Need to know
- With bundled energy offers, retailers throw in what appear to be extra benefits to enhance the value of your energy plan, but the value proposition is murky
- Consumer advocates say bundled offers add further complexity to an already confusing market
- Some retailers claim that customers in financial straits won't be able to switch to the cheapest plans if they're on bundled offers
Energy retailers are notorious for making it hard to find and stay on their cheapest offers.
New, cheaper plans are constantly being rolled out to lure new customers, leaving current customers who thought they were already on the best plan unknowingly paying more. It's not uncommon for these new plans to have the same name as an existing one.
These and other tricky pricing tactics were the subject of the energy 'super' complaint that CHOICE lodged with the Australian Competition and Consumer Commission earlier this year
Bundled energy offers, where retailers throw in what appear to be extra benefits to enhance the value of your energy plan, are adding to the pricing confusion.
Energy retailers have become famous for confusing people with false comparisons, expecting us to know the difference between a bundled offer featuring Netflix or NRMA
Eirene Noyce, Consumer Action Law Centre
These 'benefits' can include Woolworth's Everyday Rewards points, Qantas frequent flyer points, a Netflix subscription, an NRMA membership, cash bonuses, sporting club discounts and more.
"Energy retailers have become famous for confusing people with false comparisons, expecting us to know the difference between a bundled offer featuring Netflix or NRMA, or time-of-use rates versus flat rates, or to understand comparisons between their own products, let alone those of other retailers," says Eirene Noyce, a senior policy officer with the Consumer Action Law Centre.
"It's a confusing picture and it's not the fault of consumers that it's so hard to understand."
Paying more than you get in return
Origin's Everyday Rewards Variable offer where you earn Woolworths points is a particular case in point.
When we looked in early July, it was $73 per year more expensive than Origin's standard variable plan – $1611 per year compared to $1538 for a household using 3900kWh a year (plan cost estimates provided by retailer).
A bit of maths reveals that this is not the bargain of the century.
For every dollar you spend on energy on Origin's plan, you earn one Woolworths Everyday Rewards point. The points are generally worth 0.5 cents each, so 2000 points will give you a $10 discount on your shopping basket.
To recap, paying an extra $73 for a total of 1611 points in the provided scenario would not even get you a $10 Woolies voucher.
Paying an extra $73 ... would not even get you a $10 Woolies voucher
Origin also throws in 5000 'bonus' electricity or gas Woolies points just for signing up. (Existing customers pay a loyalty penalty – they only get 2500 bonus points.)
But this still doesn't bridge the gap. New electricity customers with the 5000 bonus points would earn around 6611 total points. That's about $33 in value – meaning you still wouldn't break even on the extra money you're spending to collect the points.
It seems the Rewards Points offer is just there to bamboozle prospective customers with extras that could potentially be worth less than the additional cost they'd need to pay.
An Origin spokesperson tells us "all households use energy differently, and place different values on benefits and rewards. Bundled offers provide consumers with choice, based on what they value, with add-on benefits regularly changing throughout the year".
The spokesperson says that the company encourages customers to compare plans on independent government websites and check their bills to see if they could be on a better deal. But as we'll soon explain, that's easier said than done.
Bundled energy offers make like-for-like comparisons with other offers virtually impossible.
Other bundled energy offers from big retailers
AGL's Netflix offer
The tariff you pay for this bundled plan is not the worst on offer – $1370 a year for a three-person household using 11.8kWh/day or 4307kWh/year (plan cost estimate provided by retailer). But the addition of the cheapest Netflix subscription available, valued at $7.99 a month with ads, makes it difficult to do a value comparison with non-bundled plans from other retailers.
Engie Perks
The $1680 tariff for a three-person household using 11.8kWh/day or 4307kWh/year on this bundled plan is competitive, but the added 'My NRMA' membership, which offers discounts on services like travel and dining, once again makes it hard to compare to other offers given the difficulty of quantifying the value of these perks.
