Cost of missing an energy bill slashed

From 1 July this year, households and small businesses will no longer face big penalties for missing an energy bill with the state’s energy regulator putting a cap on what retailers can charge you for not making a payment on time.

The Essential Services Commission has set a cap of 3.62 per cent on new energy contracts entered into from 1 July 2020, slashing the potential cost of missing a payment in half.

Commission chairperson Kate Symons says limiting how much you’ll pay for missing a deadline will help reduce bill shock for households and small business.

“In January, we estimated that the average cost for residential customers of missing your pay-on-time discount was around $100 for electricity and gas*.

“The new cap could cut the average cost to around $40 to $50**,” she said.

Ms Symons says while late payment fees were banned in Victoria in 2005, pay-on-time discounts grew out of proportion to the cost a retailer might incur from a customer missing a payment.

“In 2018–19, we estimated that if a residential customer did not meet pay on time discount conditions for a full year, it would cost an average $400 for electricity and $200 for gas.

“The cost for small businesses was even higher, around one thousand dollars depending on the business,” she said.

In June 2018, the Australian Competition and Consumer Commission’s Retail Electricity Pricing Inquiry report also highlighted the practice, saying those who were less able to pay, such as hardship customers, were also more likely to be affected.

As a response to pending reforms, the industry started offering fewer deals with conditional and lower discounts, but the average cost of available deals was unchanged.

Setting the pay-on-time cap is the latest step in a range of energy contract reforms arising from the Victorian Government’s 2017 independent review of electricity and gas retail markets.

The cap will take effect from 1 July 2020 for all new contracts.

_{* Source: Victorian Energy Market Report, Quarterly Update, March 2020
**Estimated by taking the average prices of discounted offers in January 2020 and applying the new 3.62 per cent cap.}