Graph of the Day: Why Australian households hate energy companies

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.