers). The average bill reduction is based on 15 retailers in Victoria, 10 or 11 (de- pending on network area) in NSW, 12 in South Australia, 5 in Queensland, 2 in the ACT and 1 (Aurora’s PAYG offers) in Tasmania. As discussed in section 2, some retailers have not changed their market offer rates and if we exclude these retailers from the averages presented in charts 4 to 6, we get the following, and slightly higher, amounts and percentages: Essential ($150/6%), AusGrid ($110/6%), Endeavour ($100/6%), SA Power ($100/4%), Citipower ($115/7%), Powercor ($110/6%), SP Ausnet ($105/5%), Jemena ($105/6%), United Energy ($115/7%) and Energex ($160/8%).

28 Chart 4 Percentage decreases (market offers) by network area and NEM average

ACT -­‐ NSW NSW -­‐ ActewAGL NSW -­‐ Essen8al SA -­‐ AusGrid -­‐ Tas Endeavour -­‐ Vic SA Power -­‐ Aurora Vic -­‐ Vic Ci8power -­‐ Vic Powercor -­‐ Vic SP Ausnet -­‐ Qld Jemena -­‐ United Energex 0

-­‐2 Network (%)

-­‐4 NEM Avg (%)

-­‐6

-­‐8

-­‐10

-­‐12

Chart 5 Reduction to annual bill (market offers) by network area and NEM average

ACT -­‐ NSW NSW -­‐ ActewAGL NSW -­‐ Essen8al SA -­‐ AusGrid -­‐ Tas Endeavour -­‐ Vic SA Power -­‐ Aurora Vic -­‐ Vic Ci8power -­‐ Vic Powercor -­‐ Vic SP Ausnet -­‐ Qld Jemena -­‐ United Energex 0 -­‐20 Network ($) -­‐40 -­‐60 NEM Avg ($) -­‐80 -­‐100 -­‐120 -­‐140 -­‐160 -­‐180

Tax on, Tax off: Electricity prices before and after 29 Charts 4 and 5 above show that the average NEM reduction to market offers is 6% (or $110 per annum) and that the reductions are greatest in jurisdictions that still offer a regulated rate (and have fewer retailers). Furthermore, as illustrated by chart 6 below, the average reductions to market offers are typically lower than the average reduction to standing offers, with the exception of Essential’s network area in NSW as well as Tas- mania (where Aurora is the only retailer).

Chart 6 Standing Vs. Market offers, reduction to annual bill by network area

ACT -­‐ NSW ActewAGL -­‐ NSW Essen8al -­‐ NSW AusGrid -­‐ SA -­‐ Endeavour Tas SA -­‐ Power Vic Aurora -­‐ Vic Ci8power -­‐ Vic Powercor -­‐ Vic SP -­‐ Ausnet Vic Jemena -­‐ Qld United -­‐ Energex 0

-­‐2

Standing -­‐4 Market -­‐6

-­‐8 Reduc&on % Reduc&on

-­‐10

-­‐12

-­‐14

30 5. Jurisdictional analyses

5.1 Bill impacts in the ACT

In the ACT, the annual bill for households using 8,000 kWh per annum has reduced by 10-11%. Chart 7 be- low shows that annual electricity bills for ACT households with this consumption level have reduced by $220 if they are on the regulated rate or ActewAGL’s market offer. Energy Australia customers have experienced a slightly lower reduction of $210.

The black line markers in chart 7 show estimated changes to annual bills (based on retailers’ substantiation statements) and the columns show the actual change to annual bills post the carbon repeal. The calculations are based on households using 8,000 kWh per annum (single rate) and the two market offers do not include additional discounts.

Chart 7 ACT: Estimated and actual change to standing and market offers

ActewAGL Energy Aus Regulated (market) (market) 0

-­‐40

-­‐80 Actual Retail es@mate -­‐120

-­‐160

-­‐200

-­‐240

5.1.1 Changes to ACT market offers

Pay on time discounts that are deducted from the consumption charges are common market offer features across the NEM. When the fixed daily supply charge as well as the percentage discount offered off consump- tion charges (either as a guaranteed discount or as a conditional pay on time discount) remain the same after the price reset, the bill reduction for market offer customers that receive these discounts becomes lower. In other words, while their overall bill would have been reduced since the repeal, the amount it is being reduced by is less.

Chart 8 compares the difference between the annual bills based on rates available before and after the price reset, and it shows that Energy Australia’s offer, which contains both a guaranteed discount and a pay on time discount, can produce a saving of less than $190 for customers using 8,000 kWh per annum.41

41 ActewAGL only offers discounts if customers bundle several products/services (e.g. gas, telephone etc.) with their electricity offer and these discounts have not been included in this analysis.

Tax on, Tax off: Electricity prices before and after 31 Chart 8 ACT: Changes to market offer discounts

ActewAGL Energy Aus -­‐170

-­‐180

-­‐190 Actual excl discount Actual incl guaranteed discount -­‐200 Actual incl all discounts

-­‐210

-­‐220

-­‐230

32 5.2 Bill impacts in NSW

The size of the reduction to NSW standing offer bills post the repeal vary significantly between network areas as well as retailers. The NSW electricity retail market was deregulated on 1 July 2014 and the retailers now therefore set the standing offer price themselves.

As discussed in section 4 above, customers in Essential’s network have on average received lower bill reduc- tions than customers in Ausgrid and Endeavour’s areas. In the case of Simply Energy, however, the reduction is significant in both the Endeavour and the Essential network (they do not offer contracts in AusGrid’s area). In Essential’s area Simply’s standing offer rates have reduced by over 10%. Origin Energy, which is the host retailer in this network area, has reduced their offer by just over 5%.

There are significant differences between the bill reductions in other network areas too. In AusGrid’s network area, for example, Momentum’s annual bill has reduced by 4.5% compared to Powerdirect’s reduction by more than 10%. Note that Red Energy has not published new standing offers in NSW and that QEnergy does not offer contracts to customers in Essential’s network.

