The cheap­est en­ergy plans on of­fer

An­nual elec­tric­ity price hikes join death and taxes as one of life's cer­tain­ties

Money Magazine Australia - - CONTENTS - MICHAEL MO­RAN

It’s a new fi­nan­cial year and, like clock­work, the elec­tric­ity bills for NSW, Queens­land and South Aus­tralian con­sumers have leapt higher. In south-east Queens­land, July 1 also marked the com­mence­ment of dereg­u­la­tion in re­tail elec­tric­ity prices for the En­ergex net­work, bring­ing south­east Queens­land into line with Vic­to­ria (Jan­u­ary 2009), South Aus­tralia (Fe­bru­ary 2013) and NSW (July 2014).

So what does this mean ex­actly? Sim­pli­fied, the Queens­land Com­pe­ti­tion Au­thor­ity (QCA) no longer sets a bench­mark elec­tric­ity of­fer for you as a res­i­den­tial or small busi­ness cus­tomer, an of­fer that all en­ergy re­tail­ers need to pro­vide. Ac­cord­ing to the Queens­land Pro­duc­tiv­ity Com­mis­sion (QPC), this will re­sult in “in­creased com­pe­ti­tion with the en­trance of new en­ergy re­tail­ers and lead to po­ten­tially lower prices”.

Now, I com­pletely agree with the first part of the QPC’s rea­son­ing for dereg­u­la­tion. Yes, new re­tail­ers will en­ter the re­tail elec­tric­ity mar­ket on the En­ergex net­work. Al­low­ing a busi­ness to in­de­pen­dently set a price for its prod­uct or ser­vice cre­ates a far more en­tic­ing en­vi­ron­ment in which to op­er­ate. There is also strong ev­i­dence to sup­port this out­come from ear­lier dereg­u­la­tion in the other states.

As for the sec­ond part of the rea­son­ing for dereg­u­la­tion, it’s worth high­light­ing the QPC’s use of the words “po­ten­tially lower prices”. Elec­tric­ity prices across all dereg­u­lated states have done any­thing but go down since dereg­u­la­tion. In fact, year-on-year prices have only in­creased since dereg­u­la­tion.

The rises can­not be at­trib­uted solely to dereg­u­la­tion, of course, but there is an­other price out­come for con­sumers that can be.

Con­sumer choice in an en­ergy re­tailer does come at cost. Ev­i­dence of this is that, de­spite an in­crease in com­pe­ti­tion and the num­ber of of­fers avail­able to con­sumers in dereg­u­lated states, the dif­fer­ence between the best and worst of­fers has also dra­mat­i­cally in­creased. As of June 2016, there was a $340 dif­fer­ence between the best and worst of­fer avail­able to res­i­den­tial cus­tomers on the En­ergex net­work (us­ing av­er­age an­nual us­age for a four-per­son house­hold). At the same time, in the dereg­u­lated and most com­pet­i­tive re­tail en­ergy state of Vic­to­ria, the dif­fer­ence between the best and worst of­fer was $633, nearly twice that amount. So in terms of sav­ings, if Vic­to­rian house­holds don’t pay at­ten­tion and shop around from year to year for a bet­ter than av­er­age of­fer, they’ll find them­selves los­ing out by roughly the same amount as a house­hold in south­east Queens­land pays with the ab­so­lute worst on-mar­ket of­fer.

The big ques­tion we need to an­swer is: does hav­ing a dereg­u­lated price re­sult in a lower price of elec­tric­ity for con­sumers? On av­er­age, it would seem not. How­ever, this is a com­plex ques­tion to an­swer. Ob­vi­ously, aside from dereg­u­la­tion, there are more sig­nif­i­cant fac­tors that in­flu­ence the price we pay.

Gas sup­ply to gas-fired gen­er­a­tors was trumped by the de­mand from the LNG ex­port ter­mi­nals in Glad­stone

Over the past decade, sig­nif­i­cant up­grades and main­te­nance have led to elec­tric­ity sup­ply charges in­creas­ing sig­nif­i­cantly across all net­works that make up the na­tional elec­tric­ity mar­ket (NEM). Sup­ply charges now ac­count for about 20% of the av­er­age house­hold or small busi­ness elec­tric­ity bill.

More re­cently, how­ever, whole­sale en­ergy prices (the price re­tail­ers pay for the en­ergy that they sell to you) in all NEM states have ex­pe­ri­enced a sig­nif­i­cant jump due to sus­tained record gas prices in Vic­to­ria, NSW and South Aus­tralia. This was a re­sult of gas sup­ply to gas-fired gen­er­a­tors and mar­kets be­ing trumped by the price for and de­mand from the LNG ex­port ter­mi­nals in Glad­stone. Hav­ing our whole­sale en­ergy mar­kets com­pete di­rectly with the ex­port price for gas, without hav­ing es­tab­lished a do­mes­tic gas re­serve, is prov­ing costly.

So given the price rises, let’s make sure that you don’t end up pay­ing more than nec­es­sary on your house­hold’s or small busi­ness’s elec­tric­ity this fi­nan­cial year. The ta­bles show the post-July 1 price changes and lead­ing on-mar­ket re­tail elec­tric­ity of­fers for NSW, South Aus­tralia and Queens­land. (I have ex­cluded any on-mar­ket of­fers whose rates have not changed since July 1. This is be­cause their rates will change be­fore the end of the year and there­fore do not pro­vide an ap­pro­pri­ate com­par­i­son. The an­nual bill es­ti­mate in­cludes all ap­pli­ca­ble dis­counts, in­cen­tives and GST.) In sum­mary:

In NSW, house­holds have been slugged an ex­tra yearly $192 on av­er­age, as the ma­jor re­tail­ers lifted their stan­dard prices 9.3% on av­er­age.

House­holds in south- east Queens­land (En­ergex) have fared bet­ter than those in NSW, slugged on av­er­age an ex­tra $95 a year, as the ma­jor re­tail­ers lifted their prices an av­er­age 4.4%.

Re­gional Queens­land (Er­gon) hasn’t made it into the new fi­nan­cial year un­scathed. The QCA an­nounced that a typ­i­cal res­i­den­tial bill will rise by 2.8%, and a typ­i­cal small busi­ness cus­tomer will be slugged with a very un­wel­come in­crease of 11.2%. For the time be­ing, the QCA will reg­u­late prices for ru­ral cus­tomers on the Er­gon net­work. But this may soon change as new laws passed in mid-July al­low the merger of En­ergex and Er­gon to form En­ergy Queens­land. State En­ergy Min­is­ter Mark Bai­ley says the merger will de­liver greater ef­fi­ciency for tax­pay­ers by re­mov­ing “du­pli­ca­tion in ar­eas like ad­min­is­tra­tion, shared ser­vices, boards, man­age­ment, and cor­po­rate costs”.

In South Aus­tralia, the vast ma­jor­ity of res­i­den­tial elec­tric­ity cus­tomers face an av­er­age an­nual price hike of a whop­ping $251 (10%) for the year ahead.

So shop around and visit en­er­gy­madeeasy.gov.au to com­pare of­fers. For any­one who strug­gles to un­der­stand their elec­tric­ity bill, you can find a great guide there as well. Keep an eye out for the re­lease of the “big en­ergy switch” of­fers from One Big Switch (onebigswitch.com.au). Its cam­paign of­fers tend to beat the best on-mar­ket of­fers at the time of their re­lease. Bet­ter still, if you’ve got a good un­der­stand­ing of your bill, use the One Big Switch of­fer to de­mand an even bet­ter deal from your cur­rent re­tailer if they wish to keep you.

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