Published on February 13, 2018 12:07 am, by Jen Bakker
Electricity prices went up again last year. Measures put in place by the government to help drive down the cost of energy are having little impact on lowering prices and the stress continues to be felt by households.
Last week the McKell Institute released a report indicating that households in Australia will continue to be hit by increases, suggesting households will be paying up to $434 more per year for their electricity by 2019.
This got us thinking. And reading. And we revisited the inquiry into electricity prices that The Australian Competition and Consumer Commission (ACCC) started last year. Some of the elements included in the scope of the inquiry are:
Retailers were given the opportunity to respond to the ACC and responses were mixed, leading to some confusion about why retailers operate the way they do. Some examples of responses:
It is widely considered that wholesale and network prices have adversely affected the cost of electricity. With 70% of our natural gas being exported overseas, the uncertainty surrounding domestic supply increases the volatility of pricing in the market.
In a nutshell, this means the government needs to do more to ensure there is certainty about electricity supply in Australia, which may help with pricing volatility.
In certain areas some consumers have been able to reduce electricity consumption with the purchase of high-end low energy consuming products, however, a large amount of the market is not in the position to replace fridges, washing machines, etc. and their consumption continues steadily.
What we know
In the last six months, we have collected data for all the retail electricity plans in Australia.
In providing a Bill Watch service to MoneyBrilliant customers where we compare their plan with others available to them, we have been in the position of keeping tariff and plan data up to date on these plans. In doing that we’ve noticed a whole heap of stuff that the average consumer (including us 6 months ago) just don’t know:
Breaking it down
What is a Price Fact Sheet?
When it comes to comparing electricity offers, this is the most important document to read before agreeing to anything. Retailers are required by law to publish this for each of their products. It contains everything that is relevant to that specific plan including rates, discounts, benefit period and terms, as well as any conditions that you need to meet.
What is a Market Offer?
Market offers are contracts that retailers design to attract customers. They often have a time frame, mostly one year, but sometimes two or three years. Market offers sometimes offer lower supply and usage tariffs, and other times offer discounts off the standing offer. As well as discounts, market offers can include sign-up incentives.
Be aware we have seen some retailers offer discounts off higher tariffs than the standing offer, making it more difficult to understand the value. This means that if you don’t meet the conditions of the contract (e.g. pay on time) you will be paying more than the standing offer.
Market contracts may also contain exit fees if you wish to leave within the contract period.
What is a Standing Offer?
Standing offers generally cost more than market offers.
The standing offer is the offer that market offer contracts often revert to. They tend to be higher than market offers and are rarely discounted. If you haven’t switched retailers or negotiated on price for some time, chances are you are on a standing offer. Standing offers don’t have exit fees and retailers can only adjust the prices on them a certain number of times per year.
What Discounts do retailers offer?
Pay on Time Discount – this is a discount on your bill that applies as long as you make your payment on time. Make sure you read the terms, as sometimes it’s off supply & usage, though most commonly just off usage.
Direct Debit Discount – this is a discount on your bill that applies as long as you set up a direct debit. This would imply that you pay your bill on time as it will be debited from your account on the due date. Make sure you read the terms, as sometimes it’s off supply & usage, though most commonly just off usage.
Guaranteed Discount – this is a discount from your bill that applies for the term of your contract. Make sure you read the terms, as sometimes it’s off supply & usage, although sometimes just off usage. Guaranteed discounts tend to be lower than other types, and more often off both supply & usage.
Which discount will be better for me?
Ordinarily, the highest discount will be the Direct Debit discount, followed by Pay on Time discount. The guaranteed discount is often the lowest. If you have a tendency to pay your bill late, we recommend you don’t take a plan with a discount for paying on time. This results in you being charged the tariff without a discount, which is generally the same or higher than the standing offer tariff.
Where you pay late, often the guaranteed discount will be cheaper for you, and at times the standing offer will also be cheaper.
If you are happy to pay by direct debit, you will probably find that is the cheapest option for most of the retailers.
How do you actually compare the prices?
MoneyBrilliant’s Bill Watch service will do it for you! Outside that you have the option of the government Energy Made Easy website, as well as other comparison websites.
Be aware that some comparison sites offer a limited number of plans to compare from. This may be based on tariff types or commission/referral fees.
At MoneyBrilliant we hold all the retailers broken down into postcodes and plans. This includes tariff amounts, discounts, solar rebates, etc.:
What you need to know to do your own comparison:
What else to know
Retailers change their plans all the time. We have seen plans change weekly! This means that the plan and plan name you are looking at may not be there next time you look. Be sure to check the date on the Price Fact Sheet and the discount amount. Even if the supply and usage charges are the same, often the discount will change.
What can you do to reduce your energy bill?
Firstly, you can make sure you are on the lowest cost plan for your meter type and usage.
Secondly, you can implement measures around your home to be more frugal with your energy usage. Here are a few ideas to start with:
Jen is an experienced banking professional who loves wine, coffee, finding a bargain and of course her three beautiful children. Since Jen's first budget led her to buy a home at 20, Jen has passionately helped others to make better decisions with their money.