Chart 9 shows the percentage changes to annual bills for standing offers published post the repeal compared to July 2014 offers, based on households using 7,200kWh per annum (single rate).

Chart 9 NSW: Change (%) to standing offers

AGL Origin Powerdirect Red Energy Click Dodo Lumo Energy Momentum Aus Simply QEnergy 0.0

-­‐2.0

EssenGal -­‐4.0 AusGrid Endeavour -­‐6.0

-­‐8.0

-­‐10.0

-­‐12.0

Charts 10 -12 below compare actual reductions to NSW standing offers to the average reductions estimated by retailers’ in their substantiation statements. All of the comparisons are based on annual bills for households using 7,200 kWh per annum (single rate). As a general trend, price reductions are lower than the average estimate in Essential’s area, while in AusGrid and Endeavour’s areas the estimates vary between being higher and lower, depending on the retailer.

Tax on, Tax off: Electricity prices before and after 33 Chart 10 Essential: Estimated and actual change to standing offer

AGL Origin Powerdirect Red Energy Click Dodo Lumo Energy Momentum Aus Simply 0

-­‐50

-­‐100 New bill

-­‐150 Retailer esGmate

-­‐200

-­‐250

-­‐300

-­‐350

Chart 11 AusGrid: Estimated and actual change to standing offer

AGL Origin Powerdirect Red Energy Click Dodo Lumo Energy Momentum Aus Qenergy 0

-­‐50

New bill -­‐100 Retailer esEmate

-­‐150

-­‐200

-­‐250

34 Chart 12 Endeavour: Estimated and actual change to standing offer

AGL Origin Powerdirect Red Energy Click Dodo Lumo Energy Momentum Aus Simply Qenergy 0

-­‐50

New bill -­‐100 Retailer esGmate

-­‐150

-­‐200

-­‐250

5.2.1 Changes to NSW market offers

All retailers except for Red Energy have published new market offer rates. While it would be impossible to verify whether all retailers have passed these rates on to their existing customers, we would assume that this has occurred (see section 3.3 about data collection). An exception may be QEnergy, which has increased its published market offer rates for new customers since the repeal of the carbon tax.42

Nonetheless, the comparison of NSW market offers before and after the repeal, shows the impact the removal of the carbon price has had on retailers’ prices (rather than costs to consumers). Chart 13 shows the impact the removal of the carbon tax has had on annual bills for households consuming 7,200 kWh per annum.43

42 QEnergy’s offer was collected from QEnergy’s website (http://www.qenergy.com.au/What-Are- Your-Options) and the tariffs listed under the Home Your Way offer (the only offer available) were used for this analysis. 43 Note that Simply and QEnergy do not have offers in all three network areas. The calculations for these market offer bills do not include additional discounts.

Tax on, Tax off: Electricity prices before and after 35 Chart 13 NSW: Change (%) to market offers

AGL Origin Powerdirect Red Energy Click Dodo Lumo Energy Momentum Aus Simply QEnergy 15.0

10.0

EssenDal 5.0 AusGrid Endeavour 0.0

-­‐5.0

-­‐10.0

-­‐15.0

On average, the annual cost of electricity for households using 7,200 kWh per annum is now $180 less in Essential’s network and approximately $130 less in AusGrid and Endeavor’s areas. The columns in charts 14 - 16 below show the reduction to the annual bill for the various market offers in each of the network areas (households using 7,200 kWh per annum). The black dots indicate the retailers estimated cost reductions for existing market offer customers. Note that Momentum did not envisage any reductions for existing customers on market offers that did not attract a carbon price prior to the repeal (the “Smile Power” product used for this analysis is one of those offers).44

Chart 14 Essential: Estimated and actual change to market offer

AGL Origin Powerdirect Red Energy Click Dodo Lumo Energy Momentum Aus Simply 0

-­‐50

-­‐100 New offer

-­‐150 Retailer esGmate

-­‐200

-­‐250

-­‐300

-­‐350 44 The calculations for these market offer bills do not include additional discounts.

36 Chart 15 AusGrid: Estimated and actual change to market offer

AGL Origin Powerdirect Red Energy Click Dodo Lumo Energy Momentum Aus Qenergy 150

100

50 New offer 0 Retailer esEmate -­‐50

-­‐100

-­‐150

-­‐200

-­‐250

Chart 16 Endeavour: Estimated and actual change to market offer

AGL Origin Powerdirect Red Energy Click Dodo Lumo Energy Momentum Aus Simply Qenergy 300

200

100 New offer Retailer esGmate 0

-­‐100

-­‐200

-­‐300

Tax on, Tax off: Electricity prices before and after 37 As half of the NSW retailers included in this analysis offer a guaranteed discount or a conditional pay on time discount that are deducted from the consumption charges, the bill reduction for market offer customers that receive these discounts can be lower. While the overall bill may have reduced since the repeal, the actual reduction is lower compared to customers that do not receive a pay on time discount if the fixed daily supply charge as well as the percentage discount offered off consumption charges remain the same after the price reset.

Charts 17 – 19 below show the impact the repeal of the carbon tax has had on price reductions for market offers, excluding all discounts, including guaranteed discounts only and including guaranteed as well as pay on time discounts. Again the bill calculation is based on households using 7,200 kWh per annum (single rate).

The charts show that Origin’s price reduction in a post carbon environment is significantly less for custom- ers that pay their bills on time. This is the result of Origin reducing its pay on time discount off consumption charges (from 10% to 7%) in their post carbon offer as well as reducing the consumption charges (for new and existing customers) while the fixed charges, that do not attract a discount, have remained the same. This effectively means that Origin’s post carbon market offer is only 4 -5% less (depending on the network area) than it was when a price on carbon was in place. This issue is discussed in more detail in section 6.3 below.

Powerdirect, on the other hand, has increased its guaranteed discount off the consumption rates (from 7% to 13%), which makes their post carbon market offer price between 10 – 14% lower than before (depending on the network area).

