An annual review of Australia’s energy markets suggest competition alone isn’t enough to keep the market running efficiently and to keep energy prices down. Research commissioned by the Australian Energy Market Commission reveals that, despite declaring Victoria’s energy market the most competitive in the country, it’s where energy retailers were making the biggest profits.
‘If the market was working correctly retailers would be competing, putting downward pressure on energy prices. The fact that Australia’s most competitive market is also the most profitable for retailers tells you energy retail competition isn’t working,’ said Denise Boyd, Director of Policy and Campaigns at Consumer Action Law Centre.
‘Victoria is often held up as the model for other states to follow because of the number of retailers in the market and the level of switching. But if the market is leading to bigger profits for retailers, you can be sure it’s consumers that are out of pocket.’
Ms Boyd said the metrics by which the energy industry measures market success don’t take the customers’ experience into account. ‘The AEMC has measured effective competition by activity amongst the retailers and a retailers’ ability to enter the market. Additionally, consumer satisfaction was measured as being relatively high, but the research said that this might more accurately be described as lack of annoyance.’
‘You can have all the energy offers you like, but if they’re too complicated and hard to compare consumers will tune out. It doesn’t help that retailers can sign you up to a fixed term contract only to increase the price before you get your first bill.’
A recent CHOICE survey found just 9 per cent of Australians trust their energy retailer, who rate bottom alongside appliance salespeople.
‘The AEMC points to the number of Victorians who switched retailers as a sign that consumers are engaged, but when you look beyond the headline it’s clear consumers have little understanding of, or time to engage with, the retail market. The research cites confusion, complexity, a sense that they won’t get a much better deal, and a feeling that it will be too much hassle as the main barriers to consumer engagement.
‘A competitive energy market can have benefits for consumers, but without real attention to consumers’ needs and motivations, those benefits are likely to remain out of reach,’ said Ms Boyd.
Media contact: Dan Simpson, 0413 299 567.