Queensland Economic Advocacy Solutions

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The one action most likely to cut your Electricity Bill

A question for your consideration: What is the one action that will maximise the likelihood of you cutting your electricity bill?

The answer: Threaten to, or actually switch electricity retailers. The limitation to this is it only applies to electricity customers in South East Queensland (SEQ).

Why Switch? The reason is embedded deep in to the ACCC's Retail Electricity Pricing Inquiry – preliminary report on page 99 and this blogs takes a look at it.

SEQ deregulated its electricity market and embraced full retail competition on 1 July 2016. It was a move that enjoyed widespread support and was first committed to by the then Energy Minister, Mark McArdle, in 2014 and actioned by the current Minister for Energy, Mark Bailey, in May 2016.

The premise was simple, let the 19 retailers in SEQ compete for market share by offering competitive electricity prices to consumers. Well the ACCC has examined this theory and provided evidence that economists sometimes know what they are talking about (well almost).

The below figure summarises offers available to residential customers in SEQ as of June 2017. The AER estimates that 74 per cent of residential customers in SEQ are on market offers. The remaining 26 per cent of customers are on standing offers. These customers are more likely to be disengaged and have not sought out a better deal which is mind boggling because substantial savings can be achieved.

Customers who stay on a standing offer due to their inaction may be paying $700 more than the cheapest market offer.   But be careful, the figure also shows considerable price dispersion and an increase in potential for customers to be paying more than they need to if they get their switching wrong.

So get yourself an electricity deal and make sure it is the right one.  The reality is that these words are easier said than actioned with the ACCC highlighting that the retail electricity market is too complex, most consumers have too many offers to choose from and it is often difficult to compare these offers.  Disappointingly in some cases, this appears to be a practice by electricity retailers to deliberately circumvent regulation and confuse customers.

As a result the ACCC is now considering what can be done to reduce complexity in the retail electricity market and how to best ensure that consumers have sufficient information, in a format that they are able to use and understand.  The ACCC wants to empower consumers to be able to manage their consumption and make informed decisions.

In particular, the ACCC is considering whether regulatory intervention is required and what can be done to encourage and raise awareness of switching.  For example many electricity users are unaware of the AER’s Energy Made Easy price comparison website as a tool to assist consumers in comparing energy offers and how to switch.  My opinion is this tool is brilliant.

In tandem to ACCC intervention, eight retailers have recently made commitments to the Prime Minister to contact consumers on expired discounts or standing offers to advise how much they can save on a better deal.  They have also committed to work with the AER to develop simpler fact sheets with comparison rates.  In essence both the ACCC and the AER are trying to make competition work better in order to deliver the theoretical benefits that have been promised to consumers. 

For those customers in regional Queensland where competition does not exist, I wish I could provide some encouraging words ……. any solution is some time away as competition relies on population density and scale to promote retailer interest.  These two essential aspects continue to evade regional Queensland.  So all of the above discussion will no doubt be very frustrating to you.   


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