Energy companies regularly offer discounts to Australians, but these “discounts” often hide the true costs faced by customers. According to the Australian Market Energy Commission’s latest Retail Competition Review (released yesterday), “some offers with discounts of less than five per cent are better than those with discounts of more than 20 per cent”.

While many retailers are competing on discounts, the biggest discount may not always equal the cheapest price, particularly where the discount has conditions such as paying the bill on time. Disappointingly the AEMC and industry have no plans to improve retailers’ practices.

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“A discount isn’t really a discount if all it’s doing is hiding the real cost,” said Gerard Brody, CEO of Consumer Action Law Centre. “It can also limit competition because consumers aren’t shopping around on the best price”.

“The problem is that the discounts are “off” various maximum prices and, unless the actual price is clearly stated, discounts can be smoke and mirrors to trick customers. It’s really disappointing that energy companies think this is an appropriate way to treat Australians around the delivery of an essential service.”

The report from the AEMC found that competition was effective in Victoria, but Consumer Action said that the detail of the report suggests consumers aren’t faring well from competition. It pointed to the following findings:

  • That consumer complaints to retailers continue to be high, increasing by 41 per cent in 2013/14;
  • That 11% of Victorians are on expensive standing offers, and older customers are more likely to be paying these higher prices. This does not include customers who have reverted to standing offer-level prices after their discounts have expired;
  • That awareness of price comparison services is very low—less than one percent of residents surveyed could name the Your Choice and My Power Planner websites;

Consumer Action said that for competition to work for consumers, retailers should be forced to compete on their prices, welcoming a proposal from the Australian Energy Regulator that would prohibit a retailer offering a discount without also stating the tariff to which the discount is applied.

“Competition could be benefitting Australians in the energy market, but this report does nothing to address that – it simply assumes that contestability in the market is good in itself. We need better rules to help Australians compare products and get the best deal for them”.

Photo Credit: Ervins Strauhmanis via Compfight cc