Australian households are being advised this week to consider switching electricity plans, as some energy providers have been found to be exceeding the safety net put in place to protect consumers.
The ACCC is urging households to contact their energy company and ask if a cheaper electricity plan is available, in light of recent price increases ranging 10-20% above the regulated safety net.
The electricity price safety net was designed to protect disengaged consumers. It establishes pricing rules that limit how much companies can charge customers on these plans, which are called ‘standing offer’ contracts.
About 10% of residential customers are on standing offer contracts, compared to about 90% that are on ‘market offers’. The ACCC has seen several letters recently sent by energy companies to market offer customers advising them of price increases above the safety net.
According to the ACCC, everyone has a right to receive a standing offer contract, but energy companies are not obliged to move customers onto it when they increase the price of an existing market offer contract higher than the safety net.
“We know that many Australians are likely paying more for electricity than they need to because their recently increased rates are higher than the safety net built into standing offer contracts,” ACCC Commissioner Anna Brakey said.
“You don’t necessarily need to change energy company to get a better deal; the simplest thing you can do is to contact your existing company and ask how your current plan compares to the regulated standing offer.”
Energy companies are obliged to display the percentage difference between any electricity plan they offer and the regulated standing offer, which is called the reference price. Recent letters seen by the ACCC from energy companies to residential customers in New South Wales, Victoria, South East Queensland and South Australia include the following information about price increases:
– ‘These new rates are 21% above the DMO reference price, however, can be 4% above the DMO reference price if you pay on time.’
– ‘This Energy Plan is 19% more than the reference price.’
– ‘Due to the variation in our rates from 1 July 2023, your plan will be 9% greater than the reference price.’
The ACCC estimates that an average household on a market plan that is now 21% above the reference price could save about $400 per year simply by moving to the regulated standing offer, assuming average consumption.
What’s more, that same household could save about $600 per year if they moved onto a market offer which was 10% below the reference price, assuming average consumption.
“The Government safety net price for electricity is there to protect you, and you should not be paying more than it”, Brakey said.
“We know many Australians are currently struggling with high energy prices and broad cost of living increases, so it is worthwhile to set aside some time this week to call your energy company and ask if a cheaper plan is available.”
Your loyalty could be disadvantaging you. Recent ACCC analysis shows that 90% of currently advertised market offers are below the reference price. There is also significant price variation between those market offers below the reference price, with some smaller retailers offering relatively large discounts.
“The case for switching to a different energy company is strong because the cheapest offers in the market appear to be reserved for new customers, rather than existing ones”, Brakey suggested.
“Moving to a cheaper plan through your existing energy company is the easiest way to save money right now, but there can be greater savings available for those who are willing to switch (providers)”, she added.
To find alternative offers, visit the ACCC’s website or the free Government comparison website Energy Made Easy.
