Unlocking Australia’s discounted energy offers

Research shows that Australians are reluctant to switch energy suppliers despite big energy savings.
Published: Tue 12 Jul 2016

Australians stand to save as much as 30% or US$290 (AU$380) a year on their electricity bills but according to a new official report, residential consumers are not taking advantage of better electricity deals through switching.

Potential electricity savings across the country

The Australian Energy Market Commission (AEMC) 2016 Retail Competition Review has revealed that Victorians can save this amount by switching from the median default tariff or “standing offer” to the cheapest discount deal. Some there could save even more, because the difference between the lowest and highest prices is AU$500 in Melbourne and the western half of the state; it is AU$600 in eastern regions.  

In NSW, where there were widespread price rises of as much as 12% on July 1, it’s possible to save 20%. In South Australia — where there was a jump of as much as 15% at the start of the new financial year — it is also possible to reduce costs by 18%.

Southeast Queenslanders can cut 10% from bills. Prices there went up by as much as 4% on 1 July.

Victorians did not have a midyear price hike but their increases occur at the start of the calendar year.

Shop regularly for good energy offers

The AEMC advised consumers to “shop regularly for an energy offer that suits their needs” saying the “benefits of doing so continue to increase”.

However, News Corp Australia analysis of data from the Australian Energy Market Operator shows that nationally the number of customers who have changed providers is the same in 2016 as it was in 2015 but lower than it was in 2012 and 2013.

An AEMC survey shows the proportion of people shopping around is trending down in Victoria, New South Wales (NSW), South Australia (SA) and southeast Queensland. However, it is increasing in the ACT. Consumers in other states and the Northern Territory do not have the opportunity to switch because there is no competition in their markets.

AEMC senior director Christopher Spangaro attributed the trends to “relatively stable retail prices” and providers doing more to retain customers. He says that price increases can trigger the switching process.

The official advocate for electricity customers, Energy Consumers Australia, said another explanation was that it may be too hard to change providers.

“Even in the face of savings of some hundred of dollars, people don’t seem to be following through,” said ECA CEO Rosemary Sinclair.

Joel Gibson of One Big Switch, which began a new Big Energy Switch campaign yesterday, said: “There was a big uptick in switching when the carbon tax came in and now that it’s gone, we’ve become a bit complacent.

“This month’s price rises (in NSW, South Australia and south-east Queensland) have put power prices back where they were during the carbon tax days, so the smart thing to do now is to shop around again,” Mr Gibson said.

Expiry of deals

The AEMC issued a warning to households that hadn’t switched recently. “The benefits included in most market offers expire after one or two years, so there may be a significant number of customers who are on a market offer, but who no longer received the benefits initially attached to it,” it said, describing it as a significant concern.

The savings figures compare the cheapest deal with the default prices, known as “standing offers”.

About 10% of Victorian households are on standing offers; well over a quarter are in NSW, about 15% in SA and more than half of all Queensland households.

Meanwhile, thousands of Australians have joined the Big Energy Switch, which seeks the support of 40,000 households inside four weeks to help unlock group-discounted energy offers.

UK switching also sluggish

While there have been some impressive escalations in switching in the UK, not enough customers are shopping around for the best energy deals, according to the latest DECC figures. [Good customer service to blame for poor switching numbers in the UK?]  

A new analysis, carried out by consumer group Which?, revealed that the proportion of customers on standard electricity tariffs has remained unchanged at about 75%, or 21 million households, since the start of 2014. The proportion on standard gas tariffs also remained broadly unchanged at about 73%, or 16 million households.

To improve switching figures, Ofgem strengthened the Confidence Code for price comparison sites, setting tighter standards on how tariffs are displayed on websites.

The UK Government has also halved switching times-instead of 5 weeks, it now takes 17 days to switch energy suppliers. Suppliers could face investigation and fines if they cannot meet these timescales..New independent suppliers are also encouraged to join the market and the government supports Ofgem reforms that force energy suppliers to provide clearer bills and educate their customers about the switching process.

Whether or not these measures will work, time will only tell but as far as we are concerned, it’s only logical that  the switching process be made as easy as possible,  with little or no penalty fees, and it has to be worth it because there is no point in switching for a few pennies.