Complex electricity deals mean that even consumers that do shop around aren’t always making big savings. (ABC News: Natasha Johnson)
Shopping around for a better deal on electricity could well be a waste of time according to new research obtained by 7.30.
- A new study of almost 50,000 Victorian power bills found households pay an average of $300 more than the best available deal
- Households that switch electricity retailers still pay an average of $255 a year more than the cheapest deal
- Even households that use price comparison websites may not get the cheapest prices available
Customers have long been blamed for not engaging with the energy market and told that if they want a better deal, they need to switch electricity retailers.
But a new study that looked at more than 48,000 electricity bills from Victorian households found switching retailers made very little difference at all.
It found that, on average, those who did make the switch only saved about $45 a year, and were still a long way from landing the best available deal.
A big obligation to put on customers
“Switching can make a difference and there are better deals available but customers are not finding them,” Bruce Mountain, who co-authored the research carried out by the Victoria Energy Policy Centre, told 7.30.
In Victoria, the average annual household power bill is about $1,300, slightly less than the Australian average of about $1,700.
The study found the Victorian average was still more than $300 a year above the best available deal.
Electricity industry researcher, Bruce Mountain, studied more than 48,000 Victorian electricity bills. (ABC News)
And those who did change electricity providers were still paying $255 a year more than the cheapest deal.
Mr Mountain said the complexity of electricity contracts, combined with customers’ lack of time and interest, means most people are paying more for energy than they should.
“Typical customers can choose from anywhere between 200 and 400 competing offers,” he said.
“The median was 254 offers from 19 different retailers.
“So they have to know there’s 19, find a way to obtain their offers, and assess their consumption against that.
“That’s an enormous choice burden on a complex product.
“It’s a big obligation to put on customers.”
‘It makes my head want to pop off’
The Armstrong family have made a huge effort to reduce their power bills by installing LED lights, solar panels and energy-efficient appliances.
According to Hugo Armstrong it has worked: they have halved their annual bill to $2,000.
However he said the hardest part was dealing with Origin Energy, the family’s energy retailer of 15 years.
Hugo Armstrong says his electricity provider only offered him its best deal after he switched to another provider. (ABC News)
After switching retailers, Origin got in touch during the cooling-off period with a better deal to entice him back.
“I said to them, ‘Why didn’t you give me that offer before I left?'” Mr Armstrong told 7.30.
“It’s like going to a department store and being told, ‘If you go and purchase the product next door from our competitor, we’ll ring you and give you that product at our actual cheapest price’.”
Frustrated at the lengths to which he needed to go to get a good deal, he decided not to take Origin’s offer.
“I had brand and consumer loyalty to Origin Energy for over 15 years,” he said.
“Why not just give your customers the best deal? “It makes my head want to pop off.”
Origin Energy declined to respond directly to Mr Armstrong’s comments, but did send a general statement to 7.30.
“Origin is making it easier for our customers to understand what offers are available in the market and we encourage them to contact us to work out a plan which best suits their needs,” the statement said.
‘A lot of people find this confusing’
Retired music teacher Barbara Durham was an AGL customer for decades and felt she was missing out on discount offers.
“I’m just so disappointed with AGL,” she told 7.30.
“I think they could have treated me a lot better, especially after being a customer for almost 20 years of both electricity and gas. And I never changed companies during that time.”
She decided to switch retailers a year ago and used a government comparison website to make her choice.
As a whole, she says she finds the market hard to navigate.
“I believe a lot of people, including all the old people like me, find all this confusing. And it’s not fair,” she said.
AGL said it sent Ms Durham several discount offers but she didn’t accept them.
How reliable are comparison websites?
There are now dozens of websites where customers can compare different plans from numerous retail companies.
Do customers who use these sites get good information and better deals?
“The answer is most haven’t,” Mr Mountain said.
“They’ve been poorly advised.
“Markets are complex. And I think this market is far more complex than the Government’s ever thought it would be.
“The answer is for many customers, even though it’s a high-margin business, they have not been able to decrease those margins.”
The Australian Competition and Consumer Commission (ACCC) agreed.
“These are commercial websites,” ACCC chairman Rod Sims told 7.30.
“They’re giving you something for free. If they’re giving you something for free, how are they making their money?
“Well, they’re making their money by getting it from the energy companies, and the energy companies can often control what prices are on those comparison websites.”
Customers are not to blame
The ACCC wants mandatory disclosure of the pricing structures of comparison websites.
It said new regulations to control electricity pricing should help reduce prices for many consumers, while greater disclosure around discount offers, introduced in July, should also improve matters.
But Mr Sims believes customers are never to blame.
“Markets should be working in ways that consumers can easily engage with,” he said.
“When companies try to make them complicated, that’s usually because they’re trying to get consumers to pay more money for electricity than they should.
“I think the blame lies squarely on the electricity companies, not at all on consumers.”
Hugo Armstrong has a simple test he applies when power companies start getting too complicated.
“I’ve said to them, ‘Would your mum or dad or uncle or aunty be able to work this out? Because I’m struggling’,” he said.