Chart 17 Essential: Changes to market offer discounts

AGL Origin Powerdirect Red Energy Click Dodo Lumo Energy Momentum Aus Simply 0

-­‐50

-­‐100 Actual excl discounts Actual incl guaranteed discouts -­‐150 Actual incl all discounts

-­‐200

-­‐250

-­‐300

-­‐350

38 Chart 18 AusGrid: Changes to market offer discounts

AGL Origin Powerdirect Red Energy Click Dodo Lumo Energy Momentum Aus Qenergy 150 100 50

0 Actual excl discounts -­‐50 Actual incl guaranteed discouts -­‐100 Actual incl all discounts -­‐150 -­‐200 -­‐250 -­‐300 -­‐350 -­‐400

Chart 19 Endeavour: Changes to market offer discounts

AGL Origin Powerdirect Red Energy Click Dodo Lumo Energy Momentum Aus Simply Qenergy 300

200

100 Actual excl discounts Actual incl guaranteed discouts 0 Actual incl all discounts

-­‐100

-­‐200

-­‐300

-­‐400

Tax on, Tax off: Electricity prices before and after 39 5.3 Bill impacts in South Australia

The South Australian electricity retail market is deregulated and the retailers therefore determine the standing offer price themselves.45

As discussed in section 4 above, customers in South Australia have on average received lower bill reductions compared to other NEM jurisdictions. As a result of the repeal, AGL’s standing offer has decreased by 4.4%. For households consuming 6,000 kWh per annum the annual electricity bill will be approximately $110 less than if the price on carbon had remained in place.

5.3.1 Changes to South Australian market offers

All retailers except for Red Energy have published new market offer rates. While it would be impossible to verify whether all retailers have passed these rates on to their existing customers, we would assume that this has occurred (see section 3.3 about data collection). Nonetheless, the comparison of South Australian mar- ket offers before and after the repeal shows the impact the removal of the carbon price has had on retailers’ prices (rather than costs to consumers). Chart 20 shows the impact the removal of the carbon tax has had on annual bills for households consuming 6,000 kWh per annum.46

Chart 20 SA: Change (%) to market offers

AGL Origin Energy Aus Simply Alinta Qenergy Lumo Powerdirect Red Dodo Momentum Pacific Hydro 0.0

-­‐2.0

-­‐4.0

-­‐6.0

-­‐8.0

-­‐10.0

-­‐12.0

On average, the annual price of electricity for households using 6,000 kWh per annum is now $100 less than it was prior to the repeal. The columns in chart 21 below show the reduction to the annual bill for the various South Australian market offers (households using 6,000 kWh per annum). The black dots indicate the retailers estimated cost reductions for existing market offer customers. Note that Momentum did not envisage any reductions for existing customers on market offers that did not attract a carbon price prior to the repeal (the “Smile Power” product used for this analysis is one of those offers).47

45 Note: We have not been able to compare changes to the standing offers across retailers in SA due to limited pre carbon repeal datasets (outlined in the methodology section above). 46 The calculations for these market offer bills do not include additional discounts. 47 Ibid

40 For some of the retailers the significant difference between estimated cost reductions and new prices can be partly explained by increases to the fixed daily supply charge. Alinta’s fixed supply charge, for example, increased by $32 per annum in their post carbon price reset. By taking account of the cost reduction due to the carbon repeal at the same time as they take account of potential non-carbon cost increases the retailer produces a final price where the effect of the repeal, and other cost components, cannot be readily identified. Alinta did pass on savings similar to the 2.29 cents/kWh they estimated in their substantiation statements, but the impact of the non-carbon related increase to the fixed supply charge reduced the impact of the 2.29 cents/kWh significantly. For South Australian Alinta customers that use 6,000 kWh per annum, the annual electricity bill is thus only $25 less than it was prior to the repeal.

Chart 21 SA: Estimated and actual change to market offer

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As half of the South Australian retailers included in this analysis offer a guaranteed discount or a conditional pay on time discount that is deducted from the consumption charges, the bill reduction for market offer cus- tomers that receive these discounts can be lower. While the overall bill may have reduced since the repeal, the actual reduction is lower compared to customers that do not receive a pay on time discount if the fixed daily supply charge as well as the percentage discount offered off consumption charges remain the same after the price reset.

Chart 22 below shows the impact the repeal of the carbon tax has had on price reductions for market offers, excluding all discounts, including guaranteed discounts only and including guaranteed as well as pay on time discounts. Again the bill calculation is based on households using 6,000 kWh per annum (single rate).

The chart shows that AGL, Origin, Energy Australia, Simply, QEnergy and Dodo’s price reductions post the repeal of the carbon tax are lower for customers that pay their bills on time compared to customers that pay late.

Alinta and Lumo, on the other hand, have increased their pay on time discounts for new customers. Alinta has increased its discount off the consumption charges from 15% to 20% and Lumo now offers a 15% pay on time discount off the bill (up from 12%).

Tax on, Tax off: Electricity prices before and after 41 Chart 22 SA: Changes to market offer discounts

AGL Origin Energy Simply Aus Alinta Qenergy Lumo Powerdirect Red Dodo Momentum Pacific Hydro 0

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42 5.4 Bill impacts in Tasmania

The Tasmanian electricity retail market opened up for full retail competition in July 2014 but Aurora remains the only electricity retailer offering contracts to residential consumers. As Aurora’s electricity prices decreased from 1 July, due to the expected repeal of the carbon tax, the Tasmanian price comparison is based on July 14 rates (“post” repeal prices) and January 2014 (pre repeal prices).48

As a result of the repeal, Tasmania’s regulated consumption rate for the single rate tariff (Tariff 31) has de- creased by 8.5%. Unlike other jurisdictions, the fixed supply charge has decreased as well as the consump- tion charge. The fixed supply charge is now $27 less per annum compared to the January 2014 rates. For households consuming 9,060 kWh per annum the annual electricity bill will be approximately $215 less than if the price on carbon had remained in place. Aurora also offers “pay as you go” (pre-paid) market offers and approximately 14.5% (or 33,160) of Tasmanian households are on a PAYG product.49 Households on the standard PAYG offer will pay $200 less per annum since the repeal.

