We take a look at the hard-sell tactics that Australian energy retailers such as Energy Australia, AGL, Red Energy, Lumo, Origin and TRUenergy were rolling out late last year, when predictions of price hikes were especially dire.
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The hard sell
It’s not an easy time to be shopping
around for an energy provider.
With the cost of electricity rocketing
and consumers scrambling for
better options, retailers are trotting out
special deals to try to lock in your business.
We’re deluged with marketing material, but
whether it’s a good idea to take the bait is
far from certain. Late last year, when talk of sky high electricity increases began to reach fever pitch, CHOICE reviewed a slew
of online promotions and found, not
surprisingly, that they aren’t much help in
making an informed decision. They often
play on fears of drastic rate hikes, and the
deals are far from straightforward.
EnergyAustralia, AGL, Red Energy, Lumo, Origin
and TRUenergy all enticed consumers to
sign contracts in exchange for a rate freeze,
a one-off payment, a 10% or similar
discount, a bonus point program, or some
combination thereof. Many of the long-term
contracts had complicated terms
and conditions, warned of unspecified costs
and imposed early termination fees. Some
promos only included usage; others both
usage and delivery to your home (that is,
the fixed cost onto which your usage
charges are added) to your house.
Pay-on-time discounts were especially
perplexing. In a typical example, Lumo
offered a 13% discount on the company’s
“best rates” if customers pay on time, but
it also says in the contract terms and
conditions that “we may vary your energy
charges for any reason”. A quick perusal of the deals on offer at the moment reveals that current marketing tactics are much the same.
As with other
offers, the Lumo deal appeared to
be contingent on signing a contract that
allows the retailer to raise prices, but we
couldn’t find these critical details in the
online marketing material. By contrast,
the number for the sales department
on most of the ads was easy to spot.
And prices can go up in ways
consumers might not expect. For
instance, CHOICE member Geoff Goonan told us that his
Lumo off-peak charges “increased by
a staggering 24.5%” with his latest bill,
as opposed to 9.8% for peak charges.
Another member, Nick Haggarty, told us
he was shocked to find out his ActewAGL
Greenchoice rates were going up in line
with those of non-renewable energy
customers – due in part to carbon
pricing, according to the company.
“I completely understand that it’s not
possible to have two electricity networks,
one from renewable sources and the other
from non-renewables,” Nick says. “What
I don’t understand is why my bills from
ActewAGL have for years included a graph
of my greenhouse gas emissions and every
one of them has shown them to have been
at zero tonnes.”
Nick is not the only consumer we’ve
heard from who’s been mystified by
retailer explanations of renewable pricing
calculations. Renewable energy options were excluded from some of the promos
Locking in rates
It can be a good idea to lock in a rate, but first make sure you understand what you’re locking in as well as all the terms and conditions of the deal.
The marketing is confusing, and much
of it has been down and dirty. Energy Australia’s offer to lock in
current rates for two years, for instance, was marketed along with a warning that
electricity prices have increased more
than 50% in Sydney in the past three
years. Yet the independent Australian Energy Market Commission (AEMC) has estimated that electricity prices
across Australia will see an average
annual growth rate of about nine
per cent through 2013-14, with retailers
free to go below any regulated increase
in order to grab market share.
In late August 2012, the launch of a Senate
inquiry into the causes of high energy
bills was announced, which will include
looking at options to reduce prices.
Around the same time, AEMC proposed new rules to strengthen
regulation of distribution and
transmission networks (the poles and
wires that delivery electricity to your
home, the expansion and upgrading
of which are cited as the main cause of
electricity price increases) with the aim
of reducing consumer costs. And with
the Prime Minister herself threatening
to use the “big stick of regulation” late last year if the
industry doesn’t figure out how to keep prices in check, consumers should be
wary of price predictions, especially
when they’re made by energy retailers.
It can be a good idea to lock in a rate,
but first make sure you understand
what you’re locking in as well as all
the terms and conditions of the deal.
Some energy marketing has been
particularly aggressive. In March 2011, for instance, AGL set out to
lure at least 500,000 customers away
from the competition with the launch
of what it called “an aggressive sales
and marketing campaign in NSW
utilising many channels”.
time, AGL’s GM of marketing, David
Hamilton, said: “we intend to educate
people about the fact that they can
choose their retailer”. (The lure to
switch was a modest $300 off the
regulated tariff over a three-year
period in exchange for committing
to a three-year contract.)
One marketing channel, AGL’s
door-knocking campaign, got the
energy giant and independent
marketing firm CPM into hot water
and cast a revealing light on the
current state of energy marketing.
In March 2012, the ACCC filed a
suit against both and accused AGL of
misleading and deceptive conduct and
making “a range of false
representations to consumers in
the course of door-to-door selling”.
Neighbourhood Energy, part of
the Alinta group, and its former
marketing company, Australian Green Credits, were also named in the suit. To prevent further transgressions,
the ACCC said it and the Australian Energy Regulator had signed
agreements with state and territory
energy ombudsmen to allow greater
scrutiny of the door-to-door marketing
of energy products.
But as recently
as August 2012, CPM was advertising for
“residential field sales agents” to sell
energy products at $18 per hour plus
“uncapped commissions” and a chance
for weekly and monthly bonuses based
on sales. CPM said applicants need
only learn some “simple procedures
and selling techniques” and would be
carted around neighbourhoods in a
company van. Backpackers “fluent
in English” were invited to apply.
In a recent report, the ACCC said one
million door-knocking energy sales
were attempted across Australia in
2011, usually by external marketing
There are an average of
eight door knocks per year on every
Australian household, with residents in
NSW and Victoria likely to experience
more than the average. The door-knocking
epidemic has led to the
introduction of a Do Not Knock bill, an
idea that CHOICE strongly supports
along with the Consumer Action Law
Centre’s Do Not Knock Campaign. In a belated act of contrition, both AGL and Energy Australia have since sworn off door knocking campaigns - at least for now.