‘Could be so much simpler': Energy Minister Chris Bowen announces energy price cap overhaul

West Australian

18-06-2025

Energy Minister Chris Bowen has announced a raft of proposed reforms designed to save Australian households from soaring power prices.
Speaking at Australian Energy Week in Melbourne on Wednesday, Mr Bowen said reform to the way the energy price cap mechanism worked outside of Victoria was needed in order to make price caps effective.
'Currently, the independent Australian Energy Regulator (AER) sets the default market offer (DMO) as a benchmark for residential and small business electricity bills in NSW, South East Queensland and South Australia, while here the Victorian default offer is set by the Essential Services Commission,' he said.
'The DMO was intended to act as a benchmark price to stop the worst forms of price gouging while leaving the job of putting downward pressure on prices to competition.
'However, I'll be frank. I don't think it's working that way and reform is needed.'
Mr Bowen said the vast majority of bill payers, 'some 80 per cent', could be getting a better deal.
'It's difficult to defend the DMO when the customer is required to do the deal hunting,' he said.
'We know it could be so much simpler.'
Mr Bowen announced that in 2026 the federal government would be delivering a 'reformed pricing mechanism' designed 'to get the best deal for consumers and act as the maximum price retailers can charge for standing offers in DMO regions'.
'The reformed pricing mechanism will bring DMO states closer in line with other jurisdictions like here in Victoria, which this year has seen significantly smaller bill increases compared to DMO regions,' he said.
The Victorian default offer (VDO) rose by less than 1 per cent in 2024–25, while the DMO varied much more widely; in NSW some residential customers experienced a decrease of about 1 per cent, while in South East Queensland prices increased by about 4 per cent.
The announcement has drawn criticism from energy providers who say they're surviving on razor-thin profit margins as it is and the planned overhaul could put small energy providers out of business.
One of Australia's biggest energy providers AGL issued a statement in response, saying it would look forward to engaging with the government on the review but 'to reduce energy bills, we need to look at the whole picture'.
'The government and industry are actively working on measures to reduce wholesale electricity costs. At 40 per cent of an average bill, network costs are a big component of bills and are continuing to grow quickly,' the statement read.
'A focus on improving network productivity is essential to keep these costs in check. Retail costs only represent around 10 per cent of an average bill and we need to carefully consider any moves that could lessen competition in the retail market, particularly if smaller retailers were no longer able to operate.'