The black markers in chart 23 show estimated changes to annual bills (based on Aurora’s substantiation statement) and the columns show the actual change to annual bills post the carbon repeal. The calculations are based on households using 9,060kWh per annum.50

Chart 23 Tas: Estimated and actual change to regulated and PAYG offers

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48 Aurora Energy, 2013 Standing Offer Determination, Pricing Proposal Period 2, July 2014 -30 June 2015, p 3 49 OTTER, Energy in Tasmania - Performance Report 2012-13, January 2014, 141 50 The PAYG tariff is a seasonal TOU tariff. We have allocated 40% of consumption to summer rates and 60% to winter. The time of week, and day, consumption assumptions are based on figures presented in OTTER, 2013 Aurora Pay As You Go price comparison report, August 2013. Note that our summer evening proportion is 1% less than that used by OTTER in order to ensure that it adds up to 100%.

Tax on, Tax off: Electricity prices before and after 43 5.5 Bill impacts in Victoria

All Victorian retailers except for Powershop and People Energy have gazetted new standing offers since the repeal of the carbon tax was passed.

Standing offer electricity bills for households consuming 4,800 kWh per annum (a typical usage level for dual fuel households) have decreased by 5 – 12%, depending on network area and retailer. Chart 24 below shows the following standing offer price decreases in the five network areas:

SS Citipower – Between 6.5% (Dodo) and 12% (Click)

SS Powercor – Between 5.5% (QEnergy) and 11% (Click)

SS SP Ausnet – Between 4% (Momentum) and 9% (Click)

SS Jemena – Between 5.5% (QEnergy) and 9.5% (Click)

SS United Energy – Between 5.5% (QEnergy) and 11.5% (Momentum)

The Victorian electricity retail market is deregulated and the retailers therefore determine the standing offer price themselves. Consequently, the size of the reduction to Victorian standing offer bills post the repeal varies significantly between retailers.

Chart 24 shows the percentage changes to annual bills for standing offers published post the repeal com- pared to July 2014 offers, based on households using 4,800kWh per annum (single rate).

Chart 24 Victoria: Change (%) to standing offers

AGL Origin Energy Powershop Aus Click Powerdirect Red Energy Simply Lumo Qenergy Momentum Dodo Alinta People Energy 0.0

-­‐2.0 CiIpower Powercor -­‐4.0 SP Aus -­‐6.0 Jemena United Energy -­‐8.0

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44 Charts 25 - 39 below show the annual amount standing offer bills, for households using 4,800 kWh per an- num, have decreased by in each of the five network areas as well as the estimated amount based on retailers carbon price substantiation statements. It must be noted that the price reductions estimated by retailers were averages (across various network areas and tariff types) and assumptions about consumption levels were not included in these statements.

The charts show that standing offer bills have decreased by a minimum of $100 per annum (QEnergy) and up to around $200 (Click). Among the three incumbent retailers, which have the majority of standing offer customers, bills have been reduced by between $120 and $170 per annum. AGL’s bill reductions are at the higher end while Energy Australia and Origin are at the lower.

Chart 25 Citipower: Estimated and actual change to standing offer

AGL Origin Energy Powershop Aus Click Powerdirect Red Energy Simply Lumo Qenergy Momentum Dodo Alinta People Energy 0

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Tax on, Tax off: Electricity prices before and after 45 Chart 26 Powercor: Estimated and actual change to standing offer

AGL Origin Energy Powershop Aus Click Powerdirect Red Energy Simply Lumo Qenergy Momentum Dodo Alinta People Energy 0

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Chart 27 SP Ausnet: Estimated and actual change to standing offer

AGL Origin Energy Powershop Aus Click Powerdirect Red Energy Simply Lumo Qenergy Momentum Dodo Alinta People Energy 0

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46 Chart 28 Jemena: Estimated and actual change to standing offer

AGL Origin Energy Powershop Aus Click Powerdirect Red Energy Simply Lumo Qenergy Momentum Dodo Alinta People Energy 0

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Chart 29 United Energy: Estimated and actual change to standing offer

AGL Origin Energy Powershop Aus Click Powerdirect Red Energy Simply Lumo Qenergy Momentum Dodo Alinta People Energy 0

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Tax on, Tax off: Electricity prices before and after 47 5.5.1 Changes to Victorian market offers

All retailers except for Powershop have published new market offer rates. While it would be impossible to verify whether all retailers have passed these rates on to their existing customers, we would assume that this has occurred (see section 3.3 about data collection). Nonetheless, the comparison of Victorian market offers before and after the repeal shows the impact the removal of the carbon price has had on retailers’ prices (rather than costs to consumers). Chart 30 shows the impact the removal of the carbon tax has had on annual bills for households consuming 4,800 kWh per annum.51

It shows that the cost of electricity (for customers shopping around) typically is between 5% and 10% less than it was in July 2014. While one retailer, QEnergy, has significantly increased its rates for new customers.

As was the case for standing offers, the percentage decrease to market offer bills is typically greatest in Citip- ower’s network and lowest in SP Ausnet’s area.

As discussed in section 2 above, Powershop, Red Energy and Momentum did not foreshadow price de- creases for market offer customers due to the repeal of the carbon tax. New Red Energy and Momentum customers, however, will receive annual bills that are between 5 and 10% lower compared to customers that switched in July 2014 (except for customers in SP Ausnet’s are where the difference is less).

