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Are you stuck on an expensive offer?
As part of a suite of measures to improve the affordability of energy, the federal government has said it will prevent inactive or loyal energy customers from being moved to these costly deals when their energy contract expires.
Instead, the government wants those customers moved to what's called a 'safe default energy offer', that has a capped price determined not by the energy companies but by the Australian Energy Regulator.
We support the introduction of a safe default energy offer but only if the conditions deliver real savings to customers.
We also don't know when the government will bring in these changes, so in the meantime, here are some tips to help you make sure you're on a fair deal.
How to get a better deal
When you sign up with an energy retailer you've often been
enticed with a big discount for a period of 12 to 24 months. However, if
there's a contract period with the deal, and you don't seek a new deal when it runs out, you may be moved to
the company's 'standing offer' with no discounts.
Alternatively, if there's no contract period with the market offer, and the
discount period runs out, you could stay on that undiscounted, more costly
market deal indefinitely.
TIP: If you haven't switched deals for more than 12 months, ring your energy retailer and tell them you're looking for a better deal.
Ask your energy retailer:
- Am I on a standing offer? If you are, ask for the best deal they can offer you.
- If they say no, ask if you're currently getting a discount, and when will it end?
- If there's no discount, ask for the best deal they can offer you.
One option is to compare the deal with others at Energy Made Easy or Victorian Energy Compare, although it's important to point out that the comparisons will be limited since these government sites don't analyse the energy deals that customers are already on as a point of reference, and they only look at consumption, not the rates customers are paying or the discount structure offered by their retailer.
Standing offers are costly
If you moved house and your energy was connected by a retailer without you
asking about the best offer, it's possible you're on the standing
offer and that's often the most expensive in the market.
A 2018 review into retail energy competition by the Australian Energy
Market Commission (AEMC) found consumers on standing
offers were paying hundreds of dollars more a year when compared to the cheapest
In South Australia it was $832 more, in Victoria it was $574, in South East
Queensland $504, in New South Wales $365, and $273 more in the ACT.
According to the ACCC this system that returns customers to the worst deals
on the market is working nicely for the big three energy retailers: Origin,
Energy Australia and AGL. In their 2018 review of retail electricity
pricing they wrote that, "Large retailers enjoy significant advantages of scale and their much
smaller rivals must spend large sums to attract and acquire customers.
Meanwhile, incumbents have benefited from large parts of their customer
bases being inactive or disengaged from the competitive market, often
remaining on high-priced standing offers. Incumbents are able to make very
attractive offers to retain customers, effectively through cross-subsidies
paid by their inactive customer cohort."
The ACCC's review reported that approximately 18–40% of revenue for the big
three retailers comes from standing offer consumers.
What's the deal? Standing offer vs market offer
All retailers must have a standing offer contract and this is often the
default when a customer doesn't choose a market offer.
Standing offers were originally intended as a default protection for
consumers who were not engaged in the market or those with poor credit
histories. Protections include:
- having a minimum amount of time before you can have your energy
supply cut off if you don't pay
- more communication about price changes (compared to the cheaper market offers)
- prices can't change as often as they can with the cheaper market
In deregulated markets, retailers also have market offers. These are
generally much cheaper than standing offers, often because of conditional
discounts such as pay-on-time or direct debit discounts that are based off
the retailer's higher priced standing offer rates.
TIP: From 1 October 2018, your energy retailer must give you 20–40 days
notice of your discount or other benefit period expiring.
Safe default offer set by the regulator
The government says it will adopt recommendations from the ACCC's 2018 review into electricity affordability, and direct the Australian Energy
Regulator (AER) and the ACCC to set a safe default energy offer for the
households that don't seek out a better deal.
The ACCC estimates that if an average customer on an inflated standing
offer moves to the new default offer they could save between $183 and $416 a year.
We applaud the introduction of safe default energy offers on the proviso
that it is genuinely:
affordable, with a capped price
available to everyone
free from excessive marketing costs
a safety net when you haven't chosen an energy offer, or your
previous contract has expired.
Where a safe default offer won't help
Check the end of your contract
Many energy deals have discounts which expire after a period (e.g. 12–24
months), but it may be that the contract doesn't end. In these cases
customers may not be moved to a standing offer, but may remain on the deal – often with high tariffs – indefinitely. This means customers could stay
on these much more expensive contracts for years.
A recent rule change requires that retailers notify customers 20–40 days
before a discount or benefit will end to advise them to take action.
Unfortunately, a safe default energy deal doesn't help customers in this
situation and it's arguable that retailers should not be allowed to keep
customers on an ongoing contract if it costs more than the safe default
Making discounts and offers easier to compare
We support another government decision that calls for energy retailers to
use these new AER-determined safe default offers as the reference point for
all advertised discounts.
In its review into the retail electricity market, the AEMC found that:
- it's difficult for consumers to compare offers because marketing campaigns usually focus on percentage
discounts off standing offers, and these are inconsistent between retailers
- a higher percentage discount
doesn't always mean a cheaper deal for the customer.
We've already written about the dark side of
that can leave customers paying much more if they can't meet the
conditions. In essence, the bigger the discount, the bigger the bill hike
if you miss the deadline.
Other measures proposed by the government
The government has said it will adopt a number of key recommendations
from the ACCC inquiry, including:
limiting the penalties customers can face when they
don't pay their bills on time
establishing a mandatory code of conduct for
energy comparator websites to ensure they focus on benefits to consumers, not the commissions
they receive from energy companies
holding an ACCC inquiry into prices, profits and
margins in the national electricity market.
Access and compare offers on Energy Made Easy
Changes have recently been made to the way retailers must present their
energy offers. They must now:
- use simplified, standardised language
- uniform plan detail templates
- make Energy Made Easy the primary
point of reference (in all national electricity market states except
Check the updated Energy Made Easy
site for more information.