Punish loyal customers

AGL Energy chief executive Andy Vesey admitted last year that big power companies were guilty of punishing their most loyal customers in this way, but said subsequently AGL was abandoning the practice.

Australian Competition and Consumer Commission chairman Rod Sims said last week he wanted to help consumers find better offers and lower barriers to new entrants to curtail the market power of AGL, Origin Energy, EnergyAustralia and Queensland's state owned power duopoly.

NSW households typically pay 39.1¢/KWh - hard on Italy's heels - while Queensland and Victoria's typical retail charges of 34-7c-35.7c/KWh exceed those in all but the four or five most expensive European countries, the MarkIntell data shows.

When taxes are excluded, the four Australian NEM states are the costliest residential electricity in the world. American households - which benefit from a large market and cheap and abundant natural gas - pay just US12.5c/KWh (15.75¢), the US Energy Information Administration says.

Electric Shock! MarkIntell / US Energy Information Administration

The annual cost to households of accepting a standing offer from one of the big three retailers instead of the best offer in the market has been estimated at $830 in Victoria, $900 in Queensland and $1400-$1500 in NSW and SA by the St Vincent de Paul Society.

Mr Mountain said power bills are constructed in such a complex way that ordinary customers without sophisticated spreadsheet and analytical skills have little hope of analysing competing offers to work out which offers them the best deal.


Private comparison websites do not include all market offers and charge retailers for switching customers, while the websites offered by the Australian Energy Regulator and the Victorian government do not provide the tools customers need to discriminate among offers.

Market ideology

"It's a market characterised by very high search costs which means it is very hard to find the right offer and people make mistakes. Customers are alienated and it's characterised as 'people are lazy'," Mr Mountain said.

Prime Minister Malcolm Turnbull (right) wants to "eyeball' big power companies over their retail pricing practices, energy minister Josh Frydenberg says. Pictured during a press conference at Parliament House Canberra on Tuesday 20 June 2017. Photo: Andrew Meares Andrew Meares

"It's an ideological approach to the market butting up against reality - which (energy market) institutions have long been loath to accept. Now it's becoming undeniable."

Energy Minister Josh Frydenberg said the government wanted energy retailers to be more transparent around electricity bills, and left open the option of regulation.

"People may get a discount for one or two years but remain on a contract for five or six years, but they don't know when the discount ends and therefore they don't know when they could be getting a better deal elsewhere," he told the ABC.

"The Prime Minister wants to eyeball the retailers and to tell them that we all need to do better to ensure particularly vulnerable households, who spend a higher proportion of their disposable income on power, get the best possible deal because right now, it seems, many of them are stuck on standing offers which are not as attractive as market offers."


"Standing offer' retail charges are nearly twice the wholesale cost of generation in NSW Carbon + Energy Markets, 2016 IPart submission

Origin chief Frank Calabria welcomed the opportunity ti discuss the problem with the Prime Minister. "We're acutely aware of how price rises are impacting Australian households and businesses," Mr Calabria said. "All of us in the industry and the government need to work urgently together on the issue."

Hard to argue it's working

An EnergyAustralia spokesperson said record prices and outages make it "hard to argue that the energy system is working as intended, in the interests of families and businesses" and electricity is "an essential service and a vital social good which must be available when people need it, and at an affordable price".

EnergyAustralia said it encouraged governments to make it easier for customers by creating a consistent, national comparison rate for electricity prices so customers can evaluate offers and a national accreditation scheme for energy comparison services to improve customer confidence and understanding.

Australian Energy Council chief Matthew Warren said he was "bewildered" by the PM's complaints over transparency and pointed out retailers fell under state regulation.

"Obviously a disappointing result": ACCC chairman Rod Sims. Sean Davey

Mr Warren said retailers were obliged to notify customers at the end of their contract and recommended they contact their retailer to discuss their plan.


He said retailers competed aggressively for new customers, with some going as far to phone or doorknock households in a bid to sign them up.

CET not 'green theology'

"There is a lot of activity in the market trying to engage customers. It's ultimately up to customers about what they want to do," he said.

Mr Frydenberg rejected Tony Abbott's description of the proposed Clean Energy Target as "green theology", which threatens to blow up into another party room fight with conservatives.

"I don't think it's green theology to get certainty into the market to drive prices down and to ensure a more stable system overall," the minister said.