Origin Energy will give automatic 10% discounts to concession card holders in NSW, ACT, Queensland and South Australia from 1 January 2019. The company estimated more than 230,000 concession card holders would save an average $169 off the company’s current standing offer rate.
Separately, Origin Energy also announced Victorian concession card customers on standing and non-discounted contracts would continue to receive a 26% discount on electricity usage and supply charges from 1 January 2019. The company estimated the discounts will result in an average saving of $548 per annum.
Other residential customers in Victoria will continue to receive a 17% discount, saving an average of $358 per annum. The standing rate for residential electricity prices for all other customers in Victoria will remain flat from 1 January 2019. The company said it would absorb higher network and green scheme costs associated with the discounts.
Origin Energy’s executive general manager for retail Jon Briskin said, “While the wholesale price of electricity has come down from its peak, this was more than offset by increases in network charges and government green schemes. We decided to absorb these costs to make sure our residential customers in Victoria don’t pay more in 2019”. In addition to electricity prices, the company will freeze natural gas prices for Victorian residential customers.
In its statement on the discounts, Origin Energy indicated the changes to pricing for concession customers would be absorbed within the existing energy markets underlying operating earnings guidance range of $1,500–1,600m for FY19.
In Ord Minnett’s view, these announcements are likely a response to continued demands from the federal energy minister for price reductions ahead of the new year. We maintain our Buy recommendation with a target price of $8.85.