The AER has today released a Position Paper on our 2020-21 Default Market Offer (DMO) price determination, for stakeholder consultation. The paper is the first step in our consultation process for our 2020-21 DMO price determination. It seeks stakeholder views on possible pricing methodologies the AER could use to set the next price.
This includes determining a DMO price for customers on time of use (TOU) and solar tariffs.
Following this consultation, we will select a methodology, which we will then use to develop draft DMO prices by early 2020. We will further consult on this draft determination, which will inform our final DMO price determination, to be published by April 2020.
Invitation for submissions
Interested parties are invited to make a submission on the Position Paper by the close of business on 18 October 2019.
Background
The AER is required under the Competition and Consumer (Industry Code – Electricity Retail) Regulations 2019 (the Regulations) to determine an annual price (the DMO price) for residential and small business customers.
The DMO price is the maximum price a retailer can charge a standing offer customer in each area. Retailers must apply DMO prices in areas where there is no other retail price regulation – south-east Queensland (Energex network area), New South Wales (Endeavour, Essential Energy and Ausgrid) and South Australia (SAPN).
In April 2019, the AER published the first DMO prices determination, covering the period 1 July 2019 to 30 June 2020.
The policy objectives for the DMO are to prevent retailers charging unjustifiably high standing offer prices, while:
- allowing retailers to recover their efficient costs of providing services, including a reasonable retail margin and customer acquisition and retention costs (CARC)
- not dis-incentivising competition, innovation and market participation by customers and retailers.
Under the Regulations, the DMO price for each area also acts as a ‘reference price’ for residential offers in that area. When advertising or promoting offer pricing, retailers must show the price of their offer in comparison to the DMO/reference price. This aims to help customers more simply compare the price of different offers.
Time of use (TOU) and solar tariffs are not covered under the current Regulations. However the Commonwealth Government has requested the AER consider these issues in the development of our determination.