Almost a quarter of Aussies still find comparing energy plans too hard

Nearly a quarter of bill-payers are still confused when it comes to comparing energy plans and providers, according to recent Canstar Blue survey data.

Despite recent reforms to make the switching process easier, 22% of 4,915 residential electricity customers surveyed in December 2022 said they find the process of comparing plans and providers too complicated to partake in.

The same survey also found that just 22% of Aussies confidently understood how the energy market operated in their state, while almost half (44%) had no idea what kind of energy tariff they were being charged under. 

Canstar Blue Editor-in-Chief, Christine Seib, said a lack of understanding could be preventing households from finding energy savings.

“It can prove a costly mistake if you don’t know what your electricity charges are or what tariff type you are on, particularly if you are unknowingly on a flexible pricing tariff,” she said. “These kinds of tariffs charge significantly higher or lower rates depending on the time of the day, which means that using certain appliances at these times could make or break your power bill.

“Plus, if it proves too difficult for a customer to compare plans or providers in the market, they miss the opportunity to find a home energy plan that offers better value.” 

Households that actively engaged in the energy market last year had the capacity to save between $120 and $404 annually on their power bills, depending on location, according to the Australian Energy Regulator’s (AER) 2022 Market Update. 

The biggest savings were made by households that switched from a default or standing contract to a market offer. A market offer is typically considered to be a retailer’s more competitive offer, with lower rates or discounts included, while standing or default plans offer the ‘cappped’ price a retailer should be charging.

The capped price in an area may also be referred to as the Reference Price or Victorian Default Offer (VDO) – as its known in Victoria. These are managed by the AER in New South Wales, south-east Queensland and South Australia and the Essential Services Commission (ESC) in Victoria and were introduced as part of reforms to simplify the energy market in 2019.

Canstar Blue’s survey found that only 13% of households had made the effort to switch electricity providers in the last two years to December 2022, despite just 40% of survey respondents saying they thought they got a good deal on their power plan.

Moreover, 35% said they’d been with the same retailer for 10 years or more, with only 12% of respondents currently planning to switch in the near future.

Ms Seib said comparing energy plans didn’t need to be a daunting task for consumers and that the switching process was easier than some may think.

“There’s perhaps a misconception that switching electricity or gas providers is a mammoth task, but that simply isn’t the case. Most of the break-up process is handled between the retailers themselves and thanks to recent reforms, it now only takes up to two business days to transfer to a new electricity retailer, if you find a better deal,” she explained.

“Not to mention that come September, retailers will start displaying ‘best offer’ messaging on their bills to help customers see whether there is a cheaper price they could be paying for their power. So, comparing plans is about to become a step easier again.”  

From September 30, 2023 retailers will be required to tell customers whether they could be paying less on one of their other plans in market, as part of the AER’s Better Bills Guideline. Retailers will need to reissue a new best offer message at least once every 100 days unless the retailer and the customer have agreed on a different billing cycle.

A similar scheme is already in effect in Victoria.  

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What should you be looking at when comparing plans?

If you too are left confused when it comes to reading your power bill or comparing plans, you’re not alone. Fewer than half of the Australians surveyed knew what their usage and supply charges were, about half (48%) knew what the term “default price’ meant and only about a quarter (24%) knew when the default price changed.

But that shouldn’t mean you are doomed to paying sky high power prices. If you need help when it comes to comparing energy plans, here are a few tips and tricks to keep in mind: 

• If you live in New South Wales, south-east Queensland or South Australia, look for plans that have a higher percentage off the Reference Price displayed in plan information or on a comparison tool. The same goes for Victorians, who should look for a higher percentage discount to the Victorian Default Offer. This refers to the default or ‘capped’ price for power in your distribution zone and will highlight how much you could save on the capped price by opting for a market-offer plan. 
• Check the usage and supply charges on each plan using the energy fact sheet to make sure they are well-suited to your home energy requirements. If you’re part of a larger household, this may mean leaning towards a cheaper usage charge because this is what will make up the majority of your bill. Smaller households may instead want to look for plans with lower daily supply charges because these charges will be proportionately larger for homes that use lower amounts of electricity.
• Beware of the conditions on conditional discounts. Some cheaper priced plans may be contingent on conditional discounts such as paying on time or using direct debit. If these are missed, it may end up costing you significantly more on your bill. 
• Check the contract length and benefit periods. If you’re tossing up between two plans, then it may be worth checking out the intended benefit period for the rates and discounts and if there are any exit fees for leaving early. While exit fees are almost a thing of the past, it doesn’t hurt to be across it. 

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