In terms of QEnergy, we can only assume that existing customers on average received a price reduction of around 9% due to the repeal (as estimated by QEnergy).52 Prices for new customers, however, have increased significantly since the repeal.53

Chart 30 Victoria: Change (%) to market offers

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AGL Click Lumo Dodo Origin Simply Alinta Qenergy Energy Powershop Aus Powerdirect Red Energy Momentum

51 The calculations for these market offer bills do not include additional discounts. 52 Note that QEnergy’s estimated average bill reduction is NEM wide (not Victoria specific). 53 QEnergy’s offer was collected from QEnergy’s website (http://www.qenergy.com.au/What-Are- Your-Options) and the tariffs listed under the Home Your Way offer (the only offer available) were used for this analysis.

48 Charts 31 - 35 below show estimated average change to annual bills (based on the retailers’ substantiation statements) and the actual difference between retailers’ July 2014 rates and October 2014 offers for house- holds consuming 4,800kWh per annum for each of the five network areas.54 On average, the annual price of electricity for households using 4,800 kWh per annum is now approximately $100 less than it was prior to the repeal. The columns in the below charts show the reduction to the annual bill for the various Victorian market offers (households using 4,800 kWh per annum). The black dots indicate the retailers estimated cost reduc- tions for existing market offer customers.

Chart 31 Citipower: Estimated and actual change to new market offer

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AGL Click Lumo Dodo Origin Simply Alinta Qenergy Energy Powershop Aus Powerdirect Red Energy Momentum People Energy

54 The calculations for these market offer bills do not include additional discounts.

Tax on, Tax off: Electricity prices before and after 49 Chart 32 Powercor: Estimated and actual change to new market offer

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AGL Click Lumo Dodo Origin Simply Alinta Qenergy Energy Powershop Aus Powerdirect Red Energy Momentum People Energy

Chart 33 SP Ausnet: Estimated and actual change to new market offer

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AGL Click Lumo Dodo Origin Simply Alinta Qenergy Energy Powershop Aus Powerdirect Red Energy Momentum People Energy

50 Chart 34 Jemena: Estimated and actual change to new market offer

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Chart 35 United: Estimated and actual change to new market offer

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AGL Click Lumo Dodo Origin Simply Alinta Qenergy Energy Powershop Aus Powerdirect Red Energy Momentum People Energy

Tax on, Tax off: Electricity prices before and after 51 As the majority of retailers did not change their fixed daily supply charge as a result of the repeal and most re- tailers offer additional discounts (including pay on time discounts) off consumption charges only, the difference to annual bills based on offers as of July 2014 compared to offers as of October 2014 is in some cases less for consumers receiving a pay on time discount compared to consumers who do not receive this discount. AGL, Origin, Energy Australia, Click, Simply and Dodo all lowered their consumption rates and kept the same fixed charges as well as market offer discounts in place. Charts 36 - 40 below show that the reduction in costs (shown as annual saving) can be significantly lower for consumers that receive pay on time discounts.

Other retailers have changed the discount applicable to new customers post the repeal. Powerdirect has increased its guaranteed discount off consumption from 22% to 26%, Lumo is now offering 22% pay on time discount off consumption compared to 20% in July, and Alinta and People Energy have increased their pay on time discount off consumption by 10 percentage points (25% and 35% respectively). As existing custom- ers will continue to receive the original (lower) discount, their savings will not be as high as those shown for market offer customers in the charts below. However, the charts do demonstrate that some of the retailers in Victoria are increasing their market offer discounts for new customers post the carbon repeal reset. Red Energy has not changed its market offer discount (10% off bills when paid on time) but as their post repeal offer contains higher fixed supply charges and lower consumption charges, the difference to the annual bill is marginally lower for pay on time customers with this consumption level.

Charts 36 - 40 below show the impact the repeal of the carbon tax has had on price reductions for market offers, excluding all discounts, including guaranteed discounts only and including guaranteed as well as pay on time discounts. Again the bill calculation is based on households using 4,800 kWh per annum (single rate).

Chart 36 Citipower: Changes to market offer discounts

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AGL Click Lumo Dodo Origin Simply Alinta Qenergy Energy Powershop Aus Powerdirect Red Energy Momentum

52 Chart 37 Powercor: Changes to market offer discounts

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AGL Click Dodo Origin Simply Lumo Alinta Qenergy Energy Powershop Aus Powerdirect Red Energy Momentum

Chart 38 SP Ausnet: Changes to market offer discounts

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Tax on, Tax off: Electricity prices before and after 53 Chart 39 Jemena: Changes to market offer discounts

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AGL Click Dodo Origin Simply Lumo Alinta Qenergy Energy Powershop Aus Powerdirect Red Energy Momentum

Chart 40 United Energy: Changes to market offer discounts

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AGL Click Dodo Origin Simply Lumo Alinta Qenergy Energy Powershop Aus Powerdirect Red Energy Momentum

54 5.6 Bill impacts in Queensland

As a result of the repeal, Queensland’s regulated consumption rate for the single rate tariff (Tariff 11) has decreased by 9.41%. The fixed supply charge, of almost 92 cents per day, has remained unchanged. For households consuming 8,000 kWh per annum the annual electricity bill will be approximately $230 less than if the price on carbon had remained in place.

5.6.1 Changes to Queensland market offers

Unlike some of the other jurisdictions, retailers have introduced very similar levels of price reductions for their market offer rates in Queensland. All of the retailers’ estimates produced savings of between $200 and $250 for households using 8,000 kWh per annum (8.3% reduction to bills). Furthermore, all new market offer rates deliver such discounts with the exception of Dodo, which has not published new market offer rates. Chart 41 shows the impact the removal of the carbon tax has had on annual bills for households consuming 8,000 kWh per annum.55

Chart 41 Queensland: Change (%) to market offers

AGL Origin Energy Aus Click Lumo Powerdirect Dodo 0.0

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Chart 42 below shows estimated average change to annual bills (based on the retailers’ substantiation statements) and the actual difference between retailers’ July 2014 rates and October 2014 offers for house- holds consuming 8,000kWh per annum.56 On average, the annual price of electricity for households with this consumption level is now approximately $200 less than it was prior to the repeal (or $230 if we exclude Dodo from the average). The columns in the below charts show the reduction to the annual bill for the various Queensland market offers (households using 8,000 kWh per annum). The black dots indicate the retailers estimated cost reductions for existing market offer customers.

