Under the Electricity Retail Code, an electricity price cap and 'reference price' help keep prices down and provide a benchmark for you to compare offers.
There are two types of electricity plans that your provider may offer you:
- a standing offer, or
- a market offer.
All electricity service providers must provide at least one standing offer that includes their prices and some standard terms and conditions that apply to all providers. The prices are set by the provider and can be changed at any time, but not more than once every six months. Standing offer prices are usually higher than market offer prices.
A price cap has been applied to standing offers from 1 July 2019 in New South Wales, South Australia and south-east Queensland. The price cap, set by the Australian Energy Regulator (AER), is the maximum price for electricity services based on an annual calculation for typical users.
If a market offer finishes and you haven't chosen a new one, your provider can move you to the standing offer.
A market offer often includes special discounts or prices for a set period. These plans vary between providers and can be changed at any time.
Most market offers are already cheaper than the price cap, and the cap does not apply to them.
The amount of the price cap is also a 'reference price' that all discounts must be calculated from.
This means that if you are offered a 20 per cent discount from one service provider and a 30 per cent discount from another service provider, both those discounts can be compared from the same starting point (the reference price).
Electricity service providers in New South Wales, South Australia and south-east Queensland are required to advertise their offered prices by showing how they compare to the reference price.
The reference price is based on a typical annual usage, so your actual bill could be less or more than this amount, depending on your actual usage.
In the following image, two examples show advertised prices that are 11% cheaper than the reference price. The assumed annual usage in the Ausgrid network is 3 900 kWh.
If there are any discounts, the advertisement must clearly and conspicuously state the conditions for the discount. The value of a discount must also be compared to the reference price as a percentage. The second example shows a further 3% below the reference price as a pay on time discount. If you always met the conditions by paying on time, the price would be 14% less than the reference price.
Advertisements must also state the lowest possible price. The lowest possible price is the minimum price you would pay, including any discounts.
Our first example without conditional discounts shows the lowest possible price of $1 301. The second one that has a conditional discount shows the lowest possible price of $1 254 .
The following image contains general brand advertising that does not need to include the reference price.
You may not be on the cheapest offer available, so it is worth shopping around. Go to your provider’s website to check their offers and visit Energy Made Easy to compare energy prices.