CHOICE power switching survey

CHOICE investigates why consumers switch electricity retailers.
 
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02.Our survey results

Biggest is not always best

More than half of our 3300 survey respondents obtain electricity from the three major retailers, Origin Energy, AGL Energy and EnergyAustralia, yet these ranked in the bottom half of all energy companies for satisfaction (see the table). Origin and AGL are privately owned and active in all four states, while NSW government-owned EnergyAustralia does not operate in SA. Of the three, AGL had the lowest satisfaction rating (52%), with price being the biggest issue.

Overall, price dissatisfaction – specifically, high and/or disputed bills – was consumers’ biggest gripe, which is consistent with complaints recorded by the various state energy and water ombudsman offices.

In the six months to June 2008, billing made up 50% of all cases brought to the Victorian office, more than doubling from 5041 to 10,440 cases. In the NSW office, billing comprised 29% of complaints lodged, and in SA it was 40%.

Our survey showed that close to 60% of the 1267 respondents who switched retailers at least once changed from the three biggest retailers. Discounts, offers and promotions were the key motivators.

Victoria most competitive

Victoria is the most competitive market for electricity in Australia. Since 2002, about 2.8 million Victorians have switched retailers. The state has 14 active electricity retailers – the highest of all states – vying for new customers.

Our survey showed Victorians are much more likely to be approached by door-to-door salespeople and telemarketers than those living in NSW, SA or Queensland. In the last 12 months:

  • Seven out of 10 Victorian respondents were door-knocked at least once, and 26% at least four times.
  • Close to 20% who switched did so through a door-to-door salesperson.
  • About 11% received more than five calls from telemarketers in 12 months.

This aggressive marketing seems to work: 47% of Victorian respondents who switched felt some degree of pressure to do so. Close to half switched because they were offered discounts and freebies (see Free footy membership sways customer) – and the competition is likely to intensify. The Consumer Action Law Centre is concerned that aggressive, sometimes unlawful, marketing is driving the market, instead of consumers making informed choices.

Price monitoring abolished in Vic

To stimulate competitive pricing, government monitoring of electricity and gas prices – found in standard contracts – was abolished in Victoria for the first time earlier this year. This removed protection for consumers who were on such contracts, as power rates can now be set by retailers without government regulation, similar to market contracts.

So now, customers who elect to stay on standard contracts with their retailer may be paying more than if they shopped around. This makes the option of switching retailers for a better deal more attractive than ever, especially given up to 40% of Victorian energy consumers are still on standard contracts.
You’re on a standard contract if you’ve never negotiated a deal with your energy retailer. A market contract is a specific deal – usually with discounts and early payment rebates – sold to you by a telemarketer or door-to-door salesperson. To offset these changes and make the new pricing transparent, all retailers are now obliged to publish a range of offers on their website and in newspapers so that consumers can compare and make informed choices. Consumers who do not have web access can also call retailers and ask for their price plans.

Fiona McLeod, Energy and Water Ombudsman (Victoria), told CHOICE she expected to see complaints about high bills where customers are not aware of price rises in standard contracts. “Pricing is not within our jurisdiction, but we can investigate whether enough pricing information was provided to the consumer,” she says.

How the change affects the pushy sales drive, however, remains to be seen. “Cases relating to marketing and transfer are often systemic in nature, and an unknown factor is how many people were unhappy about the marketing directed at them but who did not complain,” says McLeod.

Does switching equal greater satisfaction?

When asked to compare their satisfaction with the new electricity company with their previous one, 66% of all respondents who switched said they were neither better nor worse off. Overall, about one-quarter said they were better off and only 9% said they were worse off. In Victoria and SA one-third of the switchers surveyed said they felt better off compared with 6% and 7% respectively, who felt worse off after switching.

 

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