55 The calculations for these market offer bills do not include additional discounts. 56 Ibid

Tax on, Tax off: Electricity prices before and after 55 Chart 42 Qld: Estimated and actual change to new market offer

AGL Origin Energy Aus Click Lumo Powerdirect Dodo 0

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As in other jurisdictions, the annual saving to market offers with pay on time discounts are less post the repeal (due to lower consumption rates that the discounts apply to). Origin’s significant reduction (chart 45 below), however, is not just because consumption rates are lower. Origin’s pay on time discount has also decreased since July 2014 (from 5% to 3%). The price for new Origin customers, that will receive the 3% discount, is thus only 6.6% (which equates to $175 per annum) less than the pre carbon price. This issue is discussed in more detail in section 6.3 below.

Energy Australia, on the other hand, has slightly increased its pay on time discount (from 6% to 7%) resulting in the post carbon price being the same for both existing and new customers.

Chart 43 Qld: Changes to market offer discounts

AGL Origin Energy Aus Click Lumo Powerdirect Dodo 0

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56 6. Issues regarding retailers’ strategies and behaviour

The above analyses of the impact the repeal of the carbon tax has had on electricity costs and prices in each of the NEM jurisdictions identified several key issues in relation to retailers pricing strategies and impacts on post carbon prices. This section discusses these in detail.

6.1 Combining price increases with carbon tax adjustments

The clearest example of a retailer combining price increases with the cost reductions occurring as a result of the repeal in the same price reset is Alinta’s approach. In October 2014 bills from Alinta to their South Australi- an customers contained the following notice:

“Our Standing Tariffs for electricity will decrease on 8 September 2014. The new tariffs take into consideration the removal of the carbon tax as well as the impact of increased network costs and op- erating costs. These increases have been delayed from the usual July pricing change cycle so that our customers only receive one price change, which will result in a reduction in their charges.”57

Alinta did reduce the consumption charges but they also increased the fixed supply charge by just over $30 per annum. The South Australian analysis above (section 5.3) showed that Alinta’s annual bill would only be reduced by $25 for households using 6,000 kWh per annum. A low consumption household (using 4,000 kWh per annum), however, will not experience an overall bill decrease post the September 8 price reset because the increase to the fixed supply charge is greater than the value of the decrease to consumption charges.

At the same time, Alinta increased its pay on time discount for new customers to 20% while existing custom- ers on Alinta’s “Fair Go” offer continue to receive a 15% pay on time discount. Had Alinta extended this offer to its existing customers, households using 4,000 kWh per annum that paid their bills on time could have seen an annual saving of $70 post the repeal of the carbon price instead of nothing.

6.2 Cost savings versus new prices

In Victoria, South Australia and NSW, where the retailers set their own prices for standing offers as well as market offers, there may be a significant difference between the cost savings retailers pass through to existing customers and the price they offer new customers in a post carbon environment.

Alinta’s approach, discussed above (section 11.1), where new customers receive a 20% pay on time discount compared to the 15% awarded to existing customers is one example of a retailer where the impact of the car- bon repeal manifests itself differently for bill reductions compared to the new price of electricity. Powerdirect, Lumo, People Energy and Energy Australia are also retailers that have increased discounts for new customers only.

Powerdirect’s guaranteed discount off consumption charges for new customers went up from 22% to 26% in Victoria and from 7% to 13% in NSW. This effectively means that for households using 6,000 kWh per annum, Powerdirect’s electricity price post the carbon price reset has been reduced by $220 per annum for new customers in Victoria’s Citipower area and $275 for customers in NSW’s AusGrid network. At the same time, the cost saving for existing customers, with the same consumption level, is $160 in Victoria and $180 in NSW. Other examples include:

57 Information provided on bill to South Australian Alinta customer

Tax on, Tax off: Electricity prices before and after 57 SS People Energy’s pay on time discount (off consumption charges) increased from 25% to 35% in Victoria.

SS Lumo increased its pay on time discount (off the bill) from 20% to 22% in Victoria and from 12% to 15% in South Australia.

SS In Victoria, Alinta increased its pay on time discount for new customers to 25% while existing customers on Alinta’s “Fair Go” offer continue to receive a 15% pay on time discount.

Furthermore, while non-conditional discounts allow us to apply discounts to the retailers’ rates and determine whether households are paying more or less compared to before, conditional discounts (such as pay on time discounts) do not allow us to make that comparison. As raised in a report by Alviss Consulting and the St Vincent de Paul Society in December 2013:

“Only the retailers know what their customers ended up paying but nothing would stop them from claiming that higher (conditional) discounts reflect the reduction in wholesale costs, lower network charges or the repeal of the carbon tax, to give a few examples.”58

It certainly looks like some retailers have decided to pass on lower wholesale prices, due to the repeal of the carbon tax, as conditional pay on time discounts. After all, the cost of late paying customers (e.g. the cost of debt) is clearly nothing near the 20% to 35% pay on time discounts now offered in South Australia and Victoria.

Understandably, some retailers may wish to take advantage of a time when there is an increased focus on electricity prices to offer higher discounts to new customers. However, it also means that we cannot simply assess retailers’ new offers to estimate the impact the removal of the carbon tax has had on electricity prices. Similarly, we cannot entirely rely on changes to existing customers bills in order to assess the impact.

6.3 Reduced discount on market offers

In contrast to the increase in market offer discounts for new customers discussed above (section 6.2), Origin has reduced its pay on time discount for new customers in NSW and Queensland.

In NSW, Origin’s market offer (Daily Saver Plus) contained a pay on time discount of 10% in July 2014. On the 4th of August, however, this discount was reduced to 7%. This is the same discount that is offered to custom- ers post the carbon repeal price reset that took effect 15 September.

