Labor / Bill Shorten wants to cap prices – but he doesn’t think...

Labor / Bill Shorten wants to cap prices – but he doesn’t think this is feasible as it would stifle further investment, thereby pushing prices even higher

Let's not kid ourselves. Morrison is capping prices and the market has responded.

Energy retailers are warning that the government's move to set a "default" tariff for household electricity starting in mid-2019 will act as a cap on prices that could squeeze smaller suppliers out of the market and choke competition.
Suppliers both big and small voiced concern on Tuesday that the "safety net"-style tariff represents a return to the regulation of power prices and will stifle innovation and deter needed investment in new plants.
The idea of a default tariff was proposed by the Australian Competition and Consumer Commission in Julyin response to the "loyalty tax" being paid by long-standing customers who have never bothered to switch to a competitive offer and which ACCC chief Rod Sims said were being "ripped off".
Treasurer Josh Frydenberg and Energy Minister Angus Taylor, who have tasked the Australian Energy Regulator with setting the tariff, say if would close the gap between the cheapest market offer and standing offers, which is as much as $832 for a household in South Australia.
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Alinta Energy stood apart in backing the default offer system. Chief executive Jeff Dimery used the Financial Review National Energy Summit to voice qualified support.Jessica Hromas
But energy suppliers note that most customers will see zero impact, as they are already on a market offer and the ACCC's estimate of annual savings from the default tariff measure is much lower, at $105-$165.
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Still, in a letter to AER chairman Paula Conboy asking for the tariff to be set by April 30 next year, Mr Frydenberg and Mr Taylor described the measure as a "landmark reform".
"A priority for the government is the swift introduction of a default market offer for both residential and small business electricity consumers," they said.
The ACCC recommended the price would be the maximum a retailer could charge in a particular network area and be based on "the efficient cost of operating in the region, including a reasonable margin as well as customer acquisition and retention costs".
A separate "reference bill" price, also to be set by the AER, will act as a benchmark for retailers and consumers to measure discounts. The AER will publish a bill amount for each distribution region using benchmarks for a two- to three-person household and the default offers.

Retailers have broadly supported the reference price but have serious reservations about the default tariff, seeing it as a stride toward re-regulation.
"We continue to caution against a return to price regulation as it will stifle investment right at the time we need it to maintain a secure electricity supply for customers as we replace ageing coal plants and transition to a lower emissions future," a spokeswoman for Origin Energy said, reiteratinga call for the government also to tackle other issues driving up prices, such as green scheme subsidies.
AGL interim chief executive Brett Redman said only 4 per cent of customers were on undiscounted standing offers and the company was continuing to contact them "to let them know how they can move to a better deal".
Smaller retailers, whose business depends on the ability to compete on price, are worried the default price will be set too low to allow them to be effective.

"I ask myself why any government would want to be in the business of setting prices," one second-tier retailer said, pointing to the risk of getting the price wrong and forcing some businesses to the wall.
"A default market offer for energy pricing is not in the long-term interests of consumers, would deter investment in innovation and could threaten the viability of smaller retailers," said Simply Energy, a retailer owned by France's Engie.
But Prime Minister Scott Morrison dismissed the industry's warnings as predictable.
"We are determined to eliminate the loyalty tax," Mr Taylor said. "We will do whatever necessary to do that."

Growing east coast retailerAlinta Energy stood apart in backing the default offer, with chief executive Jeff Dimery saying that arguing against re-regulation would "distract from the goal of getting better outcomes for more customers".
The AER has been asked to update the government every fortnight on its progress towards setting the prices.