Electricity prices

Electricity bills are rising but can switching electricity suppliers save you money?
 
Learn more
 
 
 
 
 

01 .Introduction

saving money on electricity prices

In the wake of increasing household electricity usage and rising prices it pays to shop around for the best deal. As long as you do your homework, switching electricity providers or changing your tariff plan can save you energy and money. Our 2010 analysis found annual savings of up to 8% below government regulated prices are possible. The difference between the best and worst “market” prices then was up to 20%.

Based on recent announcements, New South Wales can expect an average increase of 18% on energy bills from July 1. While in Victoria, prices are expected to rise 2.5 - 7% during the 20011-12 financial year. Over in Western Australia households have already been hit with a 22% increase and can expect a following 5% in the next financial year. Queensland's 13.29% increase this year is expected to be followed with a further 5.83% in the 12 months following July 1. Leaving South Australian and Tasmanian households wearing a 6.9% increase, from Jan 1 following a 5.6% increase from July last year and an 8.8% rise from December last year, respectively.

And if the Carbon tax gets off the ground (the scheme would put a cost on carbon emissions, with households footing part of the bill), that same bill will rise again - albeit with the Federal Government currently promising households it will contribute about $6 billion annually in the form of compensation. Several websites do the hard work for you, but they vary in market coverage, independence and accuracy. Some electricity retailers’ sites aren’t much better, failing to publish their electricity prices and obfuscating their plans’ real costs.

And the traps aren’t restricted to the internet. Doorknocking is energy retailers’ most effective tool for signing up new customers or churning existing ones into different contracts – but complaints about misleading practices and pressure sales have risen.

For more information on energy reduction see Saving energy

 
 

Sign up to our free
e-Newsletter

Receive FREE email updates of our latest tests, consumer news and CHOICE marketing promotions.

 

First make an accurate estimation of your annual electricity use. Add up the kWh of energy used over the last year’s four billing cycles, as consumption varies dramatically between seasons and relying on one bill alone will almost certainly lead to misleading results. Next, compare prices. Our State-by-State Guide offers tips for your state or territory, including useful websites to visit for comparisons.

When comparing deals, consider:

  • Regulated tariff or market contract? In all states except Victoria, government-appointed agencies set the standard retail price for electricity – the regulated tariff. In states with competition, retailers can offer “market contracts”, with prices above or below the rate.
  • Rates for electricity use What you pay for each kWh of electricity consumed. Tariffs are usually set in tiers; for example, the first 1020kWh in each quarter might cost 18c per kWh, with the unit price rising to 21c after that.
  • Fixed supply charges The daily rate for an electricity connection is often 50c-60c. A 10c difference may not seem like much, but for small households, paying $36 more per year in supply charges could negate the benefit of switching to lower usage tariffs.
  • Discounts, including rebates for paying on time, by direct debit and for signing up online, and for switching several services (for example, your gas and electricity).
  • Contract term Often one or two years, with exit fees applying if you leave before then. Discounts offered with such plans should apply for the whole fixed term.
  • Inducements such as loyalty bonuses, free subscriptions and prizes – weigh up their real value before switching.
  • Non-tariff costs, including security deposits, late payment fees and fees for dishonoured cheques.
  • Cooling-off rights If you switch but subsequently wish to back out of the deal, you usually have 10 days to do so, at no cost. In Victoria, the limit is 10 bussiness days for contracts involving power connections. For more information see the state's Marketing Code of Conduct.

ACT

Two retailers actively market to small customers – ActewAGL and TRUenergy – but others such as Country Energy and EnergyAustralia also have domestic customers. The average discount from the regulated price is just $19 per year, according to a 2009 Australian Energy Regulator report that used CHOICE data. “Low profit margins for retailers mean few are interested in entering the ACT market,” says Janey Paterson, an electricity pricing expert who ran CHOICE’s energy price comparison website.

