Save your energy: electricity consumers fail to get results

Unhappy with your current electricity provider? Why not switch? That has been the advice by policy makers in response to customer concerns about Australia’s electricity bills, which are among the highest in the world.

A new study, featured in last night’s ABC’s 7.30 Report, by Victoria Energy Policy Centre’s Associate Professor Bruce Mountain reveals that while switching rates are high, customers changing retailers leave only $45 less on the table than customers that remain with their retailer.

The report analysed over 48,000 electricity bills from different Victorian households, uploaded to the Victorian Government’s price comparison website.

“The analysis of our sample finds that while customers that switch retailers are likely to pay lower bills, across the sample the switchers leave only a little less money on the table (around $45 per year) than those who remained with their retailers. This difference is equivalent to about 16% of the “money left on the table” of the remainers, or around 3% of the typical annual bill.”

The research also reveals the level of consumer confusion around assessing the best deal. “The complexity and opaqueness of discounts seems to explain in part why many customers with big discounts actually leave more money on the table than customers with no or small discounts. In addition, the evidence suggests price comparison websites are often providing poor advice.”

The report also found that customers living in affluent areas with a higher proportion of educated residents do not seem to be any better at finding good deals than customers living in less affluent areas occupied by residents who are less educated.

Associate Professor Mountain says customers are prepared to switch, but are clearly not getting the results they want. “These results are cause for serious concern. Policy needs to focus on ensuring effective participation, not just participation.”

Associate Professor Bruce Mountain is the inaugural Director of the Victoria Energy Policy Centre. He is a well-known Australian energy economist whose research and advisory work has focused on the economic regulation of network monopolies, the analysis of retail energy markets, and the design of emission reduction and renewable energy policies.

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