The fundamental principles of the energy market are failing Australia’s households

Australia’s retail energy market is built on a foundational principle that former regulator Ron Ben-David says has failed consumers: caveat emptor — buyer beware.

For decades, the system has placed the onus on households to protect themselves from bad outcomes by shopping around, reading the fine print and constantly switching providers. If they don’t, the logic goes, any poor outcome is their own fault.

That assumption, Ben-David argues, has not delivered competition or choice. Instead, it has produced a loyalty tax — quietly penalising customers who stay put, don’t constantly compare offers, or don’t have the time, confidence or expertise to engage with a highly complex market.

The result is a retail energy system that many households experience not as empowering, but as confusing, punitive and inescapable.

According to Ron Ben-David, the problem isn’t just high prices. It runs much deeper. The entire market, he says, is built on a flawed premise: that ordinary people behave like the rational actors described in undergraduate economics textbooks.

They don’t. And they never have.

Ben-David, a former chair of Victoria’s Essential Services Commission and now a professorial fellow at Monash University, spent years inside the regulatory machinery of Australia’s energy system. 

In a recent interview on the SwitchedOn podcast, he offered a blunt assessment: the retail energy market has been designed for a consumer that doesn’t exist — and since its inception has been wrapped in layer upon layer of protections to stop real consumers from being harmed by it.

A market no one chose

Unlike most markets, Australia’s energy market didn’t emerge organically from willing buyers and sellers negotiating terms. It was created by policymakers in the late 1990s, who decided electricity should be bought and sold through a competitive retail framework, with laws, rules and regulations written to make that happen.

“No one asked us whether we wanted to be in the market,” Ben-David points out.

Most households can’t opt out of electricity, or meaningfully reduce their reliance on it. And as homes electrify — replacing gas with electric cooking, heating, hot water, EVs and batteries — that dependence only deepens.

Yet the system continues to treat electricity as if it were a discretionary consumer good, like broadband plans or gym memberships.

The result is a strange contradiction: a market consumers are told to actively manage, optimise and “shop around” in — but one they are effectively trapped inside.

Buyer beware — and the loyalty tax

Only a small minority — roughly 20 per cent of Australian energy customers — actively shop around for a new retailer with any regularity. Not because everyone else is lazy or irrational, but because the market is dense, technical and exhausting to navigate.

“Almost half the population can look at an energy bill or an energy website and it doesn’t really mean anything to them,” Ben-David says.

Despite this, policymakers continue to insist that more choice, more products and more complex pricing structures will somehow deliver better outcomes. And when they don’t, regulators respond the only way the system allows: by adding more rules.

The regulatory game

Over 25 years, Australia has accumulated an extraordinary volume of consumer protections — hardship frameworks, default offers, comparison tools, disclosure obligations, marketing rules and complaint mechanisms — each designed to fix problems created by the last.

Ben-David questions the logic of building a market that requires constant protection.

“Wouldn’t it have been more efficient, more logical, to design a market where we don’t need to protect consumers?” he asks. “Because we’ve designed it for the consumers who are actually out there.”

Instead, the system has become more complex, less transparent and harder to trust. Regulators set rules. Companies find the gaps. Regulators respond with more rules. And the cycle continues — what Ben-David calls “the regulatory game”.

Crucially, he says, companies can comply with every rule and still deliver terrible outcomes for customers. Compliance becomes a box-ticking exercise, not a test of whether people are being treated fairly.

A duty, not another rulebook

Ben-David’s solution is deliberately provocative: flip the responsibility of the market.

Rather than forcing consumers to constantly defend themselves against bad deals, he argues energy retailers should be required to act in their customers’ best interests — through a consumer duty.

Not a rigid, rules-based checklist. Not another prescriptive code. But a shift in culture and expectation.

Under a consumer duty, retailers would be obliged to genuinely consider whether a product suits a household’s circumstances — including work patterns, appliances, insulation, flexibility and capacity to engage.

For example, it would not be in the best interests of a household where no-one is home during the day, with no battery, no programmable appliances and poor insulation, to be placed on a solar share deal that relies on cheap daytime power.

“They simply can’t take advantage of it.”

A consumer duty would not guarantee the cheapest deal at all times. But it would require retailers to at least try to serve the customer’s interests, rather than exploiting confusion, inertia or information gaps.

Ben-David notes that this logic is already accepted elsewhere in the economy. Doctors have duties of care. Financial advisers and mortgage brokers operate under best-interest obligations. None are perfect or easy to enforce — but few would argue for returning to buyer beware.

Why this matters for the energy transition

The stakes are rising fast.

As EVs, batteries, dynamic tariffs, orchestration platforms and home energy management systems become central to the grid, households are being asked to make more — and more complex — decisions. If the market is confusing now, it will be far worse in a fully electrified system.

Ben-David warns that without trust, the energy transition itself is at risk. If consumers don’t trust retailers, regulators or policymakers — if they believe the system is stacked against them — they will be far less willing to accept the scale of change required to decarbonise Australia’s energy system.

The federal government is expected to release a discussion paper soon on whether Australia’s consumer protection framework for energy remains fit for purpose. If it does little more than add another layer of rules, Ben-David argues it will miss the point entirely.

A consumer duty, he says, isn’t just about fairness. It’s about legitimacy — rebuilding confidence that the market is designed for households, not against them. Without that confidence, no amount of competition, innovation or technology will deliver the transition policymakers keep promising.

You can hear the full interview with Ron Ben-David on the SwitchedOn Australia podcast, and read his paper about a consumer duty.