Energy retailers have been up to all manner of sneaky pricing tricks lately. And the timing couldn't be worse. The relentless upward trend of energy prices has been a big part of the cost-of-living crisis, as the results of our most recent national Consumer Pulse survey make clear.
Our research shows that 84% of households are worried about paying for electricity. It also shows that the highest percentage on record (68%) are finding it hard to cut their electricity costs.
In late July, the advocacy group Energy Consumers Australia reported that 1 in 5 Australian households is vulnerable to or already experiencing some form of energy hardship. Energy disconnection is a looming threat for many Australians in financial straits.
In the midst of all this financial unease have come pricing strategies apparently designed to confuse. Exhibit A: the strategy we've come to call 'same name messaging', in which energy retailers roll out new cheaper plans with the exact same name as existing ones.
In the midst of all this financial unease have come pricing strategies apparently designed to confuse
Why don't customers switch to the new plan with the same name? Logically enough, they think they're already on that plan. This seems to be the result energy retailers had in mind. And it means the requirement for retailers to inform customers when a cheaper plan is available isn't really working as intended.
"We've estimated that energy customers as a whole could have saved around $65 million a year if retailers had made it clear that the new plan with the same name was cheaper than the existing one," says Jordan Cornelius, CHOICE senior campaigns and policy adviser.
"One very simple way to do this would have been to give the new plan a different name, or at least a different version number. But such a customer-friendly approach seems out of character for this industry."
CHOICE makes 'super complaint'
Retailers have been up to other pricing flimflams as well, including using words like 'saver' or 'save' to describe plans that are actually more expensive than plans that are not tagged with these empty promises.
Earlier this year, the pricing mayhem and resulting consumer harm had reached the point where we knew CHOICE had to act. In May, we lodged our first designated complaint – or 'super complaint' – about energy retailers with the Australian Competition and Consumer Commission (ACCC), citing the above-mentioned tactics as well as several others. This is a special once-a-year complaint mechanism available only to CHOICE and two other organisations, and the ACCC is required to respond.
It is essential that energy retailers provide clear and accurate information about their energy plans, so that consumers can make informed decisions
ACCC deputy chair Catriona Lowe
In August the regulator did so, saying it would investigate the potentially misleading 'savings' promotions. (The ACCC determined that same name messaging – a central component of our complaint – is an issue best addressed through reforms currently under consideration by the Australian Energy Regulator and the Essential Services Commission.)
"It is essential that energy retailers provide clear and accurate information about their energy plans, so that consumers can make informed decisions when choosing an energy provider and plan," says ACCC deputy chair Catriona Lowe.
Pricing confusion
But energy retailers seem to suffer from an institutional aversion to clear and accurate pricing information.
The industry's business model seems largely based on customers taking up what appear to be affordable plans, and unwittingly staying on them as their prices inevitably go up. It's called a loyalty penalty – if you've been on the same plan for a long time, you're probably paying more than you should.
Energy retailers seem to suffer from an institutional aversion to clear and accurate pricing information
It's a great idea to try to find a cheaper plan, but retailers make it very difficult to do that – because there are so many of them, they're so complicated, and their prices are bound to go up after you go to the trouble of switching.
Add in the fact they are all selling the same basic essential service – the delivery of electricity and gas – and you have a shonky situation overdue for reform.
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