EMBEDDED NETWORKS
WHAT THE VICTORIAN DEFAULT OFFER MEANS FOR THE FUTURE OF
EMBEDDED NETWORKS With many Victorians doing it tough this year, cheaper prices for utilities is always welcome news. In July 2020, the Victorian Government announced new pricing reforms that would place pricing caps on electricity for Victorians living in embedded networks. We take a closer look at the Victorian Default Offer, what it means for customers and what it means for electricity businesses.
What is the Victorian Default Offer? The reforms announced in July were part of a series of reforms to improve energy prices and transparency across the Victorian energy market. These reforms resulted in the Victorian Default Offer (VDO) being implemented, which imposed pricing caps on standing offers, meaning that retailers cannot charge over these set prices. The VDO is part of the Victorian Government’s Energy Fairness Plan which is making the electricity market fairer, simpler and more affordable for all customers. It was introduced after an independent review found that Victorians were paying too much for their energy needs. In September, the VDO was extended to include customers in embedded networks, which are electricity networks that are privately owned and managed, and supply electricity to a specific building or area, such as apartment buildings, caravan parks, retirement villages and small businesses. According to the Essential Service Commission (ESC), the extended VDO reforms will benefit over 104,000 Victorian customers in embedded networks. It’s estimated that with the new pricing caps in place, residents of apartment buildings, caravan parks and retirement villages could save between $180 and $370 a year on energy bills, while small
businesses in shopping centres could save between $900 and $2,200, helping both individuals and businesses during one of the toughest times in Australia. Phil Baxter, Chief Executive Officer of embedded network provider WINconnect, said that there were multiple reasons for price increases for Victorian customers over the past few years, including the closure of key infrastructure, as well as a lack of retail competitiveness. “There are many reasons why power prices have escalated over the past five years. The major driver has been on the supply-side, where generation disruption such as the closure of the Hazelwood Power Station – previously one of Victoria’s largest generators – alongside significant investment in poles and wires infrastructure, have contributed to bill increases,” said Mr Baxter. “But there have also been issues relating to retail failures whereby non-engaged customers receive unfair prices when their conditional discount agreement ends, as well as issues relating to a lack of a competitive retail environment in some states. “The VDO has been designed as a ‘safeguard’ tariff for customers who may have let their energy agreement expire. It sets a default or ‘ceiling’ tariff that cannot be exceeded.”
New reforms from the Victorian Government will ensure customers of embedded networks, such as those seen in shopping centres, are always getting a fair deal on energy.
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November 2020 ISSUE 12
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