- Every year Australians pay about $1.2 billion more than they should for their energy.
- Energy comparison sites can save you money, but you may not get the "best" or "cheapest" offer.
- Most comparison sites only examine a portion of the market.
- The differing tariffs, fees and charges make it difficult to compare plans.
Australians pay some of the highest energy bills on the planet, and more
than half of us either doubt or just plain don't believe we're getting
value for money with our gas and electricity plans.
About 43% of Australians think energy plans are too complicated to compare,
but it's clear that many customers are paying more than they should.
In this article, we look at what Australians could save by switching energy providers, and what's wrong with energy comparison sites.
Are you paying too much for energy?
According to recent research from the Australian Energy Regulator (AER), the difference between the most and least expensive energy offer in Sydney is $1400 a year, and in Adelaide it's $1500.
Meanwhile, the Australian Council of Social Service (ACOSS) reports that price differences between energy retailers in Victoria can be as much as $830 a year for electricity and $480 for gas.
How much you stand to save by switching depends on a number of variables including your energy needs and the type of plan you're on. According to CHOICE research, Australian energy consumers stand to save an average of about $400 a year by switching to a cheaper plan.
Overall, Australians are paying about $1.2 billion more than they should every year, not least because of flimflam marketing tactics on the part of retailers.
The energy market may be the most confusing confuse-opoly of all.
What's wrong with energy comparison sites?
Profit-driven sites dominate the market
The AER savings calculations mentioned above are based on the federal agency's Energy Made Easy comparison site, a non-commercial site whose existence was mandated by the National Energy Retail Law that came into effect in July 2012.
Savings of $1400 a year would be a best case scenario to say the least, but it's fair to say that numbers anywhere near this level in the current energy market should be enough to get tapped-out energy consumers onto an energy comparison site.
But which site do you choose?
Energy Made Easy is far from the only energy comparison site out there, but it's one of the comparative few run by government rather than a private, profit-driven business such as iSelect, Compare the Market or Canstar, who market their services more aggressively.
While it's clear that consumers need a better way to navigate the complicated energy market, commercial comparators such as these could easily lead you down the garden path.
Meanwhile, consumer uptake for Energy Made Easy has been lacklustre at best. In a 2017 AER survey, only nine percent of residential and small-business customers were aware of the site. In the 2017 financial year, it received about 600,000 visits.
Over the same period, iSelect, which has only recently ventured into the energy comparison market, had 9.8 million unique visitors to its website, generated $185.1m in revenue ($50.4m from energy and telecommunication customers) and converted 12.6% of its 2.27m energy and telco customers to a sale.
Click here for an accessible text-only version of this infographic.
You don't get the full picture
iSelect is upfront on its home page about limiting its comparisons to energy retailers that have partnered with iSelect. A further disclaimer makes clear that the site is unlikely to recommend the best deal on offer in the energy market, since it only compares a portion of that market.
"Not all products available from our partners are compared by iSelect and due to commercial arrangements or service availability, not all products compared by iSelect will be available to all customers. Some products are available only from our call centre and others are available only from our website."
Like iSelect, Compare the Market makes no bones about the limitations of its comparisons, saying, "We do not compare all brands in the market, or all products offered by all brands. At times certain brands or products may not be available or offered to you."
And while Compare the Market claims its commission-based business model doesn't influence its presentation of energy plans, the company freely admits "we receive a commission each time one of our customers takes out a new energy offer".
Considering that Compare the Market captures only 10 of the 37 energy retailers on the market, an argument could be made that commissions are influencing which energy plans are presented to users.
Other commercial energy comparison sites suffer from the same shortcomings.
In 2012 CHOICE filed a super-complaint (a complaint about what CHOICE determined was a longstanding, systemic issue in the marketplace) to NSW Fair Trading about commercial energy comparison sites in NSW.
The complaint was based on the following observations that came out of our research – issues that are implicitly acknowledged by disclaimers on comparison websites.
- People who visit only one commercial comparison site may not find, contrary to their reasonable expectations, the 'best' electricity deal available.
- Some of the comparison sites are arguably making representations (directly or by omission) that lead users to incorrectly believe they would find "your best deal" on their site.
- In some instances, different sites recommend the same electricity plan but with different estimated levels of savings, which raises questions over the accuracy of the calculations used.
- Some of the commercial sites don't provide the user with all the relevant terms and conditions associated with electricity plans so they can make an informed decision before switching.
- The characteristics of retail plans, including tariffs and relevant fees and charges, make it difficult to compare plans effectively.
It seems clear that many of the problems we outlined in 2012 have not gone away.
Australians aren't switching to cheaper plans
Early last year, the Panel for the Review of Electricity and Gas Retail Markets in Victoria held a stakeholder forum which again raised the issue of energy comparison sites giving skewed results due to commercial arrangements with a limited number of energy retailers.
The resulting report, tabled in August 2017, pushed the case for a reliable and unbiased comparison resource and pointed out that electricity and gas prices for Victorian households had increased 200% since 2000 and that consumers in Victoria were paying 21% more on average than the cheapest offer available.
Nearly a quarter of the customers whose power bills were analysed were paying $500 more than they would have if they'd shopped around and found the best deal.
It's a similar story in Queensland, where a government report published in late January revealed south-east Queensland households could save up to $588 by switching electricity retailers.
As it stands, only 21% of electricity customers have switched providers in the last three years and 55% have never switched.
With 37 energy retailers vying for business, about 70% of Australian households are currently with one of 'the big three' – AGL, Origin and Energy Australia.
And as prices have gone up in recent years, the rate of switching in most states has gone down.