Australia should stop monopoly power networks from receiving supernormal profits

IEEFA urged the state and federal governments to step in to help reduce the rise in electricity bills.

The state and federal governments in Australia need to intervene to stop monopoly power networks from receiving supernormal profits, the Institute for Energy Economics and Financial Analysis (IEEFA) said. 

This could help reduce the upward pressure on power prices, Simon Orme, Guest Contributor with IEEFA said. 

“This is the perfect time for state governments to make changes that families will appreciate by reducing power price rises. Since our report published last October, no action has been taken to stem supernormal monopoly network profits,” Orme said.

“In fact, in February 2023, the Australian Energy Regulator completed a three-year review of the largest cost in electricity network charges and concluded the system used to set the ‘allowed’ return on capital from 1 July 2023 to 30 June 2028 should remain almost entirely unchanged.”

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The report noted the draft default market offer (DMO) indicates that consumers will likely face higher electricity prices. This is expected to affect consumers in New South Wales, South East Queensland, and South Australia, and the Victorian default order (VDO). 

IEEFA said that 15-33% of the recent DMO and VDO draft residential retail bill rises could be avoided if monopoly electricity networks are prevented from extracting supernormal profits.