A new Australian Energy Market Commission (AEMC) report has shown that customer satisfaction is soaring, but that electricity and gas are rated lower for value for money than other utilities such as water and telecommunications.
The AEMC’s 2020 Retail Energy Competition Review shows that over the past year, more than half of residential customers were satisfied with the value their electricity service gave them. More than two thirds of gas customers rated their service as value-for-money.
Pre-COVID-19, consumers were the most satisfied they had ever been with their access to energy information – 55 per cent said easily understood information was available to them and complaints are down by four per cent, continuing a three-year downward trend.
However, only one in three households were confident the market is working in the long-term interests of consumers.
AEMC Chief Executive, Benn Barr, said, “Higher satisfaction levels are welcome news for the retail sector, although customers clearly think there is still room to improve.
“We know the landscape has shifted since the COVID-19 pandemic, but these figures show that things were improving in the market, with innovation still happening and the number of competitors continuing to increase – although at lower rates than in previous years.”
The AEMC’s annual review looks at the state of competition in the energy market, and whether this is benefiting consumers. It is an important tool to map retail market progress over time and identify opportunities for reform.
The review identified small increases in the proportion of customers on hardship programs over the past year in all jurisdictions except Queensland and Victoria. Before COVID-19, there were just over 150,000 hardship customers in the national electricity market.
“Overall, the proportion of hardship customers is small, but we need to keep an eye on any upward trend in these numbers,” Mr Barr said.
“This will be an important reference point for us to understand the impact of COVID-19 on customers’ ability to pay their energy bills.
“It is interesting to see the level of debt customers had when entering hardship schemes decrease in most jurisdictions.
“This could be a sign that retail hardship programs are picking struggling customers up earlier, though early indications are that COVID-19 is causing the level of debt to jump again.
“We changed the rules 18 months ago to improve retailers’ hardship policies so customers could better understand their rights and get the help they need to pay their power bills. We’ll continue to analyse these developments closely.
“It will also be important to closely monitor the pandemic impacts on competition in the sector because less competition puts upward pressure on prices.”
Three new electricity companies entered the market in 2019, including globally significant companies Nectr and Ovo Energy.
Market concentration has reduced, and by March 2020, there were 40 retail brands and 35 retail companies in the national electricity market. Net retailer margins have also fallen on average from $93 per customer to $66 per customer between 2017-18 and 2018-19.
The report shows that switching rates have also fallen by five per cent to a three-year low of 19 per cent. Lower rates of switching could mean customers are more satisfied, but they could also mean there are fewer incentives to shop around. The main reason people give for switching energy providers is being dissatisfied with their current plan’s value-for-money.
In its review, the AEMC has also called for a raft of changes, including widening the powers of the energy Ombudsman to handle consumer complaints about new energy products and services.
“The National Energy Customer Framework – which governs the sale and supply of electricity and gas to retail customers – was designed for a different era and needs to keep pace with the evolving market,” Mr Barr.
“New products and services such as energy storage systems, energy management services, electric vehicle charging services and solar PV systems are changing the retail energy landscape and they don’t fit neatly within the traditional retailer-distributor-consumer model.
“In the past, retailers simply sold energy to customers. Now, customers can generate and store their own energy. So, we need to think about new ways to apply the retail rules, so they move with the times and don’t leave consumers behind.”
Key recommendations in the report include:
- Extending the jurisdiction of energy Ombudsman schemes to handle consumer complaints regarding services that sell or supply energy or have an impact on energy sale or supply
- Allowing customers to authorise third parties – like government energy switching services – to act on their behalf in moving them to better value energy deals
- Overhauling energy bills so they make better sense to customers
- Progressing previous recommendations from the AEMC and the Australian Competition and Consumer Commission (ACCC) to tighten regulations on commission-based energy comparison sites, which do not always work in customers’ best interests
- Making the rules more flexible so that customers can be notified about changes to their energy contracts in ways that work best for them – such as SMS messages or via apps
- Promoting, strengthening and monitoring industry codes of conduct such as the New Energy Tech Consumer Code (NETCC), which recognises the risks consumers face when buying new energy technology
- Examining which rules within the National Energy Customer Framework need to be prescriptive and which regulations could be more principles-based and focussed on outcomes for customers
- Getting industry more involved in helping to develop protections for consumers.
“A number of these recommendations can be dealt with via the AEMC’s rule change process and we look forward to working with energy stakeholders to take these changes forward,” Mr Barr said.
“Some reforms are already underway, such as a rule change request from Federal Energy Minister Angus Taylor for us to look at how the required contents of energy bills can better meet consumer needs.”
“Other recommendations we have made are within the purview of energy ministers and we have put these forward for their consideration.”
The report’s findings are based on data gathered from the Australian Energy Regulator, Essential Services Commission of Victoria, Energy Ombudsman schemes and the Energy Consumers Australia Consumer Sentiment Survey.
To read the full report, click here.