Nevertheless, by June 2008 about one in five of all customers had moved from the regulated rate to market contracts, either with their present retailer or by switching. Paterson says market contracts with ActewAGL are cheaper than the regulated rates.

New South Wales

According to the NSW Energy & Water Ombudsman there are 13 retailers currently active in the NSW retail market - the biggest in Australia - with two more currently licenced and ramping up to supply. A recent CHOICE investigation showed the switching rate in 2010 was about 11%, with the average saving about $87 per annum, depending on the region. However, such savings are not available for all customers.

The Independent Pricing and Regulatory Tribunal (IPART) has approved price rises over the next two years (three years from March 2010) including an increase in the allowable profit margin for retailers. This will enable retailers to offer bigger discounts off the raised regulated price, stimulating competition. But won’t necessarily mean lower prices.

IPART also offers a free online price comparison to compare different deals from NSW energy and gas retailers.

Northern Territory

Just one active retailer, the Power and Water Corporation, markets to small customers. However, the NT is phasing in full retail competition and contestability; the last phase of this process — for domestic customers and small businesses — began in April 2010. The market is currently open for other retailers to supply electricity to NT consumers.

Queensland

By September 2009, there were 11 active retailers for consumers, with 44% of customers on a market contract and the remainder paying government regulated rates. About 15% of small customers switched during 2008-09.

Competition is mainly limited to Brisbane and the Gold Coast. In May 2009, an Australian Energy Regulator report found average switching savings in Brisbane of $95. More recently, Queensland’s Competition Authority has released Notified Electricity Prices 2011-12. According to The Authority the BRCI will increase by 6.60% between 2010-11 and 2011-12. Find out more on the Queensland Competition Authority website.

A price comparison service, is available from the government Power to choose website. Further information is available from the Department of Energy.

South Australia

There is competition, with 10 retailers and distributors currently providing consumers with electricity. Last year the switching rate was about 17%. Most residential customers are on a market contract (with most having changed to a new entrant); by mid-2008 just one in three were paying regulated tariffs. The Australian Energy Regulator’s 2009 report found SA retailers tended to offer the biggest discounts off the regulated price – up to $220 per year. South Australians can compare prices at Essential Services Commission’s price estimator.

Using that website, we found that for a household consuming roughly 8000 kWh per year, the difference between the best and worst market prices is about 21%. With prices changing regularly, we recommend you scrutinise the site for the cheapest deals.

Tasmania

Aurora Energy, the government-owned retailer, controls the small customer market in Tasmania. Legislation prevents new entrants from supplying small customers, but switching is possible for businesses. The Tasmanian government has yet to decide whether to extend competition to all customers.

Victoria

According to the St Vincent de Paul Society's Victorian Energy Prices report the price the average Victorian household has experienced an increase of more than $300 during 2008 - 2010 period.  

Victoria is the least regulated state for tariffs; with government control of retail pricing removed in January 2009, providers are free to set whatever prices they like. Victoria reportedly has the highest switching rate of any energy retail market in the world. Around 26% of small customers changed during 2008-09. Some people paying a market rate are paying too much and should think about switching. But, if you don’t have your wits about you, you may get tricked into an even more expensive plan.

Paterson says smoke and mirrors in pricing is a problem in Australia’s least regulated state. “TRUenergy sold its ‘Value Bundle’ plan door-to-door, marketing it as having an 11% discount. However, that discount was not based on a standard retail price, but on a more expensive plan with artificially high rates.” TRUenergy argues its marketing material carried a reference to Value Bundle having a new tariff, and that “salespeople were instructed to inform customers of that fact.”

Consumers in Victoria can compare prices by visiting the Your Choice website.

Western Australia

There are a range of suppliers in WA but switching only applies for large business customers; the government-owned Synergy has 96% of small customers. The Office of Energy reviewed the electricity market in 2008 and 2009, and has considered the possibility of introducing full retail contestability. However, here have been no announcements as to the likely timing of this.

Your say - Choice voice

Make a Comment

Members – Sign in on the top right to contribute to comments