Electricity prices keep going up! How do I pay less?

Electricity prices went up again last year. Measures put in place by the government to help drive down the cost of energy are having little impact on lowering prices and the stress continues to be felt by households. 

Last week the McKell Institute released a report indicating that households in Australia will continue to be hit by increases, suggesting households will be paying up to $434 more per year for their electricity by 2019.

The background

This got us thinking. And reading. And we revisited the inquiry into electricity prices that The Australian Competition and Consumer Commission (ACCC) started last year. Some of the elements included in the scope of the inquiry are:

  • How much it costs to provide electricity to consumers
  • Anti-competitive behaviour by energy retailers and the impact on us (consumers)
  • Consumer choice and anything that may impede that choice
  • Diversity and behaviour of customer segments and how that impacts retailers’ behaviour
  • The profitability of electricity retailers

Retailers were given the opportunity to respond to the ACC and responses were mixed, leading to some confusion about why retailers operate the way they do. Some examples of responses:

  • Origin says more needs to be done to help consumers understand the different plans and be cheapest for them. They suggest the practice of some retailers who discount prices off an inflated price rather than the standard offer contributes to customers’ confusion
  • AGL suggest that the levels of competition are fine, they say retail margins have decreased while network and wholesale prices have increased. They say the market is highly competitive and this has been a positive outcome for consumers
  • Alinta agrees that competitiveness between retailers should be increased, they, however, disagree that discounting is problematic. They do also suggest that network costs should be lowered

It is widely considered that wholesale and network prices have adversely affected the cost of electricity. With 70% of our natural gas being exported overseas, the uncertainty surrounding domestic supply increases the volatility of pricing in the market.

In a nutshell, this means the government needs to do more to ensure there is certainty about electricity supply in Australia, which may help with pricing volatility.

In certain areas some consumers have been able to reduce electricity consumption with the purchase of high-end low energy consuming products, however, a large amount of the market is not in the position to replace fridges, washing machines, etc. and their consumption continues steadily.

What we know

In the last six months, we have collected data for all the retail electricity plans in Australia.

In providing a Bill Watch service to MoneyBrilliant customers where we compare their plan with others available to them, we have been in the position of keeping tariff and plan data up to date on these plans. In doing that we’ve noticed a whole heap of stuff that the average consumer (including us 6 months ago) just don’t know:

Breaking it down

What is a Price Fact Sheet?

When it comes to comparing electricity offers, this is the most important document to read before agreeing to anything. Retailers are required by law to publish this for each of their products. It contains everything that is relevant to that specific plan including rates, discounts, benefit period and terms, as well as any conditions that you need to meet.

What is a Market Offer?

Market offers are contracts that retailers design to attract customers. They often have a time frame, mostly one year, but sometimes two or three years. Market offers sometimes offer lower supply and usage tariffs, and other times offer discounts off the standing offer. As well as discounts, market offers can include sign-up incentives.

Be aware we have seen some retailers offer discounts off higher tariffs than the standing offer, making it more difficult to understand the value. This means that if you don’t meet the conditions of the contract (e.g. pay on time) you will be paying more than the standing offer.

Market contracts may also contain exit fees if you wish to leave within the contract period.

What is a Standing Offer?

Standing offers generally cost more than market offers.

The standing offer is the offer that market offer contracts often revert to. They tend to be higher than market offers and are rarely discounted. If you haven’t switched retailers or negotiated on price for some time, chances are you are on a standing offer. Standing offers don’t have exit fees and retailers can only adjust the prices on them a certain number of times per year.

 What Discounts do retailers offer?

Pay on Time Discount – this is a discount on your bill that applies as long as you make your payment on time. Make sure you read the terms, as sometimes it’s off supply & usage, though most commonly just off usage.

Direct Debit Discount – this is a discount on your bill that applies as long as you set up a direct debit. This would imply that you pay your bill on time as it will be debited from your account on the due date. Make sure you read the terms, as sometimes it’s off supply & usage, though most commonly just off usage.

Guaranteed Discount – this is a discount from your bill that applies for the term of your contract. Make sure you read the terms, as sometimes it’s off supply & usage, although sometimes just off usage. Guaranteed discounts tend to be lower than other types, and more often off both supply & usage.

Which discount will be better for me?

Ordinarily, the highest discount will be the Direct Debit discount, followed by Pay on Time discount. The guaranteed discount is often the lowest. If you have a tendency to pay your bill late, we recommend you don’t take a plan with a discount for paying on time. This results in you being charged the tariff without a discount, which is generally the same or higher than the standing offer tariff.

Where you pay late, often the guaranteed discount will be cheaper for you, and at times the standing offer will also be cheaper.

If you are happy to pay by direct debit, you will probably find that is the cheapest option for most of the retailers.

How do you actually compare the prices?

MoneyBrilliant’s Bill Watch service will do it for you! Outside that you have the option of the government Energy Made Easy website, as well as other comparison websites.

Be aware that some comparison sites offer a limited number of plans to compare from. This may be based on tariff types or commission/referral fees.

At MoneyBrilliant we hold all the retailers broken down into postcodes and plans. This includes tariff amounts, discounts, solar rebates, etc.:

  • We enter the average daily usage
  • The plans are ordered from least expensive to most expensive and provide the annual amount based on this usage and these tariffs
  • We can exclude certain plans when customers ask – e.g. Pay on Time plans
  • We can include Green Energy if the customer wants to include this
  • We can calculate solar rebates and deduct these from annual cost
  • We then notify you of the 3 lowest cost plans for your usage in your area

What you need to know to do your own comparison:

  • Your average daily usage
  • Your meter type/s
  • The number of days in your billing period
  • The daily supply charge for each plan
  • The cost per kWh for each plan
  • The discount that would apply to your situation
  • Solar: your average daily feed in
  • Green Energy: the percentage of Green energy you are willing to pay extra for

What else to know

Retailers change their plans all the time. We have seen plans change weekly! This means that the plan and plan name you are looking at may not be there next time you look. Be sure to check the date on the Price Fact Sheet and the discount amount. Even if the supply and usage charges are the same, often the discount will change.

What can you do to reduce your energy bill?

Firstly, you can make sure you are on the lowest cost plan for your meter type and usage.

Secondly, you can implement measures around your home to be more frugal with your energy usage. Here are a few ideas to start with:

  • Switch off appliances at the wall when not in use
  • Only use your clothes dryer when absolutely necessary
  • Wash clothes in cold water
  • Use the air conditioner/heater sparingly
  • Turn off your hot water when you are away (some people turn it off overnight)



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