In a deregulated energy retail market, switching to a cheaper energy offer is one important way for consumers to save money on energy bills. This is, however, difficult in a complex market where most consumers struggle with the confusing array of tariff options. For low income and disadvantaged consumers the task can be much harder and yet these are the very groups that could benefit most from lower prices.
CUAC’s latest research Tariff switching among older energy consumers explores the causes of lower switching rates among older persons and considers the policy and programs that might support increased switching. The research originated from work CUAC has been undertaking to support the implementation of the Department of State Development, Business and Innovation’s (DSDBI)’s Energy Information Fund (EIF). The EIF provides grants for not-for-profit organisations to develop and deliver energy consumer information, targeted at disadvantaged, vulnerable or hard-to-reach consumers.
Our research findings are based on a desktop review of Australian and UK academic research and policy regulatory reports on older persons in relation to: switching in energy and similar retail markets; internet access, use and skill levels; and provision of information and advice. CUAC also consulted with National Seniors Australia (Victoria) and Council on the Ageing (Victoria). Key findings are summarised below:
Reforms to support switching
Older persons tend to use less and spend less on energy than average. It appears that they are also less likely to switch energy contracts and thus miss out on likely savings from a cheaper offer. Reasons for not switching included business loyalty, believing it is not worth the effort, loss aversion, maintaining the status quo, and lack of clarity and transparency about deals. To reduce the barriers to switching for older persons, CUAC has recommended:
- A reform of the transfer or switching process to make it simpler and more timely for consumers
- That the Victorian government support a CUAC and Consumer Action Law Centre rule change application which requests the Australian Energy Market Commission to amend rule 46 of the National Energy Retail Rules to prevent retailers from unilaterally varying tariffs in fixed term contracts – This will give consumers more certainty in how much they are likely to pay over the contract period
- That retailers improve their trust and reputation through measures including better financial hardship policies, committing to targets to reduce disconnections and complaints, implementing a best practice hardship guideline, and improving customer service
Supporting access to price comparators
CUAC’s research identified the digital divide as another obstacle to switching for older people. Older people are less likely to use the internet and when they do, they use the internet for a limited range of activities (e.g. email) and may not know how to search and navigate more widely. The lack of skills, confusion about technology and the physiological effects of ageing may deter older persons from using price comparison websites such as My Power Planner (electricity) and YourChoice (gas) in Victoria, or the Australian Energy Regulator’s (AER’s) Energy Made Easy price comparator in the national energy market. This impedes their ability to make sensible switching choices. These findings suggest that to support older people’s access to these websites, the websites need to be as simple as possible to use. CUAC has recommended:
- Reducing the number of ‘click-throughs’ required to reach the offer comparison results page on the My Power Planner
- Improving the ease and simplicity of consumer access to a My Power Planner compatible smart meter data file from their retailer or distributor
- Presenting My Power Planner as a stand-alone website separate from Switch On so that consumers can find the comparator easily
- Removing some of My Power Planner’s detailed imagery and text as this may be off-putting to some users
The AER is revising the Energy Made Easy price comparator to improve its usability based on feedback from consumer testing and changes will be implemented in the second half of 2014. The simpler results page, better filtering options, a ‘how to use’ video guide and greater prominence of the helpline number for consumers who wish to speak to a person are likely to benefit vulnerable consumers as well as older persons.
Positioning government and regulator price comparator websites as research and information activities could potentially boost usage by older people. This is as older internet users tend to use the internet for research rather than online shopping, likely due to security concerns. Messaging could highlight that government and regulator price comparators only compare offers and do not carry out a switch or involve making a purchase; that they are safe and secure to use and that they are meant to help consumers compare offers by reducing the complexity of comparisons. Highlighting the benefits of switching in realistic dollar amount estimates of potential savings and the services of the Energy and Water Ombudsman (Victoria) to address any problems which arise through the awitching process could help people overcome their status quo bias. To assist non-internet users, who lack the resources for internet access whom lack access to make effective switching decisions, CUAC recommends a telephone service to assist consumers with comparisons could complement government and regulator price comparator websites. These services (already available through MyChoice) can carry out searches based on consumer information and provide hard copy mailouts of the results.
Information & advice
The CUAC rsearch found that interventions such as the provision of independent information and advice can facilitate switching amongst older persons. This, however, needs to take into account the physical and cognitive changes associated with ageing, their learning and decision-making styles, and their preference with regard to information advice and support provision. For older people, ‘information’ alone is insufficient; instead advice (recommendation or opinion about a course of action) and support to fully understand and act on information may also be needed. Face-to-face advice from trusted sources complemented with independent tools and printed materials appropriate to people’s abilities, knowledge, language and culture, reflecting the diversity of the audience’s experiences, and offering representations older people can relate to, are the most effective ways to provide education.
Note: CUAC has developed two brochures ‘assisting older people with energy costs: A guide for community organisations’ and ‘three ways to save on energy bills’ produced with funding from DSDBI. These can be downloaded from our website.