By Janine Rayner, Senior Policy Officer, Consumer Action Law Centre
It’s disappointing, in a recent policy paper entitled ‘Reconciling energy prices and social policy’, AGL failed to address some of the energy market problems that consumer advocates have been talking about for some time.
AGL argues that consumers will be better off if they are on a ‘market contract’, and that advocates should focus on encouraging consumers to participate in the competitive market as a means of reducing their energy bills. We maintain that competition in the industry is hampered by complex tariff structures that make it hard for households to compare tariffs and determine whether they’d be better off switching or sticking with their current deal.
The ability of energy retailers to increase their prices during the term of a fixed term contract also has negative effects on the competitive market place. Consumers may well ask ‘what is the point of shopping around for the best deal when the energy company can simply increase its prices?’ The time spent shopping around and assessing your usage habits may not be worthwhile if the cheapest plan can quickly turn into the most expensive by virtue of a price increase.
And while the industry may point to statistics about the number of households switching accounts to argue that completion is alive and well, much of this switching activity is a result of door-to-door sales, a type of sales even AGL has admitted has inherent problems—most households are not shopping around of their own volition.
We were surprised to see AGL suggest that financial counsellors should help struggling households onto the most appropriate energy tariff. But in making this suggestion AGL demonstrated a fundamental misunderstanding of a financial counsellor’s role.
The financial counsellors at our MoneyHelp service help Victorians keep the wolf from the door. They deal with credit card debts that can be upwards of $20,000, they assist those facing bankruptcy and, more generally, they try and get callers back on a safe financial path. Financial counsellors can explain consumer rights and obligations and direct clients to hardship programs or ombudsman services.
Sadly, when a financial counsellor sees a client struggling to pay their electricity bill it isn’t because they’re on the wrong tariff—it’s because the bill is one of a number of competing financial pressures, or because their income simply isn’t enough to meet the cost of living.
AGL should also remember that financial counsellors aren’t experts in energy tariffs, time of use issues or contract terms. If energy retailers aren’t producing products that account holders can understand and compare on their own, they’re failing their customers. Financial counsellors regularly refer struggling consumers to energy retailers’ hardship programs—it’s the staff in these programs that can ensure consumers are on the best tariff for their needs.
We agree that much can be achieved from energy retailers, governments and the community sector working together—what AGL calls ‘shared responsibility’. But the appropriate response from energy retailers is to tackle the areas they can control:
- Offering understandable and easily comparable products;
- Proactively identifying and assisting struggling households by offering payment plans and making sure they’re on the most appropriate tariff for their needs;
- Lobbying others in the industry to stop door-to-door marketing—a type of selling that effectively discourages consumers from making an informed decision.
We hope that in its future policy publications AGL addresses these issues which consumer advocates have raised time and time again.