Graph of the Day: Why Australian households hate energy companies

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Australia boasts some of the highest ‘churn’ rates of electricity customers in the world. Special offers made to switching customers are subsidised by the majority.

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Is there anything less loyal than an energy customer? The Australian energy market boasts one of the highest rates of “market churn” – the number of customers who change their energy providers – in the world. In 2011, Victoria had the highest in the world with more than one in four customers changing utilities, and it seems that the churn rate  – as our graph of the day shows – is increasing, at least on a national basis.

Energy retailers say this is a sign of competition – Victoria has Australia’s only deregulated retail energy market, although the churn rates remain high in other states.

That may be, but it’s costly to customers. AGL last year said it cost nearly $200 to “buy a customer” – relating to the size of the discount offered to new customers. And someone has to pay for it. Guess what, it’s the other customers.

In Queensland, for instance, the Queensland Competition Authority calculates an appropriate “headroom” for electricity retailers to play the market. This is over and above the normal “retail margin” that the energy utilities enjoy, and is paid for by all consumers.

In fact, the total amount of headroom proposed by the QCA is greater than the cost of green energy schemes. So even though the majority are paying extra so that the utilities can offer discounts to a minority of consumers, you don’t hear (conservative) governments complaining about this as much as they do about green energy schemes. Is there an inconsistency here?

This Graph of the Day is provided by Origin Energy, to highlight how they had capped their rate of churn in the gas and electricity retail markets – except for the NSW market. Another of the big three energy retailers, EnergyAustralia this week said its churn rates were also below average in NSW and Victoria, and AGL said today its churn rates of 18.9 per cent were well below the national average of 23.2 per cent (up from 22.2 per cent last year).

Which makes you wonder, who is losing market share? It certainly stumped leading analyst John Hirjee from Deutsche Bank, who last year noted that all three energy retailers had claimed below market churn rates. “We continue to scratch our heads as to how” this is so, he said in a note to clients.

 

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4 Comments
  1. Beat Odermatt 6 years ago

    The real solution would be for companies to show some basic respect to existing customers. We see it in many industries (telecommunication, health insurance, power, banking), where attractive new deals are valid for a short time only. These companies hope that their customers are too busy to check for more competitive deals. I am getting fairly “pissed off” when I see that my health insurance company is offering better deals to new customers. I would not be surprised that in a few years time, many residents will remove themselves off the grid. With systems such as the Ceramic Fuel Cells, solar power installations and new affordable back-up systems, the grid may lose its relevance altogether. Recent black-outs in Adelaide have shown that the grid is no longer a reliable as a back-up. It may be better spending $300.00 for a cheap generator for emergencies.

    • Peter 6 years ago

      I’m with you.. It is absurd the new customer sign up deal is actually legal. I await my steak knives

  2. Ronald Brak 6 years ago

    There is no real competition in the retail electricity market as generally customers are quite simply unable to tell how much they will have to pay if they join a particular scheme. I certainly can’t tell and I’ve studied like maths and stuff.

  3. Lars 6 years ago

    Essentially there is little competition as others have stated. What the energy companies DON’T tell you is that their offers are available to existing customers. So you can sign up with them and and get say a 12% discount if you commit for 12 month contract. After the contract is over they fail to let you know that it is coming up for renewal and would you like to recommit with xx deal. No what happens is that you then convert into a default rate which is higher and without discount.

    I found so many inconsistencies in the billing I received for both my gas and electricity that I sent quite a long email asking for a response to 6 inconsistencies on each type of bill over a 12 month period. Never got one – so I contacted EWON the ombudsman. Then immediately got a response but only to resend my email to a person with a name. But this time I resent my email but also demanded a refund of some $260. A start I thought. Again no response so I advised that I would contact EWON again. Then got immediate response that they would credit both gas and electric bills with $150 each (total $300) – I had at the time already resigned with the supplier with their top discount offer. But they refused to answer my questions – clearly they were doing things that were deceptive to say the least. Billing is complicated despite it being a bundled bill. You do need to know the details behind how they bill – something they do not tell you. One website that is certainly worth looking at is http://www.myenergyoffers.nsw.gov.an There might be similar website in other states – this one set up by IPART the pricing regulator. Here you can type in your postcode and see all available offers and you will not be surprised to see very similar calculation methods (its regulated). The only difference is the discounts they are offering. So I recommend that if you have gone off contract – pester your retailer, ask for a refund and then perhaps resign with them on the discounts they are offering. But first – do your homework and really try to understand your bills. Looking at the IPART website can help you understand this better.

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