Putting a stop to energy discounting that leaves consumers worse off

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The AEMC has made a new rule to prohibit energy retailers from making discounts appear bigger than they actually are.

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PRESS RELEASE

The AEMC has made a new rule to prohibit energy retailers from making discounts appear bigger than they actually are.

The rule aims to stop pseudo-discount deals that leave consumers worse off.

This rule was requested by the Federal Minister for the Environment and Energy, the Hon Josh Frydenberg, and is part of the reform package from ministers following the Australian Government’s roundtable with energy retailers last year to help deliver more affordable energy for consumers.

AEMC Chairman, Mr John Pierce AO, said preventing discounts off inflated base rates is another important way of protecting consumers and giving them more control over their energy bills.

“Discounting can work to benefit consumers as long as the details are properly disclosed,” Mr Pierce said. “But dodgy discounts deliberately designed to confuse consumers are not acceptable.”

“Confusion around retail price offerings also means most consumers don’t grasp the opportunities on offer.”

“That’s why it’s important to have rule requests like these – so competition in the retail market delivers for consumers,” said Mr Pierce.

The new rule starts on 1 July 2018.

In detail, it will prohibit retailers from discounting off market retail contracts where all the rates in the contract (such as usage rates and daily charges) are above the equivalent rates in a standing offer. In these cases, before discounts, consumers would be worse off compared to the standing offer.

“There’s no single deal that is best for every customer, given the different ways people use energy. So it’s still important of customers to shop around,” said Mr Pierce.

The AEMC’s final determination also recommends new civil penalties if retailers breach the Retail Pricing Information Guidelines which set out how energy prices must be presented.

These changes relate to one particular aspect of discounting. However, there are broader issues with retailer discounting practices. As explained in the AEMC’s 2017 Retail Competition Review, the use of conditional discounts, such as pay-on-time discounts, are also potentially confusing consumers. Many consumers are not aware that the discounts are typically off a standing offer price that is not set consistently across retailers, as each energy retailer sets its own standing offer.

The AEMC supports the work underway on these broader issues with discounting, including the Australian Energy Regulator’s revision of the Retail Pricing Information Guidelines and also the ACCC’s retail electricity pricing inquiry.

The AEMC will continue to liaise with the AER and ACCC on other rule changes and initiatives to make it easier for consumers to compare energy offers.

Victoria

Victoria has not adopted the National Energy Customer Framework. This means the National Energy Retail Rules managed by the AEMC do not apply in Victoria. Accordingly this new rule does not apply in Victoria.

Victoria has its own retail energy code managed by a state regulator, the Essential Services Commission of Victoria. The Victorian regulator can adopt a rule from the National Energy Retail Rules to its own retail energy code.

Media: Bronwyn Rosser, Communication Specialist, 0423 280 341, [email protected]

Key terms

Market offer contracts are set by energy retailers. Because the prices are set by the retailer, discounts can be offered. They have terms and conditions which must adhere to consumer protection laws. Outside of these minimum requirements, retailers have flexibility in how they design their offers for customers. This can include incentives, different billing periods and additional fees and charges for flexible service arrangements.

If you don’t want to sign up to a market retail offer, you can choose a standard retail offer, sometimes called a standing offer. With standard retail offers, prices are:

  • often set by the government (depending on where you live)
  • are generally higher than for market retails offers
  • and can’t change more than once every six months.

Customers on standard retail offers can’t get discounts like they can with market retail offers. In general, standing offers are used as a benchmark against which retailers may offer discounted prices.

For more information visit the Energy made easy website.

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1 Comment
  1. Greg Hudson 7 months ago

    IMO this story is slightly misleading. I’ve just moved into a new (for me) 20 year old house, and had plenty of time to examine the market for the lowest price after discounts, which is very easy in Victoria because there is a State Govt run comparison website listing every offer on the market. See:
    https://compare.switchon.vic.gov.au/
    BTW, they are offering a $50 payment just for using the site after 1 July 2018
    After entering all the variables into the above site, I ended up choosing the cheapest available (for me) which was Alinta at 19.8c/kWh on a fixed 24 hour rate (which is also solar compatible). Important, because I’ll have solar very soon.
    Now, compare 19.8c to the 29.8c I was paying at my old house just 6km away, using the same distributor, but a different retailer (Red Energy) who jacked up my prices 25% in Jan 2018, and 18% in Jan 2017. They WERE good initially (5 years ago) but greed got the better of them, and so they lost me when I moved.
    Since I signed up with Alinta (no contract, no exit fees, etc) prices have changed in the market and the latest ‘cheapest’ in now available from GoBird Energy, but it is such a small difference it is not worth changing (yet).
    With a super competitive market like we have (with approx 30 retailers to choose from), offering HUGE discounts to people to pay using a credit/debit card, and pay ON TIME using direct debit us customers are actually winning out big time. I hear people complaining all the time that they are paying too much, but all they need to do is shop around (assuming they can, and are not locked into a single supplier).
    Most people seem to be LAZY and take the easy way out, usually choosing to stick with one of the Big 3 (AGL, Origin, or the Singapore owned Energy Australia – who IMO should be forced to change their name to Energy Singapore, and not be allowed to fool people into thinking they are buying Australian. Sorry, that’s another topic.)

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