Money, What's New
Published on August 31, 2017 4:01 am, by Pete Lalor
Global warming, renewables, gas prices, gold-plating or profit margins?
It seems like electricity prices are out of control. There has been a lot of media attention on the issue, but we can’t recall seeing a simple explanation of what’s driving the price rises or what you can do about it. We think you deserve one. So, we’ve put it together for you.
Electricity prices are such an enormous political issue that all the major stakeholders seem to have their own view of what is driving up prices. When you boil it all down though, there seem to be a couple of key drivers.
First, and most recently, is a substantial increase in wholesale gas prices. A recent report by the Australia Institute and pricing data from the Australian Energy Regulator shows that wholesale gas prices are almost 50% higher now than they were a year ago. There is growing concern that high gas exports will reduce local supply and continue to push prices up which is why the government has recently taken action to limit exports from next year.
The second likely driver is found in a recent report by the Grattan Institute. They blame a steep increase in profit margins for electricity retailers. This is partly our own fault for accepting overpriced energy plans (see below for more on this). They also suggest, and we agree with them, that in the new contestable energy markets customers have been forced to pay for a massive increase in marketing, sales and management costs incurred by energy retailers. In the old days we didn’t need electricity and gas to be marketed to us – we just bought it because we needed it. In hindsight, the old days seem pretty sensible!
What can we do about increased prices?
To some extent, we are our own worst enemy. The fact is there are cheaper electricity deals available in the market. But most of us couldn’t be bothered doing the research and switching to cheaper alternatives. So, what happens is energy companies keep us on their expensive default pricing plans. Even those of us that do switch eventually lose interest and after a year or two come off a cheap deal and go back to the high cost default deals offered by our electricity company.
This is exaggerated by the fact there are over 3,000 different electricity options available to Australian customers – and some of them are incredibly complex. It’s no wonder customers lose interest or couldn’t be bothered. It’s even possible that energy retailers have deliberately made things complex to make sure customers stay disengaged!
Industry estimates suggest that about 70% of people just don’t shop around and have remained with large, expensive incumbent electricity companies. These people are generally on deals that are about 20% more expensive than the cheaper deals available in the market. In summary, 70% of us are paying 20% more than we need to for our electricity. What an outrage!
MoneyBrilliant is going to help – introducing Bill Watch
We’re passionate about helping you make better decisions about your money and spending it more wisely. So, we are stepping in to help you get a better deal on your electricity and your gas – we think it’s better that you spend the money you will save on the things that are really important to you.
In the next few days we are introducing a new MoneyBrilliant feature called Bill Watch. While we build it and perfect it (and because we think it’s a nice thing to do) we are making it available to all our customers free of charge for a limited time.
Soon you will be able to find your electricity or gas bill in MoneyBrilliant and turn on Bill Watch. That will tell us you are interested in a better deal, as well as how much you spend and who you spend it with. We will use that information to find you the best deals available.
Remember, Bill Watch won’t be a one off, snapshot of the best deals in the market. It will be continuously scouring the market to find you a better deal. Oh, and we’ll let you know when we think your sneaky electricity or gas company has moved you off one of their attractive discount plans to a full price plan. Just another way that MoneyBrilliant will have your back.
If customers like you find Bill Watch useful we will continue to enhance it to cover other types of bills – so we can help you save money on all the things you buy. Every cent we help you save is more money you can put away or spend on the things that are really important to you.
Peter is the CEO of MoneyBrilliant. He has over 20 years experience in banking, insurance and accounting. Peter has three sons, ranging in age from 16 to 3, is a sport and fitness fanatic and a volunteer firefighter. He is passionate about improving people's lives through making financial services more accessible.