Savings as a Service - Issue #15
It's been a tumultuous time in the retail energy market over the past few months. Now more than ever, energy consumers need to stay vigilant.
It's been a wild ride in retail energy this year. In our last edition, we warned our subscribers to expect an average of 20% to 30% price increases to their retail electricity bills after the July/August annual price changes.
The trouble with averages is that they can mask more extreme values. Some Bill Hero subscribers on monthly billing cycles have already seen their bills are up well over 40%, and if you're on a quarterly billing cycle, then brace yourself; bill shock is near.
Our roundup of recent retail energy news
Retail overspend in Victoria
In Victoria, retail energy is regulated by the Essential Services Commission, and the regulatory regime for Victoria is considered to be stricter than in other NEM states. For example, Victoria was the first jurisdiction to force retailers to include 'best price' information in bills to inform customers if there is a better price available from the same retailer. AER has recently applied this same requirement in the other NEM states. Victoria also has 'price surety' regulation that prevents retailers from increasing their prices more than once per year.
So you'd be forgiven for thinking that Victorian energy consumers should be relatively well protected from overcharging. Unfortunately, a recent investigation demonstrates this is not the case at all.
The main findings are damning:
- Twenty-eight per cent of Victorian residential households could have saved $100 or more last year by moving to their retailer’s best offer.
- Around six per cent could have saved between $250 and $400 per year.
- A further six per cent could have saved over $400 per year.
In aggregate, over the last financial year, Victorian households could have saved $191 million on electricity bills and $89 million on gas bills had they been on their own retailer’s best offer.
This is an extraordinary analysis, demonstrating that energy retailers are so good at applying Loyalty Tax that they managed to squeeze a total of $280 million out of their own customers in Victoria by making sure they stay on sub-optimal plans.
This $280 million figure understates the true level of overspending in the Victorian retail energy market because it does not assume switching to the absolute best-priced plan. It assumes only that customers could switch to the best-priced plan from their current retailer.
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AER State of the Energy Market
The Australian Energy Regulator’s (AER) latest State of the energy market report highlights that the wholesale price shocks of 2022 have now receded; however, the vulnerabilities that cause the 2022 price shocks remain. This includes the lack of a domestic gas reservation policy for East Coast Australia and limited hedging opportunities for retailers.
Average wholesale electricity prices are now significantly lower than the record highs seen in 2022.
Unfortunately for energy consumers, wholesale spot prices are largely theoretical — what really matters is retail bill prices, and these prices remain very high, impacting households already suffering broad cost-of-living pressures.
The expectation is that decreasing wholesale prices will roll through to retail bills eventually. Still, there are significant new costs yet to be absorbed in the retirement of legacy coal generation assets and the commissioning, including network build, of renewables. Significant network transformation investments are required to deliver a renewable grid, which will continue to cause high retail prices.
A welcome change to the retail energy landscape is that, finally, the AER's 'Better Bills' regulations have come into force.
You might have noticed that your most recent electricity bill features some new design elements, with a refresh to the look and feel.
It's not just your bill and your retailer that has done this; every retailer has had to update their bills to accommodate new requirements.
Several changes should help energy consumers understand their bills better:
Time of Use bills must now, at last, for the first time, actually document what times of day and days of week correlate with 'Peak', 'Off Peak' and 'Shoulder' tariff periods.
This long overdue reform finally makes it realistic for energy consumers to manage their energy consumption to avoid high-priced usage.
Final bills must now be clearly labelled, so consumers should be less confused when they receive the final exit bill from their old retailer after having just switched to a new retailer.
In the press
More people than ever are now accessing hardship programs than at the peak of the COVID-19 pandemic.
Origin Energy general manager for government engagement Tim O'Grady told a Senate inquiry into the cost of living crisis that the number of customers it was now supporting had risen by 22 per cent compared to last year.
The Australian Energy Regulator has sounded the alarm over the growing market power of government-owned Snowy Hydro as an increasingly dominant provider of backup power for renewables, which it says has the potential to further increase costs in an electricity system where households are already struggling with higher bills.
Snowy is a very interesting energy industry player - it is a government-owned energy generator with a significant retail presence through its wholly owned retailer subsidiaries Red Energy and Lumo Power and the Direct Connect residential connections service.
Ajust your expectations
At Bill Hero, we are all about helping energy consumers achieve the best outcomes in the notoriously difficult retail energy market. Our focus is on price, but of course, we understand that price is not the only thing important to consumers.
One of those elements is customer service, which is particularly important when there is an issue, complaint or dispute to resolve with your retailer.
We're delighted to introduce Ajust, a new business developing a 'fast, fair and free' service to help consumers engage more efficiently and achieve better outcomes at the difficult point of raising complaints, not only with their energy retailers, but with their banks and telcos as well.
Bill Hero customer Sue had signed up for a special offer with OVO Energy. When she received her first bill, she knew something went wrong as it was unexpectedly high. After she struggled to get in contact with OVO Energy, Sue asked the team at Bill Hero for guidance on how she could resolve the issue. The team told Sue about Ajust - a technology platform that helped consumers resolve issues with businesses. Sue found Ajust easy to use and within just a few minutes, her complaint had been sent to OVO Energy. Just 24 hours later, Sue received a call from OVO Energy to say that had resolved the issue and credited $185 to her account.
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