The first national review of competition in retail electricity and gas markets has found people are saving money on their energy bills, but more can be done to make it even easier for consumers to shop and save.
The Australian Energy Market Commission (AEMC) recently released its report on competition in retail electricity and gas markets for small customers in the National Electricity Market (NEM), along with new research on consumer experiences.
The level of competition ranges from effective in south-east Queensland, New South Wales, Victoria and South Australia, to less effective in the Australian Capital Territory, and is yet to emerge in Tasmania and regional Queensland.
Competition in retail gas markets is at different stages of development between and within states and territories.
AEMC chairman John Pierce said the review survey found 90 per cent of all consumers were aware they could choose their energy company, up to 40 per cent had actively investigated options, and up to 28 per cent had actually switched during 2013.
“Consumers are shopping around for better deals for electricity and gas more often than they are switching insurance companies, or phone and internet providers,” Mr Pierce said.
“New retailers are entering markets and winning customers with discounts and other incentives, with conservative estimates of savings ranging from $60 to $240 or more a year, depending on where they live and how much electricity they use,” Mr Pierce said.
“Previous AEMC research has found that consumers who shopped around in 2012-2013 were able to save around 5-16 per cent.”
The review has involved extensive consumer research, stakeholder consultation and the analysis of data from the Australian Energy Regulator, ombudsmen in each jurisdiction, the Australian Energy Market Operator, regulators and retailers to develop a picture of energy competition in each jurisdiction.
The research found many customers will shop around for a better deal if they believe the savings will justify the time and effort involved.
“The biggest barriers to consumers confidently shopping around and saving money is a lack of clear information,”
Mr Pierce said.
To overcome these barriers, the AEMC has recommended simplifying the switching process to make it easier for consumers to shop around, considering options for raising awareness of the tools available for comparing offers, and reviewing concession schemes to target financial assistance to those most in need.
The AEMC has considered competition in south-east Queensland in light of the Queensland government’s plan to remove retail price regulation on July 1, 2015. This plan is subject to a number of criteria being met, including that competition is effective.
Mr Pierce said conditions in the south-east Queensland electricity market are right for the removal of price regulation, with increased competition set to benefit customers when that occurs.
The review details the state of competition in each state and territory in the NEM, including the structural, regulatory and market characteristics that impact the level of competition in each jurisdiction.
It is the first review under a revised approach agreed by the Council of Australian Governments, for the AEMC to assess competition in NEM jurisdictions each year. These reviews support the commitment made by jurisdictions in 2004 under the Australian Energy Market Agreement to deregulate retail energy prices where effective competition can be demonstrated.
Report misses the mark for energy consumers: CHOICE
Despite the rosy picture painted by AEMC’s major report, consumer watchdog CHOICE has said unfair energy contracts and poor information leave consumers in the dark.
Responding to the first national review of competition in retail electricity and gas markets, CHOICE said the experience of many consumers is low on trust and high on complexity and price.
“Our recent Consumer Pulse survey found electricity continues to top the list of national cost-of-living concerns, at 84 per cent,” CHOICE director of campaigns and communications Matt Levey said.
“It is also a complex and distrusted market, with 54 per cent of Australians saying they distrust the advice of energy providers, and only 9 per cent confident it is in their best interests.”
CHOICE said the bright view of the energy market provided by the AEMC was disappointing given only last month the Commission released a draft decision that would allow electricity retailers to continue increasing prices at will, even during fixed-term contracts.
“It is hard to see how consumer confidence in the energy market is going to increase when the benefits of shopping around can be eroded as soon as you sign a long-term contract,” Mr Levey said.
“A proposed rule change from Consumer Action Law Centre and the Consumer Utilities Advocacy Centre would have fixed this problem and taken a step towards the competitive markets we all want to see.”