Rising household debt puts retail energy market risk under sharper scrutiny

Rising household debt, worsening hardship levels and greater visibility of vulnerable customers are exposing deeper structural risks for retailers.

The Australian Energy Regulator’s (AER) latest Retail Energy Market Performance Update for October–December 2025 offers the clearest picture yet of where those risks are building. 

The report is the first under expanded reporting rules introduced from 1 July 2025, requiring retailers to provide broader data across hardship, debt, embedded networks, family violence, life support customers and smart meter rollout.

For the sector, the message is less about quarterly fluctuations and more about the growing challenge of affordability.

As the AER stated alongside the report, “energy debt and the ability of customers experiencing financial difficulty to repay debt and current usage costs remains a concern,”  warning that rising hardship balances are deepening repayment challenges and reinforcing the need for retailers to provide “effective and timely support.”

The AER found average electricity debt for customers on hardship programs rose 22.8% over the year to reach $2,392, while average gas hardship debt climbed 23.2% to $1,058.  Retailers attributed the increase to customers entering hardship programs with larger debts already accumulated, while in some cases ongoing usage costs remained higher than repayment amounts.

That creates a difficult cycle: customers are falling behind faster, while retailers face rising compliance expectations around how and when support must be provided.

Outside formal hardship programs, 159,909 residential electricity customers — or 2.3% of the market — were carrying debt more than 90 days old, with average debt of $1,812. For gas, 64,281 customers were in the same position, representing 2.7% of customers. The AER notes that older debts are significantly harder to recover, with customers facing greater difficulty meeting both repayment obligations and current energy usage costs.

Disconnections rise over the year

Disconnections remain one of the clearest signs of financial stress.

During the quarter, 6,230 residential electricity customers and 1,498 gas customers were disconnected. At the point of disconnection, average debt stood at $2,622 for electricity and $1,298 for gas. Around half of those customers were reconnected within seven days.

This will become an even sharper focus from 1 July 2026, when the AER’s higher disconnection threshold takes effect, preventing retailers from disconnecting customers for non-payment where debt is less than $500. The regulator has already flagged it will be closely monitoring how disconnection rates respond.

Speaking earlier this year about broader hardship reforms, AER chair Clare Savage told ABC News there has been a shift in expectations around how retailers engage vulnerable customers.

“I don’t think the expectation of Australians is that if you can’t afford your electricity, that you should live without it,” she said, adding that the rule changes are designed to ensure “customers themselves are not having to find the magic words.” 

Off-market contracts in the dark

The expanded reporting also shines a stronger light on customer groups that have historically sat outside mainstream visibility.

Embedded network customers — those in privately owned networks such as retirement villages, caravan parks and shopping centres — now account for 213,857 customers, or 3% of authorised retailers’ electricity customers. Of those, 96% were on off-market contracts, limiting transparency around pricing and reducing customers’ ability to negotiate tariffs or switch providers.

While these customers showed similar levels of electricity debt to the broader market, they were significantly less likely to be receiving support through payment plans or hardship programs — a gap the AER says may indicate they are not receiving the protections they are entitled to.

Family violence and life support customers at risk

Family violence reporting is another area where the regulator is paying closer attention.
Customers identified as affected by family violence showed far higher levels of payment difficulty, with 27.2% on electricity hardship programs compared with just 2% across the broader residential market. They were also significantly more likely to be on payment plans. The AER says tracking these metrics is critical to monitoring whether retailers are meeting their obligations to identify affected customers and provide appropriate support options.

Life support customers present a different kind of operational risk.

Of the 228,718 customers registered as requiring life support equipment, only 69% had provided medical confirmation required to maintain formal protections. Without that confirmation, customers can be deregistered and may be disconnected under the National Energy Retail Rules.

In the October to December quarter alone, 19,915 life support customers were deregistered.
For retailers, maintaining these registers is not just an administrative issue — it is a frontline compliance obligation.

Billing complaints remain dominant 

At the same time, customer dissatisfaction remains elevated.

Retailers received 44,119 small customer complaints during the quarter, with billing accounting for 61.4% of complaints. Around one-third of billing complaints related directly to bill prices. Complaints were lower than the previous quarter, largely due to seasonal billing cycles, but remained higher than the same period a year earlier.

That pressure is reflected in pricing. Median electricity market offers increased across every distribution region over the 12 months to December 2025, ranging from a 1.2% rise in Queensland to 7.2% in New South Wales. Gas market offers, by contrast, were marginally lower across most regions.

For retail leaders, the broader signal is clear: affordability is now a regulatory, operational and reputational risk.

As reporting becomes more detailed and customer vulnerability becomes harder to ignore, the expectation on retailers is shifting from reactive compliance to proactive intervention.