The big three electricity retailers are charging as much as triple the rate for power in deregulated markets compared with the ACT, costing consumers hundreds of dollars a year, according to a study by energy economist Bruce Mountain.
The report, commissioned by the GetUp! group, analysed how much AGL, EnergyAustralia and Origin Energy were charging customers for the retail component of bills. It found South Australian customers, for instance, were paying about twice as much for the retailing component as it cost to generate the electricity itself.
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Taking a snapshot of offers on the market, Mr Mountain found NSW households would typically cop an annual retail charge of about $444, $485 in Victoria and about $650 in SA. By contrast, ACT household could expect to pay about $225 in their regulated market.
"Once deregulation occurs, prices rise substantially," Mr Mountain said, adding NSW prices from the big retailers had jumped 10-15 per cent since caps were lifted in July 2015.
The share of retail charges of total bills was also high in comparison with other deregulated markets such as Britain's. Consumers could expect to pay triple the amount in dollar terms, with the share about twice that of Britain's 18 per cent.
(See chart below showing how retail charges compare with other items, including generation (wholesale) costs from a range of suppliers.)
The report's release comes days before Josh Frydenberg, the new federal Environment and Energy Minister, calls state and territory counterparts to Canberra on Friday to discuss how to ensure energy markets "remain strong and stable".
The gathering was called in the wake of sharp spikes in wholesale electricity prices, particularly in South Australia in May and June, that have been blamed on a combination of limited competition among suppliers, higher renewable energy penetration and poorly timed maintenance on a key power link to Victoria.
Dylan McConnell, a research fellow at Melbourne University, said big retailers bank on the fact most customers stick with their electricity providers despite regularly griping about power bills.
"One estimate is that the average person in Australia spends just eight minutes a year looking at their electricity bills," Mr McConnell said. "That's what retailers are aiming for – sticky customers are best."
In a separate report released last week by the Melbourne Energy Institute, Mr McConnell argued more such spikes in wholesale prices can be expected if the exit of fossil fuel power plants further concentrates market power in a few hands.
The fact AGL, EnergyAustralia and Origin were also the dominant suppliers of electricity to Australia's main markets helps explain the fat retail margins they have been able to charge, he said.
"It was never the intention for the [electricity] business to be very integrated," Mr McConnell said.
"You can create a competitive disadvantage to your competitive retailer by having super-high wholesale prices," he said. "Vertical integration is one of the worst things to happen to our market."
Along with high retail costs, Australian consumers are also slugged with "extraordinarily high" fixed charges in their power bills, said Mr Mountain, who is a director at Carbon and Energy Markets Australia.
"Large parts of the US have no fixed charge, [and] in other countries such as the UK, it's typically a quarter of our level," he said.
Such a mix meant there was reduced incentive for households to buy energy-efficient appliances or put solar panels on their roofs, "which is why it's happening", Mr Mountain said.
One outcome of the lack of effective action by regulators is that governments end up forking out subsidies to help poor households keep the lights on. For Victoria alone, such aid amounts to $300 million a year, Mr Mountain said.