Need to know
- In July last year, CHOICE was named by the federal government as one of three organisations with the authority to lodge a designated or 'super' complaint
- We've targeted the energy retailer sector due to complicated and confusing pricing tactics that leave customers paying more then they should
- We’ve estimated the total cost to consumers of same-name messaging at around $65 million
The pricing tactics of energy retailers are the stuff of nightmares. One flagrant case in point: new plans are constantly coming out that are cheaper than previous ones, except they have the same names.
The new offers are often marketed as 'best offer' or 'better offer', leaving customers who thought they were already on the best offer unknowingly stuck on a worse one. The idea seems to be to keep people as confused as possible.
The idea seems to be to keep people as confused as possible
As the 52 or so active retailers subject to the National Energy Retail Law compete furiously for market share, consumers are caught in the crossfire, unable to find the best energy deal for their circumstances due to the overwhelming complexity of the options. (The National Energy Retail Law applies to retailers in the ACT, NSW, Queensland, South Australia and Tasmania.)
It's not surprising that so many throw in the towel and accept the default offer from their retailer.
There's a lack of good faith underpinning customer dealings with these power merchants, a sentiment echoed in a survey late last year from the advocacy group Energy Consumer Australia (ECA), which found that consumers trust energy retailers less than supermarkets and banks.
The first CHOICE 'super complaint'
All of the above – and more – is why CHOICE has filed its first 'designated complaint' with the Australian Competition and Consumer Commission (ACCC) about this sector.
In July last year, CHOICE was named by the federal government as one of three organisations with the authority to lodge a designated complaint (also known as a 'super complaint') with the regulator about ongoing and systemic issues in the consumer marketplace.
The ACCC then has to respond within 90 days, a special rule that only applies in such situations.
It shouldn't be this hard to know if you're being ripped off on your energy bill
CHOICE CEO Ashley de Silva
The hope is that our evidence-based complaint will accelerate the necessary regulatory intervention to end this pricing chaos.
"It shouldn't be this hard to know if you're being ripped off on your energy bill. We're calling on the ACCC to enforce the law with strong court action to put an end to these dodgy practices costing consumers money," says CHOICE CEO Ashley de Silva.
The language energy retailers use to ostensibly inform customers seems designed to confuse them instead.
Financially distressed faring the worst
The energy customers bearing the brunt of the confusion are those who can least afford to be paying more than they should.
Research from ECA shows that many households under financial pressure start the process of trying to find the best energy offer for their situation, but ultimately give up because it's too time-consuming and complicated.
Meanwhile, the number of residential customers with electricity debt over the last five years remains at a high point, and the average debt of about $1148 hit a five-year peak in 2023–24. Only around two-thirds of these customers were on hardship programs.
It's also telling that energy bill complaints that were escalated from retailers to state and territory ombudsmen went up about 40% in 2023–24 compared to the previous 12 months. Yet only a small percentage of electricity customers have switched retailers over the past five years – a trend that goes back well before this period.
Aren't I already on the best offer?
Probably not. The ACCC reported in December 2024 that nearly a quarter of customers (24%) who received 'best offer' or 'better offer' messages from their retailer between January and August 2024 were already on a plan with the same name as the new offer. Every retailer the regulator looked at was engaging in this sleight of hand.
In a recent review by the ACCC, 81% of customers were not on their retailers' best offer
Another ACCC statistic seems to illustrate the consequences of such tactics: 81% of customers across the National Electricity Market (NEM) were not on their retailers' best offer during the period under review. (The NEM is made up of Queensland, New South Wales, the ACT, Victoria, Tasmania and South Australia.)
Many are misled by same-name messaging
As part of the research for our designated complaint, we reached out to our CHOICE supporter base, asking people to send in their energy bills. We received 382 of them, 64 of which had 'best offer' or 'better offer' messages.
The problem was that these were for plans that had the same names as the ones the customers were already on.
The customers we reviewed missed out on an average of $171 in annual savings
By not switching to the new plan with the same name, the customers we reviewed missed out on an average of $171 in annual savings. In one case, the savings would have been as high as $588 a year.
We've estimated the total cost to consumers of the same name messaging practice at around $65 million.
We've alerted the ACCC that this same name messaging is potentially misleading.
Customer case studies
One customer we heard from aptly summed up the effects of the doublespeak: "I'm confused that it seems to be saying that the same plan I am on may cost less than my current plan, but my current plan is the one they are saying would cost less."
Another customer told us: "Every time a bill arrives, there's a note saying I could save money by switching to a plan that has exactly the same name as my current plan. When I questioned this, they said they had changed the plan but not the name. So now I have to check their website regularly and more or less change plans every month."
I'm confused that it seems to be saying that the same plan I am on may cost less than my current plan, but my current plan is the one they are saying would cost less
Australian energy customer
Luke, an academic specialising in consumer law, had a similar experience with EnergyAustralia. He received a bill that was 57% higher than the same quarterly billing period a year earlier, even though his energy usage hadn't changed.
The bill said he could save $617 a year if he switched to the 'Flexi Plan (Home)' offer, which was the name of his current plan. Apparently he should have switched to this new version of the plan earlier.
"Eventually I got through to someone at EnergyAustralia and discovered they had a new plan with the same name but better terms," Luke says. "I couldn't resist telling them I think their bill's wording is misleading."
'Energy market is confusing enough'
In a national CHOICE survey conducted in September last year, we presented respondents with a hypothetical scenario in which they received a better offer message with the same name as the offer they were already on. Only about half (56%) understood it to be a prompt for a better deal.
"The energy market is confusing enough without energy retailers using dodgy tactics that make it nearly impossible for consumers to know if they're getting a good deal," says de Silva.
"At a time when we're all looking for ways to save, energy companies are making it harder and harder to know what you're paying and why."
Trying to find the cheapest energy plan for your circumstances is often an exercise in futility.
The 'variable rate' conundrum
Adding to this general confusion is the use of the term 'variable rate' by retailers.
Customers generally understand that this means the rates they pay may vary (which generally means go up), but they don't necessarily understand that this may not happen for newer customers on newer plans with the same name.
Our survey research found that 57% of energy customers mistakenly assumed that if their rates change, this will also happen for new customers signing up to a plan with the same name.
Of course, this is nothing new. Newer customers paying less than existing ones is standard operating procedure in energy retailing, where paying the loyalty tax is all but unavoidable.
CHOICE can only submit one designated complaint each year, and much like the Shonky Awards, we only use it for the most serious issues we see
CHOICE CEO Ashley de Silva
The business models of energy retailers, in fact, seem to be built on the expectation that customers will scoop up cheap offers and stick with them even as the prices continually rise.
Such a strategy for an essential service is especially harmful to consumers during a cost-of-living crisis. By lodging this super complaint, CHOICE hopes to begin the process of cleaning up this mess.
"CHOICE can only submit one designated complaint each year, and much like the Shonky Awards, we only use it for the most serious issues we see," says de Silva.
"We are calling on the ACCC to urgently investigate these sneaky tactics used by energy retailers to confuse and potentially mislead consumers."
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Stock images: Getty, unless otherwise stated.