Red Energy Qantas Points
The tariff you pay on this offer is competitive, but its overall value is hard to calculate. You'll get 10,000 bonus Qantas points when you pay your first electricity bill on this plan and two Qantas points for every dollar you pay for electricity (if you pay on time). Given the uncertain and fluctuating value of frequent flyer points, quantifying the value of the extras is, once again, elusive and makes it difficult to compare to other offers.
Bundled offers obscuring the true costs
In the view of Jaunita Pope, CEO of the Victorian Council of Social Service (VCOSS), bundled energy offers add yet more opaqueness to an already murky energy market.
"When you see an energy plan with bonus perks like rewards points, subscriptions or movie tickets, it can mean you'll end up paying a higher price for the energy you use," Pope says.
"Some of these bundled offers have competitive prices; some don't. But overall, they tend to obscure the true cost of your energy supply, making it harder to compare deals and find the best price."
Sometimes people can feel like they're getting a bonus extra, but these offers can be far from competitive when it comes to energy costs
Essential Services Commission chair Gerard Brody
Gerard Brody, Chair of the Victorian Essential Services Commission (ESC), agrees that energy consumers should be wary of apparent freebies that surreptitiously add costs.
"Bundled additions with an energy deal are not free. Sometimes people can feel like they're getting a bonus extra, but these offers can be far from competitive when it comes to energy costs," says Brody.
Another issue is that the financial value of the added services are not factored in on government comparison sites such as Victorian Energy Compare or Energy Made Easy, making like-for-like comparisons with other non-bundled plans impossible.
The value of the extras are also not factored into the best-offer messages that retailers are required to include on bills. (In Victoria, energy retailers are required to inform customers how much they could save by switching to the retailer's cheapest plan at least once every four months. In jurisdictions overseen by the Australian Energy Regulator, retailers are required to do this every 100 days.)
What customers should focus on instead
VCOSS recommends that people who struggle to afford their power bills steer clear of bundled offers and focus strictly on what really counts – low supply and usage charges.
Another detail to focus on is how much cheaper a plan is than the default (or standing) offer.
For anyone struggling with the rising cost of living, we recommend looking for basic energy deals without the extra perks
VCOSS CEO Jaunita Pope
"Most energy retailers are offering a product that is essentially the same or very similar to each other. Bundled offers can help them entice new customers to switch to their service by offering extra incentives," says Pope.
"These deals may be attractive to people who don't have to worry too much about their power bills. For anyone struggling with the rising cost of living, we recommend looking for basic energy deals without the extra perks."
Additional risks for customers in financial stress
The backdrop of concern in Victoria is the review of the Victorian Energy Code of Practice by the Victorian Essential Services Commission (ESC), which is currently underway.
Earlier this year, the ESC flagged the changes it would like to see in a draft decision, many of them designed to throw a lifeline to customers in financial straits.
A key recommendation is that energy retailers be required to switch people who are having trouble paying or have more than $1000 in energy debt to a retailer's cheapest offer, an idea that's strongly backed by both Consumer Action and VCOSS.
The ESC estimates that, if this happened, around 75,000 electricity and 60,000 gas customers in Victoria would end up saving a collective $16.8 million and $11 million, respectively.
Some retailers are claiming they won't be able to switch people on bundled offers to their cheapest offer, as they'd lose the extras
But some retailers are claiming that they won't be able to switch people on bundled offers to their cheapest offer, as they'd lose the extras.
The ESC has proposed that customers on bundled plans be allowed to opt out of the automatic-switching requirement, and reactivate it once they move to a non-bundled plan. But being on one in the first place is probably not a good idea.
"We recognise that some consumers may prefer to keep these bundled additions, but ultimately the energy market should be about competing on energy prices," says ESC chair Gerard Brody.
"When these offers are promoted, it's not clear to people whether they're a good deal or not. We want retailers to compete on a level playing field and have genuine competition on the thing that really matters to customers, which at the end of the day is the energy costs."
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