By John Pierce AO, Chairman, Australian Energy Market Commission
There has been considerable discussion in the past week about energy prices flattening or falling.
It is undoubtedly positive that the big retailers are passing on falling wholesale prices, but it’s just the beginning of what retailers need to do if they want to regain the trust of customers.
The Australian Energy Market Commission report on retail competition in Australia’s energy markets, released yesterday, makes for sobering reading. Trust in the energy sector has fallen from 50 per cent last year to 39 per cent; confidence that consumers’ long-term interests are being served is down to 25 per cent.
It’s hardly surprisingly that perceptions of value for money are also down. Consumers are less satisfied with the value they receive from electricity and gas than they are with other services.
Equally significant is a fall in consumers’ confidence that they have the information they need to make good decisions about their energy contract (down 7 per cent), and in their ability to make choices about the best deal for them (down 11 per cent).
These concerns are driven not just by price but by a lack of transparency over pricing: complex and opaque offers that make it almost impossible to tell what an advertised discount really means.
These days, getting a good deal often requires a threat to switch retailers, which is generally rewarded with a “special” deal that is never advertised, via discretionary win-back marketing techniques. It may be good for that customer but it’s not available to others and essentially means a loyalty tax that is recovered from those who don’t ask.
Now that prices are flat or falling, the last thing consumers need is retailer complacency around the real difficulties consumers have in trying to understand the pricing plans they are offered. There is a golden opportunity for retailers to start rebuilding trust and confidence. They can do this by making it simpler for consumers to understand the deals on offer.
As the energy market rule-maker, the AEMC is already looking at several initiatives to help customers deal with their retailers, such as advance notice of price changes, timelier installation of meters, and making it easier and quicker to switch offers.
But although all of these reforms can help, there is nothing stopping retailers doing more for their customers today.
What we want is more of the good stuff being brought into the market by innovative retailers. Consumers with a solar-battery set-up can find retailers that will use generation patterns to optimise the value of your system in line with wholesale price signals. There are other retailers that will use your consumption data to find the best retail offers out there and automatically switch you when savings are available.
On the other hand, consumers are telling us they have had enough of complex tariffs made up of peak/off-peak/shoulder rates for three seasons — just unnecessarily confusing — let alone practices such as the 43 per cent pay-on-time discount, which is really a 43 per cent late fee if you miss it.
Given that such a large part of retailer bills is made up of regulated network charges, retailers also need to shift away from their approach of simply passing on network price changes to their customers.
They could become active voices in the network regulatory processes, advocating on behalf of their customers the lowering of those charges as well.
It is the retailers’ choice as to whether the path forward is paved by their commitment to their customers or by further regulation.
The power — for now — is in their hands.