Need to know
- The Australian Energy Regulator made 'better offer' messages on energy bills mandatory in 2023
- The goal was to encourage energy customers to switch to the best deal available from their retailer, but many customers don't look at their bills
- A new rule will require retailers to publish 'better offer' messages in more places, but advocates say the need to constantly switch is a symptom of an unhealthy market
At any given moment, there's probably a better energy deal on offer than the one you're on. But energy retailers don't make finding it easy, and many customers have given up trying.
Back in September 2023, the Australian Energy Regulator set out to shake up this consumer inertia when it made 'better offer' messages on energy bills mandatory for retailers operating in Queensland, New South Wales, South Australia, Tasmania and the Australian Capital Territory.
With millions of energy customers disengaged from the market and paying more than they should, the regulator reasoned that making retailers show their best offers every time a customer opens a bill would encourage switching. But many retailers flouted the spirit of this reform.
In our designated complaint to the Australian Competition and Consumer Commission (ACCC) lodged in May this year, CHOICE highlighted a number of problems with the ways energy retailers communicate their best offers, including promoting new offers with the same names as existing ones and using words like 'save' or 'savings' on plans that weren't their cheapest.
It meant that people got stuck on plans they thought were the cheapest when they weren't, which seems to have been the intent.
But there's a more fundamental problem – the simple fact that many people don't look at their energy bills. It's a symptom of an essential services market becoming so complicated that its customers tune out.
Only 12% of energy customers are 'very confident' that they're on a competitively priced energy plan
Recent research from Energy Consumers Australia (ECA) reveals further symptoms of disengagement from the energy market: 30% of consumers don't know what type of electricity tariff or plan they have, and 77% of consumers don't even know what a tariff is. (It's the pricing structure of your energy plan, including supply and usage charges, which can be applied as flat or time-of-use rates as well as other forms or pricing.)
Only 12% of energy customers are 'very confident' that they're on a competitively priced energy plan, and only 18% had switched providers in the past 12 months, according to the ECA research.
'Better offer' messages in more places
Earlier this month, the Australian Energy Market Commission (AEMC) enacted a new rule aimed at improving the effectiveness of 'better offer' messages. Starting in December 2026, retailers will be required to publish 'better offer' messages not only on bills but also on other communications related to a bill, such as the email accompanying one as well as bill summaries.
Theoretically, energy customers will be more likely to see the best deal on offer and switch to it, thereby driving competition in the market and pushing prices down.
Will this reform have the desired effect? ECA CEO Dr Brendan French has his doubts.
He says the issue of energy customers not switching to better offers "arises from a broader and deeper place", with energy retailers trying to grab market share from other retailers rather than enticing new customers with dependably competitive offers.
To keep paying low prices, you have to keep switching between plans at least once or twice a year. People have lives and this is exhausting
Energy Consumers Australia CEO Dr Brendan French
"This means they price their new contracts quite low – known as 'honeymoon pricing' – often at unsustainable levels," French says.
"How do they afford this? This is where the so-called 'loyalty tax' comes in, because these low acquisition tariffs are more or less subsidised by the higher prices that pre-existing customers pay."
In other words, customers who stay on the same energy plan for a sustained period end up paying a few hundred dollars more a year than new customers with the same retailer, because the honeymoon offers only last so long.
"To keep paying low prices, you have to keep switching between plans at least once or twice a year. People have lives and this is exhausting," French says.
Constant need to switch indicates an unhealthy market
In ECA's view, putting the onus on energy customers to continually be on the lookout for the best deal is a sign of a market not working in the interest of the people it's meant to serve.
"The constant churn, and the marketing costs that underpin it, are a cost that all customers ultimately bear," French says.
"Only those who can afford the time, have the skills and access, and maintain their interest will get the benefit. We don't think a healthy market should require customers to do all the work."
We don't think a healthy market should require customers to do all the work
Energy Consumers Australia CEO Dr Brendan French
As it stands, that work involves reviewing energy contracts and tariffs that are "confusing, intimidating and hard to compare," French says.
"So, while it's good that the new rule requires retailers to more visibly remind customers to think about switching, we don't think that addresses the fundamental issue that sits at the heart of the problem."
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