Electricity prices have dropped. Here’s why, and how to save even more on your power bills

IMAGE: The latest research shows that the vast majority of consumers are not getting the best deal on electricity. (Unsplash: Patrick Tomasso)

Source: ABCnews

“Prices have come down and they’re continuing to come down, which is really good news for households and small businesses,” St Vincent de Paul Society’s Gavin Dufty said.

“But those price reductions aren’t going to magically jump into your pocket. You have to go and chase [them].”

Cheaper prices overall and a regulated minimum rate could have contributed to people feeling “a little more relaxed” about their bills, according to the chief executive of the Australian Energy Council, Sarah McNamara.

“We want to try [to] make sure people understand that, if they’re on the regulated price, they’re definitely paying too much for their energy because [almost] all of the competitive market offers … sit underneath that regulated price and are cheaper and better value for you,” Ms McNamara said.

The good news is that getting a better deal can be easy. So how do you do it? And why are so many people paying more than they should?

Why are electricity prices going down?

Australia’s energy market is in transition.

More renewables are coming online and the wholesale price of electricity — a big component of bills — has fallen.

Put simply, there are supply and demand factors at play in the energy market.

When it comes to supply, more solar and wind generation has come online.

Demand factors include the economic disruption from the COVID-19 pandemic.

artists depiction of the Port Augusta wind farm, multiple turbines from a distance
More renewable projects are coming online, which is helping to push prices down for consumers.(Supplied: DP Energy/Tadgh Cullen/File)

The Australian Competition and Consumer Commission (ACCC) said those lower prices have started to flow through to customers.

The ACCC expects further reductions in wholesale costs over the next 12 months.

Mr Dufty said it was hard to forecast how long prices would stay low for, so people should make the most of low prices now.

“People need to make hay while the sun is shining, as they say,” he said.

Very few people are getting the best deals

Less than 1 per cent of customers in New South Wales and South-East Queensland are with the three retailers offering the most competitive deals, the analysis found.

In South Australia, the vast majority of customers are with seven retailers, and very few customers were on the best offers.

In Victoria, the analysis shows the market is less concentrated around the major retailers, but that the majority of customers are with companies that produce higher-than-average annual bills.

Mr Dufty said Tasmania and the ACT were still evolving into competitive markets, with fewer retailers operating in both jurisdictions and a limited number of consumers shopping around.

“Tasmania and the ACT have the benefit of learning from the challenges identified in this report,” Mr Dufty said.

The Northern Territory and Western Australia are both regulated, and are not part of the National Energy Market (NEM), so all of those customers are unable to switch to better offers.

However, the analysis showed the vast majority of customers across Australia were with a handful of the big retailers: Origin, Energy Australia, AGL, Red Energy and Alinta. And, it said, that came at a cost.

“Many customers pay more than necessary by not switching to some of these smaller retailers,” the analysis said.

Mr Dufty said consumers should feel confident giving smaller players a try.

“We’d encourage people to don’t be afraid to go to a different retailer rather than one of the incumbents whose brands you might recognise,” he said.

Why are so many people paying more than they need to?

Mr Dufty said many consumers still found electricity bills confusing or overwhelming.

And, in some cases, he said electricity retailers weren’t helping either.

“There are a lot of offers out there, more than there used to be,” Mr Dufty said.

“Confusion is creeping back in.”

The report said that, instead of simply offering better prices to customers, some retailers were offering at least half a dozen different rates to customers.

A flat lay of a calculator, an electricity bill and a mobile phone displaying an ABC article about electricity prices.
The savings could be “significant” if you’re able to switch to a cheaper plan.(ABC News: Natasha Johnson)

Some were also offering discounts and bonuses in vastly different ways that were difficult to understand, it said.

“Instead of just offering a better price, for the homogenous product energy is, consumers are asked to consider the value of an eGift Card compared to an account credit, whether a free St Kilda guernsey is more valuable than a $100 prepaid digital Mastercard,” it said.

But Ms McNamara said that was an unfair criticism.

“Retailers are competing against each other and I think that some customers will respond very positively to additional bonuses attached to their energy bill, such as gift cards or footy club memberships,” she said.

“We do think that it’s important that people weigh-up the pros and cons of these offers via the government-run comparative site because it does all the hard work for you.”

How a 15-minute check can save you money

The simplest way to save on bills is by going through a simple process on the free, government-run website Energy Made Easy.

If you’re in Victoria, use the Victorian Energy Compare site, which takes into account the state’s smart meters.

It only takes about 15 minutes, and all you need is your latest electricity bill.

Mr Dufty said taking a little bit of time could save people a lot of money.

“We reckon there’s a couple of hundred dollars there [in savings], on average, for people,” he said.

“Now some will be more and some will be less.

“And, of course, if you’re solar, it will be less than that generally because your bills are much lower, smaller to start with.

“But there is a significant amount of money on the table.”

Ms McNamara strongly encouraged people to use the government comparison sites, and said there was another option for people who didn’t like to go online.

“All retailers have very cheap deals. So, for people who are strongly not inclined to jump online, or can’t jump online, the simplest thing to do is to ring your retailer … and say to your retailer, ‘I want to know if you have a cheaper deal for me’.”

Moves to end ‘misleading tactics’ are underway

If you’re in Victoria, more changes came at the end of 2021 for energy consumers.

The Victorian government banned door-to-door sales for energy, as well as so-called “save” and “win back” offers.

According to the state government, this includes short-term discounts that end up costing customers more in the long run.

“This misleading tactic is used by retailers to stifle competition and, by banning them, customers will be able to judge the genuine best price in the market — and not just for a limited time,” the government said.

One of the smallest retailers on the market, ReAmped Energy, said it was a positive change that should happen in other states as well.

“As a retailer, we see a certain number of customers [who] switch to us, but change their mind after their old provider offers them an improved deal,” chief executive Luke Blincoe told the ABC.

“But, in most cases, this retention offer will not be better than their new one, but is enough to convince them the change is a hassle they do not need to go through with. It’s terrible for competition.

“Now this law has changed in Victoria. We will be campaigning for the [Australian Energy Regulator] to implement similar rules in the other states.”

However, Ms McNamara said door-to-door selling was not exclusively used in the energy market.

“Governments need to be really careful that any changes are in the public interest because, in the case of the energy industry, door-to-door selling tends to be a channel used particularly by smaller energy retailers to reach new customers,” she said.

“If smaller energy retailers who are fighting for market share don’t have that opportunity to use door-to-door selling, then we risk entrenching concentration at the top end of the retail market.”