What is energy deregulation?

Energy deregulation has significantly reshaped Australia’s energy market, offering consumers more choices and potential savings. Previously, energy providers were government-controlled and unable to set their own prices.

However, deregulation has introduced private energy companies, allowing them to determine their own pricing in certain regions. This shift has fostered competition and opened up more options for consumers.

In this article, we’ll explore what energy deregulation is, how it works, and how you can benefit from the changes in the energy market.

What does ‘deregulation’ mean?

Energy deregulation allows private companies to enter the market and set their own electricity and gas prices, creating more options for consumers.

In Australia, deregulation applies to both electricity and gas in certain regions, enabling providers to purchase energy at wholesale prices and offer tailored plans. While deregulation doesn’t affect the energy supply, it encourages competition, which can lead to more competitive pricing.

However, state regulators still enforce rules to ensure fair operation within the market.

What are the benefits of energy deregulation?

There are some great benefits to energy deregulation in Australia. Some of those are listed below:

Energy prices are more competitive

In deregulated energy markets, increased competition between providers can drive down prices as companies vie for customers. With a wider range of energy retailers offering various plans, consumers often have the opportunity to find better rates for their gas and electricity by comparing options.

The competition encourages providers to offer attractive deals, discounts, and promotions, helping households potentially save on their monthly bills. This also gives consumers greater bargaining power, as companies strive to offer more competitive pricing to retain or attract customers.

Wider choice of energy plans

Deregulation opens the door to a wider range of energy plans, giving consumers more choices to suit their specific needs. With more private companies in the market, you’re no longer limited to a one-size-fits-all plan.

This variety includes flexible billing options, off-peak pricing, and even green energy plans, which allow you to support renewable energy sources.

By opting for a renewable energy plan, you can contribute to a greener, more sustainable future while potentially reducing your environmental impact and supporting the transition to cleaner energy.

Better options for solar feed-in tariffs

For homeowners who have invested in solar panels, deregulation can provide more attractive options for solar feed-in tariffs (FITs). These tariffs allow you to receive credits or payments for any excess electricity you generate and return to the grid.

With deregulated markets, energy providers often offer different rates for these feed-in tariffs, allowing you to compare options and select the best deal. A competitive FIT can help offset the cost of your solar panel system and reduce your electricity bill, making it more financially rewarding to invest in renewable energy at home.

More flexibility in tariff and plan choices

Deregulated markets offer more flexibility in choosing plans that align with your energy consumption habits. Whether you use energy primarily during peak or off-peak hours, deregulated providers can offer pricing structures tailored to your lifestyle.

For example, some providers offer time-of-use plans, where electricity costs vary depending on the time of day. In contrast, regulated markets often have limited options and fixed tariffs that may not cater to different usage patterns.

This flexibility can be especially beneficial for households that want to optimise their energy usage and minimise costs, while in remote or less competitive areas, where energy distribution costs are higher, consumers often have fewer choices.

Energy deregulation across Australia

As of 2024, energy deregulation across Australia varies by state, with each state and territory responsible for managing its own energy sector.

While several states have deregulated their energy markets, not all regions follow the same approach.

Western Australia & Northern Territory

In Western Australia (WA), the retail gas market in Perth is fully deregulated, allowing private providers to compete.

However, electricity remains largely regulated, with government-owned provider Synergy servicing most of the state. Synergy operates in the Southwest Interconnected System (SWIS), covering the south-western region. Outside of SWIS, large businesses can choose their own electricity retailer, but residential and small business customers are still restricted to Synergy.

Both WA and the Northern Territory (NT) have self-contained electricity grids, making deregulation less practical due to their dispersed populations and geographical challenges.

New South Wales, Victoria, South Australia and Australian Capital Territory

Other states, such as New South Wales (NSW), Victoria (VIC), South Australia (SA), and the Australian Capital Territory (ACT), have fully deregulated energy markets, offering consumers a wide range of private providers and competitive pricing.

Tasmania and SE Queensland

Tasmania (TAS) has limited options due to its smaller population, while in Southeast Queensland (QLD), deregulation applies only to certain regions, with rural and northern areas still under regulated pricing.

Even in areas where electricity markets remain regulated, providers often offer discounts or special deals, giving customers some flexibility in their energy choices.

How is the government involved?

The Australian Government has put several safeguards in place to ensure that consumers are protected from unfair pricing practices and to maintain a fair and competitive energy market. These safeguards are overseen by a range of regulatory bodies that monitor and regulate energy providers across the country.

Australian Energy Regulator (AER):

The AER plays a key role in overseeing the national electricity and gas markets, ensuring that energy providers comply with regulatory requirements. It monitors pricing practices to prevent price gouging and ensures that consumers are not being charged unfairly.

The AER also enforces rules and standards designed to protect consumers while promoting competition in the market.

Australian Competition and Consumer Commission (ACCC):

The ACCC works to promote competition and protect consumers across various sectors, including the energy market. It investigates any potential anti-competitive behaviour or misleading conduct by energy providers.

The ACCC also works to ensure that energy providers do not engage in practices that could harm consumers or limit competition.

Essential Services Commission (VIC):

The Essential Services Commission (ESC) regulates the energy market in Victoria, ensuring that electricity and gas providers offer fair and transparent pricing.

The ESC works to prevent unfair practices and ensure that all consumers have access to essential energy services at reasonable prices.

Australian Energy Market Commission (AEMC):

The AEMC is responsible for setting the rules and guidelines that govern Australia's electricity and gas markets. It focuses on long-term energy market reforms to improve market efficiency, reliability, and fairness.

The AEMC plays a critical role in shaping policies that impact both energy providers and consumers.

Each state and territory in Australia also have an Energy Ombudsman. These independent bodies help resolve disputes between energy providers and consumers. If a customer faces issues with their provider, the Energy Ombudsman offers a free, accessible service to help mediate and resolve conflicts.

This ensures that customers have a fair and effective means of addressing any problems that may arise with their energy service.

What about energy price caps?

In deregulated markets, price caps exist through the Default Market Offer (DMO), introduced in 2019 for Southeast QLD, NSW, and SA.

The DMO sets a maximum annual cost for default energy contracts, which varies depending on your location. It also serves as a reference price for energy providers, who must show whether their offers are above or below this price when advertising. This helps consumers easily compare deals.

Victoria has a similar scheme called the Victorian Default Offer (VDO), which also acts as a price cap and reference point. Currently, neither the DMO nor VDO applies to gas prices, but this could change in the future.

Contact Compare Energy

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