Consumer trust in energy sector drops to new lows

Electricity bill-shock and lack of trust in energy retailers is driving Australians to take control by generating their own electricity, according to the Australian Energy Market Commission (AEMC).

The AEMC’s 2018 National retail energy competition review has revealed higher prices combined with complex and confusing energy offers have driven consumer confidence to new lows.

Only one in four consumers now say energy retailers are working in their long-term interests, down 10 per cent from last year.

Satisfaction with value for money in energy is lower than banking, water, broadband and mobile sectors.

Energy is the only sector to have had decreased satisfaction in the past year, with trust dropping from 50 per cent in 2017 to 39 per cent in 2018.

AEMC chairman John Pierce said while competition in the retail energy sector continues to evolve, it is currently not delivering the expected benefits to consumers.

“There are more energy entrepreneurs operating in the market, and greater savings on offer with increasing numbers of consumers switching plans and accessing new technology,” Mr Pierce said.

“But in the 12 months since our last report, we have seen retail electricity prices rise following the closure of Northern and Hazelwood generators and higher gas commodity costs.

“While prices are now flatter or falling, we are disappointed to see retailers are still not doing enough to help their customers.

“Complex pricing plans, conditional offers, discounts from bases that vary by retailer, and an increasing trend towards discretionary win-back marketing have created consumer confusion and dissatisfaction.

“Retailer inertia and a lack of transparency have emerged as significant barriers preventing consumers gaining the maximum benefits possible in terms of prices and services.”

Mr Pierce said consumers are opting for rooftop solar to take charge of their energy.

There were 154,877 residential solar PV installations in 2017, an increase of 25 per cent from 2016, with 1.8 million Australian households now using solar panels.

Concern about retailer behaviour was driving an increase in the number of rule requests to the AEMC to protect consumers, according to Mr Pierce.

New rules have already been implemented which:

  • Prohibits retailers from offering confusing retailer discounts that leave consumers worse off. The new rule starts on July 1.
  • Requires retailers to notify their electricity and gas customers when contract benefits like a discount, are about to end or change. This rule started in February 2018.

Australian Energy Council general manager of corporate affairs Sarah McNamara said the sobering review was a sharp reminder to the industry of the changes needed to re-gain the trust of consumers.

“We know energy bills have increased sharply as a result of tight supply in both gas and electricity markets,” Ms McNamara said.

“The AEMC report sends a clear message that customers want greater transparency and simplicity in how energy is sold. And, fundamentally, they would like to see price relief as soon as possible.

“Importantly, the AEMC warns that re-regulating energy prices is not warranted.

“Re-regulation would hit the smallest, most disruptive and most innovative retailers hardest. This would reduce competition and innovation for consumers.”