Is your power discount in jeopardy?

Report warns energy companies may look to shore up profits by cutting discounts.

upset woman

If you’re one of those motivated money-conscious individuals who shops around for services in order to get the best deal, the Government’s plan to simplify the confusing energy market may actually cost you money.

In the wake of historically high power prices and confusing plans, the Australian Competition and Consumer Commission (ACCC) released its Retail Electricity Price Inquiry last June containing 56 recommendations. Since then, the Government has proposed a default market offer (DMO) that would set a regulated basic power price.

However the Grattan Institute warns that if the DMO is set too low, electricity companies could remove some discounted offers in order to maintain profits.

Effectively, consumers who have done the hard yards to lock in a good discount would be disadvantaged.

“The risk remains that retailers simply remove the best market offers or increase their prices to offset losses from reduced standing offers,” the Grattan Institute report says.

“In our view, a disengaged customer (who hasn't searched for the best deals) should not receive protection over and above what an engaged customer can reasonably achieve in the market.”

Consumer comparison group CanstarBlue expects that the regulated default offer will save some households between $105 and $165 per year, depending on their state and electricity network.

EnergyAustralia, Origin and AGL reported strong profits last month, but Origin has estimated it would post a $44 million reduction in pre-tax earnings from the 2019-20 financial year as a result of the DMO.

The ACCC says: “There is a risk that lower-priced offers will be withdrawn from the market, to the detriment of active or price-responsive consumers.”

CanstarBlue spokesman Simon Downes told Fairfax Media that a regulated price would remove some of the imbalance in the market, but should not penalise consumers who have been engaged in the market.

He said: “Households that have been paying the high standing offers have been subsidising the savings of those who do shop around.

“But people who can least afford [it] are often left paying the most. It should be set so it doesn't penalise people at either end of the spectrum.”

Energy Minister Angus Taylor said last month that the DMO would also act as a reference price, requiring energy retailers to advertise their standing and market offers against a common price benchmark.

He said the Australian Energy Regulator (AER) had estimated savings to customers on standing offers of:

  • up to $174 for customers on a flat rate tariff
  • up to $218 for residential customers on a controlled load tariff
  • up to $937 for small business customers on a flat rate tariff.

In June last year, 15 per cent of households in NSW were on standing, undiscounted offers, as well as 16 per cent in Queensland and nine per cent in South Australia.

Have you been able to make sense of the energy sector and lock in a good deal? Are you now concerned that deal might be taken away?

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    COMMENTS

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    Tom Tank
    21st Mar 2019
    11:09am
    One upon a time our State owned electricity providers existed to generate and supply customers throughout each Sate with Electricity.

    Since privatisation these entities now exist to generate and supply profits to their owners, many of whom are overseas owned. The reason our electricity prices have increased is because of the maximisation of those profits.
    Anonymous
    21st Mar 2019
    12:38pm
    Yes - we were lied to by the LNP.
    jackie
    21st Mar 2019
    1:55pm
    Knows-a-lot....yes we were lied to by this Government but don’t forget Guillard deregulated them too.

    The Australian public need a Government like NZ has.
    Cowboy Jim
    23rd Mar 2019
    8:46am
    jackie - I don't like their 15% GST one bit. Talking to Kiwis with a foot in each country tells me we are better off here. The rich pensioners are better looked after in NZ as there is no asset and income test to access the pension at 65 years of age.
    Tom Tank
    21st Mar 2019
    11:09am
    One upon a time our State owned electricity providers existed to generate and supply customers throughout each Sate with Electricity.

    Since privatisation these entities now exist to generate and supply profits to their owners, many of whom are overseas owned. The reason our electricity prices have increased is because of the maximisation of those profits.
    jackie
    21st Mar 2019
    2:02pm
    Tom Tank... Privatisation has been the worst thing to happen to this country. The worst part is that it makes profits at the expense of its customers. These corporations don’t pay tax and reduce jobs so their CEOs can collect more money for themselves. It’s pathetic when people overseas have cheaper gas bills using Australian gas than Australians. Foreign ownership does not look after Australians and Governments that sell off our assets don’t know how to Govern.
    Rae
    22nd Mar 2019
    8:42am
    Unfortunately electricity is only the tip of an iceberg of privateers now gouging the Australian population.

    Those caught up with delays in privatised health system or privatised age care system or unemployed caught in privatised training or employment providers are suffering badly.

    Allowing political parties access to public assets to sell to whomever they liked was never going to benefit citizens.

    Privatisation was an economic policy designed by economists in Berlin in 1934 t de o exactly what has been done here.

    I'm glad my dad who fought against fascism in WW11 isn't here to see how easily we allowed fascist policy to create poverty in Australia.
    Charlie
    21st Mar 2019
    11:40am
    North Queensland can't get discounted offers because there is only one supplier, Ergon Energy. So how would the percentage of offers be anything like another place that has competitive suppliers.
    jackie
    21st Mar 2019
    12:00pm
    With all these supposed discounts around and choosing the so-called best ones for me from the Government website, my bills keep on increasing. I use less power than ever but bills keep on increasing. Australians are blatantly being ripped off by these foreign-owned companies and their profits are going overseas offshore instead of staying in Australia. We have fools in Government that can't manage to tie their own shoelaces.

