Retail energy state-of-play: satisfaction up, complaints down

retail energy

Energy customer satisfaction has reached a four-year-high, a new Australian Energy Market Commission (AEMC) report shows. But when it comes to value-for money, households and businesses still rate electricity and gas lower than other utilities such as water and telecommunications.

The AEMC’s 2020 Retail Energy Competition Review shows that over the past year, more than half of residential customers were satisfied with the value their electricity service gave them. More than two thirds of gas customers rated their service as value-for-money.

Pre-COVID-19, consumers were the most satisfied they had ever been with their access to energy information – 55 per cent said easily understood information was available to them and complaints are down by four per cent, continuing a three-year downward trend. However, only one in three households were confident the market is working in the long-term interests of consumers.

“Higher satisfaction levels are welcome news for the retail sector, although customers clearly think there is still room to improve,” AEMC chief executive Benn Barr said.

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“We know the landscape has shifted since the COVID-19 pandemic but these figures show that things were improving in the market, with innovation still happening and the number of competitors continuing to increase – although at lower rates than in previous years.”

The Commission’s annual review looks at the state of competition in the energy market and whether this is benefiting consumers. It is an important tool to map retail market progress over time and identify opportunities for reform.

The review identified small increases in the proportion of customers on hardship programs over the past year in all jurisdictions except Queensland and Victoria. Before COVID-19, there were just over 150,000 hardship customers in the national electricity market.

“Overall, the proportion of hardship customers is small, but we need to keep an eye on any upward trend in these numbers,” Mr Barr said.

“This will be an important reference point for us to understand the impact of COVID-19 on customers’ ability to pay their energy bills.

“It is interesting to see level of debt customers had when entering hardship schemes decrease in most jurisdictions. This could be a sign that retail hardship programs are picking struggling customers up earlier, though early indications are that COVID-19 is causing the level of debt to jump again.

“We changed the rules 18 months ago to improve retailers’ hardship policies so customers could better understand their rights and get the help they need to pay their power bills.

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“We’ll continue to analyse these developments closely. It will also be important to closely monitor the pandemic impacts on competition in the sector because less competition puts upward pressure on prices.”

Three new electricity companies entered the retail energy market in 2019, including globally significant companies Nectr and Ovo Energy. Market concentration has reduced, and by March 2020 there were 40 retail brands and 35 retail companies in the national electricity market. Net retailer margins have also fallen on average from $93 per customer to $66 per customer between 2017−18 and 2018−19.

The report shows that switching rates have also fallen by five per cent to a three-year low of 19 per cent.

Lower rates of switching could mean customers are more satisfied, but they could also mean there are fewer incentives to shop around. The main reason people give for switching energy providers is being dissatisfied with their current plan’s value-for-money.

The report’s findings are based on data gathered from the Australian Energy Regulator, Essential Services Commission of Victoria, Energy Ombudsman schemes and the Energy Consumers Australia Consumer Sentiment Survey.