AGL, Origin and EnergyAustralia dominating the market, with consumers suffering most in South Australia
Electricity retailers are price-gouging consumers in Australia, with the big three retailers exploiting a lack of competition and the complexity of electricity bills, according to the results of a new analysis.
The situation was worst in South Australia, where retailers were making an average margin of $425 a year more than they did in the regulated market in the Australian Capital Territory, according to the report produced by the economics consultancy CME and commissioned by GetUp.
The findings come shortly after another report found generators were “gaming” the wholesale electricity market in South Australia and just days before state and federal energy ministers meet at the upcoming Coag energy council meeting on Friday.
The electricity retail market didn’t work properly because making an informed decision about which deal is the best for a customer is beyond the capabilities of almost everyone, said Bruce Mountain, who wrote the report.
“We have this weird market in which retailers are paying a fortune to market their products – paying switching companies $180 every time they switch a customer, paying for call centres around the world to phone people incessantly – but they’re offering practically the same thing,” Mountain said.
There was also not enough competition, with AGL, Origin and EnergyAustralia dominating the market.
In South Australia, the big three retailers were charging an average of $650 above the costs of providing the electricity, which was about 30% of the bill. In the ACT, where the retail market is regulated, retailers’ margins were only about $225, about 20% of the bill.
The report noted that compared with other costs in delivering electricity – such as generating it or distributing it – very little capital is required to retail the electricity.
Mountain also compared the margins of retailers in Australia to those in the UK, where the a government authority found the retailers were exploiting their market power to charge customers at rates that were “above justifiable levels”.
Despite the finding of price-gouging in the UK, the margins charged by retailers in Australia were significantly higher – 40% higher in the case of South Australia.
Mountain compared the average offer from the big three retailers with their best offers, as well as the best offers from the other retailers.
In all states, the best offers from the smaller retailers resulted in smaller margins for the retailers than the best deals offered by the big three retailers. But he also found the big three did have deals that were cheaper than their average offers.
GetUp’s environmental justice campaign director, Miriam Lyons, said: “The big three have been exploiting their power in the market and South Australian families in particular are getting ripped off.
“This has huge impacts for people struggling to pay unaffordable energy bills. Further lining the pockets of energy execs comes at the expense of Australian families.
“When this kind of behaviour was revealed in the UK, there was a huge public outcry – yet their retail charges are a fraction of what the big three charge here.”
Mountain said it was possible that the market could get a shake-up with the introduction of new technology like battery storage and the continued uptake of rooftop solar, which might drive innovation in the retail offers.
The report used a data-mining tool created by CME, which gathers published retail offers as well as costs charged by the companies that own the poles and wires.
