01.Electricity switching sites
CHOICE has lodged its first super complaint, part of a pilot project with NSW Fair Trading on electricity switching sites.
Download our super complaint for more information.
The complaint shines a light on systemic issues with commercial electricity switching sites in NSW, with CHOICE finding that consumers could be going to some sites and not getting the ‘best’ deal, contrary to their reasonable expectations.
CHOICE believes that switching sites can play an important role, providing easy to understand and accessible information to consumers, especially in increasingly complex markets like energy, banking and telecommunications.
By looking for better deals, savvy consumers encourage greater levels of competition between companies that need to fight to get their business.
Will you find the ‘best’ deal?
Consumers have told us that things they look for in switching sites include transparency and independence. CHOICE considers that problems arise when a consumer goes to a switching site expecting to find the ‘best’ deal but doesn’t, potentially resulting in a consumer switching to a ‘better’ option as opposed to the ‘best’ option – or even a worse option.
Some of the commercial switching sites use words like ‘independent’, ‘comprehensive’ and ‘impartial’. CHOICE considers that a typical user who sees these claims is likely to think that that site will find them the ‘best’ deal. Some sites also don’t provide all the relevant details on applicable fees and charges for listed plans, so consumers cannot make an informed choice about which plan to switch to.
The biggest issue identified in CHOICE’s analysis was that a user putting identical information into different switching sites could get very different recommendations on the ‘best’ deal for their individual circumstances.
For example, based on the exact same input, a typical consumer in Taree, NSW, would be approximately $300 better off if they took up the ‘best’ plan recommended by one switching site, compared to the ‘best’ recommendation from another.
Our analysis also shows that it can be difficult for a consumer to identify transparent, accurate and comprehensive switching sites simply by searching the Internet. For example, the best sites may not appear high in Google search rankings and have no kind of independent accreditation.
Can you compare ‘apples’ with ‘apples’?
CHOICE also found that the structure of electricity retail plans including tariffs, fees and charges makes it difficult for NSW consumers to compare ‘apples’ with ‘apples’. For example, consumers need to weigh up factors like ‘5% discount on electricity usage charges versus 4% when you pay on time’, fixed contracts, early termination fees, late fees and account establishment fees.
With such an intense focus on rising energy costs, aggressive marketing and new technologies, there is a real risk that energy will follow the telecommunications sector in becoming a ‘confusopoly’, where consumers are left floundering in complexity and marketing spin.
CHOICE recommends that a code or accreditation system for commercial switching sites be introduced, similar to that which operates in the UK. This will help consumers quickly identify the switching sites they can trust.
CHOICE recommends that NSW Fair Trading investigate whether any of the commercial switching sites are engaging in misleading or deceptive conduct with regard to whether a user would find the ‘best’ plan using its site or other related representations.
CHOICE recommends that a project similar to the UK Midata project be pursued in Australia. The Midata project is aimed at giving consumers their personal consumption data in a secure, usable and portable format – the sort of information that is already collected and held by businesses like energy providers. By giving consumers access to this information, possibly in combination with switching sites or other third-party comparison tools, it could help Australians navigate complex markets and make more efficient purchasing decisions.
Where to now?
NSW Fair Trading will now research and assess the super complaint, and report on actions within 90 calendar days.
CHOICE’s switching sites
CHOICE operates its Compare, Ditch and Switch site located at choice.com.au as part of its Better Banking campaign. The service, powered by Mozo.com.au, enables consumers to objectively compare credit cards, home loans, savings products and transaction accounts. CHOICE does not receive any payments as part of this service.
CHOICE operated CHOICE Switch from August 2008 to March 2010. CHOICE Switch allowed the user to compare gas and electricity providers by postcode. CHOICE received a standard flat fee from electricity providers for customers that switched using CHOICE Switch. There was no other fee payable by users for the service. CHOICE compared all available providers and plans. However, a user was only able to switch to the plans by providers with whom CHOICE had a commercial arrangement.
Check out CHOICE's guide to shopping for a new electricity plan, and for more News, see Consumer news.