In their substantiation statement, Origin estimated an average 8% reduction in cost for NSW electricity customers. Customers that signed up for Origin’s Daily Saver Plus in July 2014 will presumably continue to receive the 10% pay on time discount for 12 months (which is the “benefit term” for this contract). For house- holds using 7,200kWh per annum the new Origin rates will produce a saving of between 6.5% and 8.1% depending on network area. For new Origin customers, receiving a 7% pay on time discount however, the repeal of the carbon tax will only reduce annual electricity costs by 4% in Essential Energy’s network area and 5.5% in the rest of NSW.

58 Gavin Dufty and May Mauseth Johnston, The National Energy Market – Is there a devil in the retail?- December 2013, p 23

58 In Queensland, Origin’s market offer (again the Daily Saver Plus) offered a pay on time discount of 5% in July 2014. Post the carbon repeal price reset (that took effect 15 September), however, this discount was reduced to 3%.59

In their substantiation statement, Origin estimated an average 8% reduction in cost for Queensland electric- ity customers. Customers that signed up for Origin’s Daily Saver Plus in July 2014 will presumably continue to receive the 5% pay on time discount for 12 months (which is the “benefit term” for this contract) and for households using 8,000kWh per annum the new Origin rates will produce a saving of 8.3%. For new Origin customers, receiving a 3% pay on time discount however, the repeal of the carbon tax will only reduce annual electricity costs by 6.5%.

6.4 Changes to tariff structures

In addition to changing their rates and discounts, retailers can also change the structure of the tariffs they offer.

In Victoria, Momentum’s “smile power” offer has changed from being an inclining block tariff to a declining block tariff. At the same time, the consumption threshold for the first block is lower than previously. This means that consumption charges have decreased significantly for households consuming more than 600 kWh/quarter. In some network areas, however, Momentum has significantly increased its daily fixed supply charge.

6.5 Changes to supply charges

While a couple of retailers have decreased their daily fixed supply charge for new market offers, others have increased theirs. Momentum is the retailer with the greatest increases, with the fixed supply charge increasing by as much as $150 per annum in one Victorian network area (Jemena). Unlike other jurisdictions, Victoria’s network charges do not change on 1 July every year (it changes on 1 January), which means there must be other reasons for these increases.

Chart 44 below shows Momentum, Red and Alinta’s annual increase to the supply charge in various network areas.

59 When we checked the fact sheets on Origin Energy’s website on 3 September 2014, Origin listed two sets of fact sheets, one was the current offer and the other was the offer that took effect on 15 Sep- tember. The current offer stated that it took effect on 1 July 2014 and contained a 3% pay on time discount. However, when we compared that to the Factsheet that we had downloaded from Origin’s website in July, Origin appears to have altered the discount at a later stage. Our saved Origin fact sheet also states that it was effective from 1 July and the pay on time discount is listed as 5%.

Tax on, Tax off: Electricity prices before and after 59 Chart 44 Increases to the fixed supply charge

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60 7. Allocation issues and potential windfall gains

The repeal of the carbon tax effects all energy consumed since 1 July 2014. For customers on a quarterly billing cycle that do not have a smart meter it is, however, impossible to determine actual consumption post 1 July unless all meters were manually read on that day. As July is a particularly cold month in many parts of Australia, we can fairly assume that July energy consumption is higher than, for example, that of May.

To illustrate the issue arising we have examined the ActewAGL bills for one Canberra consumer.

The customer received the following electricity bill from ActewAGL on 23 July 2014 covering the period from 25 April to 22 July:

Table 5 Customer’s initial bill

Supply charges Charges Amount GST Total Home plan 67 days x $0.668 $44.76 $4.48 $49.24 per day Home plan 22 days x $0.689 $15.16 $1.54 $16.68 Total $59.92 $6.00 $65.92

Electricity Consumption charges 3,162kWh x $578.65 $57.87 $636.52 $0.183/kWh 4,200kWh 1,038kWh x $198.92 $19.89 $218.81 $0.19164/kWh Total $777.57 $77.67 $855.33 Total current $837.49 $83.76 $921.25 charges

The bill contains two different supply charges and two different consumption charges because ActewAGL increased its rates from 1 July. It also shows that ActewAGL has no knowledge about when the total con- sumption of 4,200kWh actually occurred within this three month period. The methodology used is simply total consumption of 4,200 kWh divided by 89 days (67 days prior to 1 July and 22 days post 1 July) equals a daily average consumption of 47.1910112kWh. ActewAGL then multiplied this average daily consumption with the number of days before and after 1 July to determine that the customer used 3,162kWh prior to 1 July and 1,038kWh post 1 July.

The customer’s bill, however, also shows that the average daily consumption went from approximately 20kWh in the previous billing period (ending 24 April 2014) to almost 48kWh per day in the billing period for this example. It would thus be reasonable to assume that a larger proportion of the actual consumption occurred post 1 July.

Tax on, Tax off: Electricity prices before and after 61 According to the ActewAGL bill the customer’s average daily consumption profile for each quarter looks like this:

48

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0 Jul-­‐13 Oct-­‐13 Jan-­‐14 Apr-­‐14 Jul-­‐14

When the customer received an amended bill on 21 August 2014, adjusted for the repeal of the carbon tax, only the 1,038kWh that ActewAGL had assumed were consumed post 1 July attracted a lower rate. The orange cells in the table below show the new amounts adjusted for the repeal of the carbon tax.

Table 6 Customer’s amended bill

Supply charges Charges Amount GST Total Home plan 67 days x $0.668 $44.76 $4.48 $49.24 per day Home plan 22 days x $0.689 $15.16 $1.54 $16.68 Total $59.92 $6.00 $65.92

Electricity Consumption charges 3,162kWh x $578.65 $57.87 $636.52 $0.183/kWh 4,200kWh 1,038kWh x $172.72 $17.27 $189.99 $0.1664/kWh Total $751.37 $75.14 $826.51 Total current $811.29 $81.14 $892.43 charges

62 A comparison of the initial bill (table 5) to the amended bill (table 6) shows that the customer was charged $29 less for electricity consumed between 1 and 22 July 2014 due to the repeal.

