The Australian Energy Market Commission (AEMC) has admitted that competition among energy retailers is not delivering ‘expected benefits’ in its annual retail energy competition review.
Consumer Action Law Centre and PIAC’s Energy and Water Consumers’ Advocacy Program (EWCAP) are calling for stronger action by energy retailers and regulators to ensure that the market is working for consumers.
Gerard Brody, CEO of Consumer Action Law Centre, said that the AEMC’s report was the first time the Federal rule-maker had really called out the sub-standard practices of many energy retailers and the failure of competition to deliver consumer benefit.
“The AEMC has found that many retailers continue to offer complex tariff structures and conditional discounts leaving people confused and dissatisfied. Most of the discounted offers promoted in Victoria are conditional on paying on time. In effect, these are huge late payment fees that unfairly hit those doing it tough”.
The AEMC report also found that trust in energy retailers has dropped from 50 percent in 2017 to 39 percent in 2018.
“Positive sentiment about value for money in banking is 30 percent higher than it is for the energy sector. This is not just because of high base prices, but because retailer marketing and contracting strategies are designed to bamboozle. Perhaps we need a Royal Commission into energy retailers”, said Mr Brody.
Miyuru Ediriweera, EWCAP Senior Policy Officer, said that while PIAC welcomes the ongoing work of the government and regulators to increase transparency in the market, this is not sufficient to improve consumer outcomes.
Mr Ediriweera noted the finding that the deregulation of retail energy markets has not delivered for consumers, and agreed with Mr Brody that disadvantaged households are hit the hardest.
“While market competition is generally associated with the development of new, innovative products, this has not played out in the energy retail space,” said Mr Ediriweera. “Even though there has been an increase in consumers signing-up with smaller retailers, they are not seeing the innovative deals that were predicted in a more de-regulated retail market.
“Fundamentally, Australian energy consumers expect to pay a fair price for their essential energy services, and they need more than just extra information from governments, regulators and retailers to ensure that innovation occurs, and that the price they are paying is fair.”
Consumer Action Law Centre is calling for the Victorian Government to intervene by ensuring retailers are required to offer a fair price.
“Victorian electricity legislation states that the State Government can’t re-regulate energy prices unless the AEMC concludes competition is not effective. This AEMC report is a clear signal that competition isn’t working, so it’s time for the Andrews Government to act.”
A bipartisan report was provided to the Andrews Government in August 2017, which recommended that energy retailers be required to offer a ‘Basic Service Offer’. A Basic Service Offer would require electricity retailers to offer Victorians a fair price guarantee set by the Essential Services Commission, based on the reasonable cost of an electricity retail business.
“The Andrews Government rightly agreed to scrutinise the Basic Service Offer proposal earlier this year. This AEMC report should be a further wake-up call that energy retailers can’t be trusted to fix these issues on their own”, said Mr Brody.
A survey commissioned in January 2018 found that 66.5% of Victorians said they would either support, or strongly support a Basic Service Offer.