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Electricity Retailers have lowest level of trust as pricing system questioned by ACCC

Energy retailers have reached a tipping point as soaring retail prices reinforce a lack of trust in the industry by consumers.

A recent survey commissioned by Landis + Gyr (through Essential Research) showed that the level of trust consumers have in their Energy Retailer is lower than ever- below even banks and telecommunication companies. While retailers are starting to try to rebuild perceptions by using ethical retailing efforts to win back public trust, they’re up against years of bad behavior and opaque pricing structures that confuse and frustrate customers.

This has been flagged by the ACCC who announced in January 2018 their plan to focus on the Energy industry’s consumer issues following the results of the retail electricity pricing inquiry report. Rod Sims (ACCC Chairman) highlighting the state of Australia’s electricity and gas markets for C&I users:

“For C&I customers, huge increases in electricity prices have been driven mainly by an overspend on network infrastructure (poles and wires) and environmental schemes such as premium solar feed-in tariffs. More recently wholesale cost increases have driven prices even higher as generation capacity exited the market,” Mr Sims said: [1]

However, as wholesale prices have recently fallen, many are calling for retailers to follow the market with a price drop for consumers.

Adrian Merrick (Founder and CEO of Energy Locals) :

“Last July, one of the larger retailers and generators, who operates in NSW, Queensland and South Australia, carried out a double-digit percentage increase and blamed it on the wholesale price increases but it is these three large ‘gentailers’ (companies who are both generators and retailers) who control the wholesale price,” Mr Merrick said.

Mr Merrick dismissed retailer discounts on these prices as smoke and mirrors, saying it was designed to confuse customers and had little basis in reality.[2]

It’s true that there are no level playing fields for energy in many states, and certainly in Victoria it’s even more complex with 5 different distribution zones (which equals 5 different pricing structures). An overall percentage off usage is a meaningless figure when there is no regulation on base pricing to begin with.

“The benchmark used to be the government-regulated electricity price and the discount was calculated off that price,” George Maltabarow, former head of EnergyAustralia and Ausgrid told Fairfax Media.

“In NSW and Victoria they’ve deregulated prices so now you have to ask the question of what the discount is actually off.” [3]

The ACCC enquiry has many people excited, hoping for some sweeping changes to the pricing structure for the energy industry.

“The ACCC is now focused on producing a report by end-June on how to improve electricity affordability for Australian businesses and consumers.”

“We will make recommendations on networks, environmental schemes, generation and retail. We will factor in and reflect on a wide range of recent proposals, such as the National Energy Guarantee and the Grattan Institute’s work on network valuations,” Mr Sims said. [4]

 

 

[1] ACCC Media release C&I users need affordable energy

[2] SMH Former EnergyAustralia exec says electricity retailers are unethical

[3] SMH Former EnergyAustralia exec says electricity retailers are unethical

[4] ACCC Media release C&I users need affordable energy