However, if we assume that 40% (or 1,680kWh) of total consumption (4,200kWh) actually occurred post 1 July, the customer would be under compensated by $12.60 Who keeps the windfall for the remaining 642kWh potentially consumed post 1 July? This would be a smallish amount for the individual household ($12) but ActewAGL has approximately 150,000 residential electricity customers and $12 per household would equate to $1.8 million. If the customers do not receive the money someone else keeps it.

In relation to the reduced cost of waste disposal, the NSW Council of Wollongong highlighted this issue in a media release:

“With 2014/15 rates already set and in the mail, Council resolved to quarantine the carbon tax com- ponent, which ranges from $12-$18 depending on bin size configuration, and use it to reduce the fees for the next rating period (2015/16).

Council is also currently holding around $4.4 million collected under the repealed scheme. Negotia- tions are now underway with the Federal Government regarding what should happen to the remaining funds once all payments required under the repealed scheme are finalized. When this is clarified a report will be presented to Council.”61

The issue of estimated consumption post 1 July is of course not just an issue for ActewAGL and the ACT. The vast majority of homes, and small businesses, in the NEM do not have smart meters installed and someone in the supply chain, and most likely retailers, can end up with a significant windfall. This raises issues in relation to how these savings should be accounted for and how they could be redistributed (noting that it would be impossible to know which individual consumers used more kWh than the retailer estimated post 1 July 2014).

60 As the amended bill would have been $880.70 based on this assumption about when the actual consumption occurred. 61 Wollongong City Council, Waste disposal fees drop in-line with carbon tax repeal, Media release 30/7/2014 and reported in Crikey.

Tax on, Tax off: Electricity prices before and after 63 Conclusion

Leading up to the carbon tax repeal, households were regularly reminded about how much this tax was adding to their energy bills and that savings of 9%, or $200 per annum for electricity alone, would occur if repealed.62

This report shows that there is no ‘magic number’ and household savings on electricity bills vary significantly.

Jurisdictional differences were expected. A common explanation offered was that the carbon tax made up a smaller proportion of the total bill in Tasmania and South Australia than in, for example, the ACT.63 Similarly, households’ actual consumption levels are unlikely to be the same as the assumed average. However, it is not as easy as looking at cost savings by jurisdictions, or across different consumption levels, to make sense of the average 9% (or $200) estimate.64 Some of the reasons for this are:

SS For jurisdictions with more than one network area there are significant differences to the reductions in bill depending on geographic location. In Victoria, for example, households in the northern part of inner city Melbourne (i.e. the suburb of Carlton) will experience an average decrease of 6% in 2014/15.65 Households in the inner northwestern suburb Flemington, on the other hand, will experience an average decrease of 5%.66

SS There is a difference between standing (or the regulated rate in some jurisdictions) and market offers. The NEM average reduction to standing offers is 8% while the NEM average reduction to market offers is 6%.

SS There tends to be a difference between jurisdictions where retail prices remain regulated and jurisdictions that have deregulated. That is, the difference in reduction between standing offers and market offers is typically less (albeit with some exceptions) in jurisdictions where the standing offers are still regulated.

SS There are significant differences between the reductions offered by the various retailers within each network area or jurisdiction.

SS Some retailers offer different cost reductions to existing customers compared to price reductions for new customers.

Overall, most electricity customers have received price reductions, but for many households the price reduc- tion is significantly lower than the averages estimated by the Government.

62 Australian Government, Department of Environment, Repeal of the carbon tax – Impacts on house- holds and businesses, Fact Sheet which estimated that electricity bills in 2014-15 would on average be $200 less than they would have been with a carbon tax in place at http://www.environment.gov.au/system/files/ pages/59388d77-a9b5-4e4c-87b7-d732baf7c45b/files/factsheet-impacts-households-and-businesses_0. pdf and Prime Minister Abbott’s statement on 15 October 2014: “When this bill is passed, this Government estimates that power prices will go down by 9 per cent” available at http://www.abc.net.au/news/2013-10- 30/tony-abbott-carbon-tax-gas-electricity-bills/5050348 63 Several commentators have provided reasons for why the reductions will be lower in some jurisdic- tions compared to others. See for example, The Conversation, Carbon tax axed: how it affects you, Australia and our emissions, 15 July 2014, The Canberra Times, Canberra to save more than most from carbon tax repeal, 19 July 2014 and www.news.com.au, Carbon tax scrapped: how the changes will affect Australian consumers, 15 July 2014. The claim that Tasmanians would receive the lowest reduction now appears to be wrong. 64 See Fn 62 65 Based on market offers in Citipower’s network area. 66 Based on market offers in Jemena’s network area.

64 Due to extensive and ongoing messages about the savings that the repeal of the carbon tax would create, it is understandable if the community’s interest and expectations are high. Furthermore, as it is important that consumer confidence in energy markets does not erode further, we believe consumers need, and deserve, better information about the impact the repeal of the tax has had on their bills. We do not believe that the ‘substantiation statements’ or the ‘notices to customers’ that we have examined as part of this project ade- quately explain the impact the repeal has had on electricity costs. In our view, both the Federal Government and retailers, through the Energy Retail Association of Australia, have a role to play in ensuring that consumers are adequately informed.

Finally, we believe this study can provide a strong lesson for future decisions where government policies di- rectly impact on customers’ bills. Just as the GST is a line item on bills, other taxes, levies or policy decisions (such as a smart meter roll out) should be itemised. We recognise that it may be more politically expedient to “hide” unpopular policy costs from the electorate, but as policies can and do change, itemising these costs are necessary to ensure market transparency and consumer confidence.

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Tax on, Tax off: Electricity prices before and after 65