Understanding energy deregulation in Australia

Deregulated energy markets may result in more competition from brands and increased options for you to choose from. Different options mean you may be able to find a tailored plan that suits your needs for:

• Gas and electricity prices. When there’s a more competitive market, energy companies may feel motivated to offer lower prices and incentives to draw in customers. This means that the average local utility costs will often vary between distributors within and across, states and territories.
• Options for electricity generation. With deregulated electricity, you may be able to choose a renewable energy plan. Energy-efficient options help diversify the electricity industry and generate more renewable energy. This allows for cleaner power generation, which decreases emissions and dependency on greenhouse gases produced from fossil fuels.
• Tariffs. In a deregulated market, you may have more choice over your tariffs. For example, in deregulated states, you can compare solar feed-in tariffs offered by different electricity providers and potentially get a credit on your electricity bill.

Generally, the state governments are responsible for their energy sector; this includes deregulation. While several states have deregulated their energy markets, not every state or territory has.

For example, in Western Australia (WA), the retail gas market is fully deregulated in Perth. However, electricity is still provided for most customers by government-owned provider Synergy.¹ Synergy services the south-western region of WA, known as the South West Interconnected System (SWIS). Areas outside of SWIS are contestable, so large businesses may be able to choose their own retailer, but residential and small business customers are still restricted to Synergy.

Both WA and the Northern Territory (NT) have self-contained electricity grids and are regulated electricity markets. This is because these states have smaller populations spread out over a wide area, making it difficult for private energy providers to set up shop and be profitable without excessively charging customers. However, even in regulated electricity markets, energy providers are still allowed to offer discounts on official pricing.

The other states are deregulated energy markets – to varying degrees. Some of these have multiple private companies operating within them, but the energy prices they offer customers are still somewhat regulated:

• New South Wales (NSW)
• Victoria (VIC)
• South Australia (SA)
• Australian Capital Territory (ACT)
• Tasmania (TAS) – limited providers to choose from due to the population size
• South East Queensland (QLD) – regional and North QLD are regulated markets.

Currently, not everywhere in Australia is deregulated, but in some cases, this can actually be a good thing. It’s true that regulated markets don’t give you much choice when it comes to what plan you’re on or which provider you’re with for your electricity and gas.

However, it does mean Australians in remote parts of the country won’t be financially penalised for the additional expense of transporting energy to their property.

In deregulated markets, distributors charge energy retailers for this cost, who then usually pass it on to their customers. In places like the NT and WA, energy customers may be spread far and wide, meaning the cost of transporting electricity can be much higher than in denser populated areas.

But with a regulated market, customers might still pay a similar rate to others, regardless of their energy provider and how far away they live from a major city.

In 2019, the Australian Government introduced the Default Market Offer (DMO) in South East QLD, NSW and SA.² The DMO acts as the maximum annual cost customers should pay on a default energy contract (also known as a standing offer contract) for each distribution zone.

This means these ‘price caps’ will differ depending on where you live.

The DMO also acts as a reference price for providers to set their electricity prices and discounts against. When displaying offers online or over the phone, providers, energy comparison services and energy brokers must disclose the annual cost of the product as a percentage below or above this reference price, so you’ll have an idea if you’re getting a good deal.

Victorians have a similar offer known as the Victorian Default Offer (VDO), which is the amount you’ll be charged on a standing offer plan and is considered a fair price to pay for electricity. It establishes a reference price similarly to the DMO when comparing against other plans.

Currently the Australian Government has appointed the ACCC to continue to monitor and report on the Australian gas markets