Price cut for some SA power users

The SA government has negotiated price cut for around 20 per cent of the state's electricity users. Source: AAP

THE South Australian government has negotiated a 9.1 per cent price cut for about 20 per cent of the state's electricity consumers, short circuiting retailer AGL's court action.

Earlier this year the Essential Service Commission of South Australia (ESCOSA) ruled that prices for AGL's standing contract should fall by eight per cent.

AGL has been fighting the ruling in the SA Supreme Court.

The government has negotiated a bigger price reduction from January, in return for locking in the new prices for two years.

ESCOSA will also lose its price-setting powers from February when the state's electricity market becomes fully deregulated.

The government says the new deal will ultimately benefit all consumers, including those on cheaper market contracts, as increased competition among existing and new retailers prompts a "race to the bottom".

"With the deregulation of the electricity retail market here in South Australia, we will see a price war that will put further downward pressure on electricity prices," Premier Jay Weatherill told reporters on Tuesday.

"This is a fantastic present for South Australian energy consumers."

Mr Weatherill said ESCOSA would remain in place to monitor prices and the government would reintroduce regulation at the first sign of collusion or other anti-competitive behaviour involving energy retailers.

The South Australian Council of Social Services welcomed the price cut.

"The opportunity is there for the energy companies to step forward and to make their case," executive director Ross Womersley said.

"They've got an opportunity now to create real competition."

The Energy Retailers Association of Australia (ERAA) also hailed the move to deregulation and price monitoring saying it would offer consumers more choice and better services.

ERAA chief executive Cameron O'Reilly said Australians had shown in the past that given greater choice they were ready to switch power retailers to get a better deal.

"As South Australia moves to deregulate energy prices, customers will see an increased range of offers which will ensure that active customers are better off," Mr O'Reilly said.

The Energy Supply Association of Australia agreed the state government's move would lead to greater savings on power bill from increased competition.

"Today's announcement will encourage cut-throat competition between retailers, with households the big winner," association chief executive Matthew Warren said.

ESCOSA chief executive Paul Kerin said the commission also believed that vigorous competition was the best way to keep prices in check.

"While the commission will no longer set standing contract prices, it will monitor prices and it notes that the government is able to reintroduce stronger price regulation if that monitoring suggests that prices set by retailers are not competitive," Mr Kerin said.

Acting Prime Minister Wayne Swan said South Australia was the first state to act on the Council of Australian Governments (COAG) agreement earlier this year on energy market reform.

"This decision is a great result for people of SA and will mean greater competition, more choice and lower prices," Mr Swan said in a statement.

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