In response to state government calls to pass on cuts to customers worth approximately $160 a year per household to more than 500,000 homes, SA Premier Jay Weatherill has announced a two-year deal with AGL and Origin Energy. Power customers with standing contracts for electricity will now get a price cut of 9.1 percent.

This news is in light of AGL fighting its power contracts ruling in the Supreme Court of South Australia. In the draft ruling, the Essential Services Commission estimated an 8.1% cut in electricity prices for customers with standing contracts with AGL, affecting approximately one quarter of all South Australian electricity customers. In court, AGL said its current contract which was not due to expire until 2014 could change, costing them $15 million over 6 months. AGL, Energy Australia, and Origin Energy currently account for 80 percent of the market contracts in South Australia, which influence smaller electricity retailers. Only around a quarter of customers are currently on standing contracts since the market has been opened to greater competition.

In response to this agreement, AGL will drop its legal action against ESCOSA, paying court costs with the matter withdrawn. The premier announced “Rather than put this much-needed relief from power bills at risk, we have negotiated a commitment from AGL to cut the existing standing contract price for residential customers by 9.1 per cent and small business by 4.5 per cent with the retail component fixed for two years.”

Approximately 200,000 South Australian households will now receive the cut from January next year, with more prices expected to be affected via a push from increased competition in the deregulated market. The ESCOSA will lose its price-setting powers in February next year when the state’s market is deregulated. The Energy Retailers Association of Australia and the Energy Supply Association of Australia both welcomed the changes.