A quick look at retail discounts – win some and lose some

Once a month we like to look at retail discounts. We take the online offer from AGL for a set of selected retail addresses in Sydney, Melbourne and Victoria. We assume 8MWh of consumption for the households, a standard pricing plan (not time of use) and back out our calculation of the network costs.

Network tariffs in Sydney changed on July 1 but on our estimates only by about 3%. Calculating the network tariffs requires working through some “mumbo jumbo” in Brisbane where Energex show the numbers before GST and make you work hard to find the metering costs. As such the numbers need to be treated with caution.

In any event, churn in Queensland is relatively low and the market is not fully deregulated. Of course, network costs are not the only costs faced by retailers. We make no allowance for any changes in the cost of buying electricity and RECs or the retailer’s own costs including the customer care system and bad debts.

The costs of buying electricity and RECs have increased so this is putting some additional pressure on RETAIL margins not captured in these graphs.

However, from AGL’s case the reduction  in retail margins is more than offset by an increase in wholesale (generation margins) and by book profits on their rapidly diminishing but still significant REC  back book.

On the numbers we look at there is still more gross profit in Victoria but the gap to NSW is diminishing and “only” $16/MWh. NSW is now fully deregulated and should be the market to watch  over the next 12 months.

It’s really the smaller retailers that will notice the pressure more,  particularly those without access to dual fuel.

 

Figure 1: AGL retail offer history
Figure 1: AGL retail offer history

 

Figure 2: Retail tariffs showing network component
Figure 2: Retail tariffs showing network component

The Figure below, taken directly from the AEMO site, shows that all the churn that matters is in NSW and VIC and shows a modest increase in Victoria in recent months.

rsz_screen_shot_2016-08-01_at_11009_pm
Figure 3: Retail churn monthly, source: AEMO

 

David Leitch is principal of ITK. He was  formerly a Utility Analyst for leading investment banks over the past 30 years. The views expressed are his own. Please note our new section, Energy Markets, which will include analysis from Leitch on the energy markets and broader energy issues. And also note our live generation widget, and the APVI solar contribution.

 

David Leitch is a regular contributor to Renew Economy and co-host of the weekly Energy Insiders Podcast. He is principal at ITK, specialising in analysis of electricity, gas and decarbonisation drawn from 33 years experience in stockbroking research & analysis for UBS, JPMorgan and predecessor firms.

Comments

One response to “A quick look at retail discounts – win some and lose some”

  1. Andrew Roydhouse Avatar
    Andrew Roydhouse

    I advise everyone to carefully have a look at their power bills for the last 15 months and check what has happened to their kWh prices and daily connection fees.

    In our case, the ‘best offer going’ through a ‘group buying power offer’ – went up in kWh charges by 20% on 1 July 2016, the daily connection fee went up by over 10%. Unless you carefully checked the bill you would never have known. If you wanted to see the before and after prices you are referred to go look at their web site for more information – and then you have to work your way through the myriad of different schemes they have on the market (many no longer able to be obtained).

    So the ‘great’ offer from Click Energy is now one of the most expensive in the market. Unfortunately our last meter reading was in the first week of July so we are stuck being gouged until the first week of October.

    But the change in provider is underway now.

    Great business model – get people in with a very good offer and hope they don’t check your price gouging 13 months later.

    Caveat Emptor lives!

    What a coincidence – the very same thing happened with the group buying Health Insurance – one of the largest premium increases if not the largest in NSW – also history…

Get up to 3 quotes from pre-vetted solar (and battery) installers.