Rule change from AEMC will safeguard small electricity retailers from COVID-19 pandemic, says GlobalData

Following the news that the Australian Energy Market Commission (AEMC) is considering a rule change, allowing electricity retailers with COVID-19-affected customers to put their electricity network charges on hold for six months;

Somik Das, Power Analyst at GlobalData, a leading data and analytics company, offers his view:

“This change is expected to be of essential help to electricity retailers in general and small retailers in particular who are supporting financially challenged customers with easy repayment options or deferring payments to a later date. Electricity retailers are facing difficulties in paying for wholesale electricity and network access fee which account for 75-80% of their costs without having proper cashflows. With financially challenged people finding it difficult to pay for the electricity consumption and the providers are forced not to withdraw supply during the crisis, the rule change would provide some breathing space to the electricity providers who may otherwise have irrecoverable damage to their financial health.”

“In addition, smaller retailers may not cope with the pressure in the long run and might be forced to exit the market. If several small retailers go out of business in a short period then other retailers in market will come under pressure to serve larger numbers of financially troubled customers. This may also lead to an increase in electricity prices in the future as customers will be left with fewer options to choose from.”

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