    21st Mar 2019
    12:35pm
    There are no "good deals" from the energy sector. The fact that they can offer discounts of 20-30% show just how much they're gouging the public. The sooner there's a Royal Commission into them, the better.
    jackie
    21st Mar 2019
    2:08pm
    Knows-a-lot...The so called good deals are not less than what you paid 2 years ago. We are being conned. Wake up! It’s all just a diversion to keep you busy and distracted by the lies and rip offs. Each time you change providers you have to do it before the 12 months is up and they swindle you then during the change over.
    Greg
    22nd Mar 2019
    12:35am
    These discounts are not real, if you pay on time you get the discount - I would say the vast majority of people do pay on time regardless hence the power companies are working on a price of the base rate less that discount as being their profitable price.

    And as I assume you are aware the discounts can't be compared IE: 30% discount from company A is less then the 40% discount from company B, HOWEVER, the discounts are worked off their base rates and company B may have a higher base rate so when you calculate it company A is actually the better option. Like I say the discounts don't really mean much.

    There's a furniture retailer who regularly sells their goods at 50% off, they'll have a sale a few times a year, year after year. They have a guarantee that if you buy at full price and they have that item on sale within 6 months they will refund the difference - hence they are actually selling all their goods at the 50% off so obviously that 50% off price is their profitable price, they are making money. It's a marketing gimmick to get people in, they see the ads for 50% off and think we should go there and buy that piece of furniture.

    It's similar with these energy companies, their profitable price is that lesser price including the discounts, it's all marketing crap that gets some people in.

    jackie - some players where I live have come up with better deals over the last couple of years, I've switched twice now and very happy that I did a little research and saved some money.

    21st Mar 2019
    12:37pm
    The nincompoop LNP has privatised so many things - including Telstra and electricity provision - promising lower prices. Look how they lied to us! prices have gone up and up and up. Maybe the future Labor government can do something about this.
    KSS
    21st Mar 2019
    12:54pm
    Highly doubtful. There will be steep increases certainly in the short term if Mr Shorten and the watermelons have their way with closing down mining and increasing renewables.
    Anonymous
    21st Mar 2019
    3:38pm
    You don't know much at all, Knows-a-lot (not!) if you are silly enough to think Labor will stop price rises. They are offering nothing but massive tax increases and massive over-spending.
    Charlie
    21st Mar 2019
    6:12pm
    In Queensland it was labor's Peter Beattie who deregulated the electricity industry in 2007.
    KSS
    21st Mar 2019
    12:52pm
    With the exception of those in the few places where there is no competition (e.g. parts of QLD), if you can't be bothered to do the research then pay the 'lazy tax'.There is plenty of help available to do comparisons, not just on power charges but all forms of insurance, bank loans, credit cards, so use it. Don't complain because you don't look after your own money.

    I do agree with Knows a lot, that the ability to offer 20-30% discounts to 85% of people (in NSW) clearly indicates pricing is awry somewhere. After all the potential to have to discount at that rate to 100% of customers is obviously unsustainable otherwise.

    21st Mar 2019
    12:58pm
    The discounts are peanuts, this disgusting state of affairs caused by bloody idiot politicians who have sold off utilities to private profit oriented companies.
    jackie
    21st Mar 2019
    2:10pm
    Our politicians are puppets to corporations and the rich. Our economy is judged by the amount of rich we have not the poor.
    floss
    21st Mar 2019
    2:38pm
    What can one say the people have finally woke up , you were told that if the Liberal Premier of N.S.W was returned he would sell the poles and wire which true to his word he did you had your chance to stop the sale of TransGrid and you blew it.
    MITZY
    21st Mar 2019
    2:42pm
    Yes, years ago we never ever looked twice at the cost of our electricity bills, water bills, council rates, insurances etc. Come the new financial year when this change occurs will tell the story. I'm with Red Energy, at least its not an overseas operated set-up. I get 12% discount for paying on time not on just the usage charges but also the service charges. That's a big rip-off these days. Services charges when first applied to our bills were about 70cents, have a look at your bill these days and depending on how frugal you are with your energy they can be just as much as the bill itself. The pensioner discount on my Council rates has basically not moved upwards in 18 years but the rates themselves certainly have.
    Retirement on the single aged pension for many is just existing, they wouldn't be able to afford the "Mediterranean Diet" - fresh fruit and vegies happen to be the most expensive items in the supermarket. Processed foods and take-aways (heaven forbid) the cheapest, but then as the saying goes: "You dig your grave with your knife and fork" !!
    Alexii
    21st Mar 2019
    7:53pm
    Privatisation of state owned enterprises has been one of the worst things that state and federal governments have done over the past few decades. Absolute madness.
    musicveg
    21st Mar 2019
    9:02pm
    Discount or no discount, it goes by how much per kwh they charge. I am over the discount offers, all misleading, I am now with Red Energy a simple plan with only pay on time discount and lower rates, compared to what I had before I am saving money even over winter.