Electricity prices are plummeting, but 1.5 million Australians are still paying hundreds of dollars too much on their bills, new analysis has found.
And it will only get worse as experts forecast more falls in electricity costs over 2021 thanks to a renewable energy boom and lower coal prices.
That’s according to Compare the Market chief strategy officer Emma Alberici, who said customers looking to reap the rewards will need to get off the federal government’s default offer and start shopping around.
“It’s in the energy retailer’s interests to make energy bills opaque, [but] it’s not actually that hard,” Ms Alberici told The New Daily.
It all comes down to a bit of research and a few phone calls, she said.
Compare the Market data, shared exclusively with The New Daily, reveals customers in Brisbane could save $274 a year by negotiating their way off the default offer (DMO), rising to $364 for those in Sydney.
Melburnians switching from Victoria’s separate default rate (VDO) could also save $211 each year, based on usage rates for the average customer.
The federal default offer, introduced in 2019, created an effective price ceiling on electricity, capping what retailers can charge those who don’t negotiate across NSW, South-Eastern Queensland and South Australia.
But the gap between the regulator-determined price and what you can get for shopping around has grown over time because prices have been going down thanks to an explosion in energy supply from renewables.
The gap is now between $227 and $352 per year depending on region, the Australian Energy Regulator (AER) revealed this week.
Andrew Harpham, director of Frontier Economics, said this means the cost of failing to negotiate is increasing because the default offer is following market prices downwards, not leading them.
“The default market offer is well above the median,” he told The New Daily.
If you think the regulator is looking after you now and you don’t need to shop around, well their own data suggests you still should be.’’
Mr Harpham said those looking to maximise savings will also need to negotiate more often because prices are falling so quickly.
It means you’re best off jumping on the phone at least once a year, he said.
The default offer is trying to keep up though; the AER proposed a 4.6 – 7.9 per cent reduction in the current price from July 1, 2021 earlier this week.
That could net savings of between $69 and $136 from the current default rate, which is $1462 – $1832 a year (depending on region).
More than 600,000 households will benefit from the reduction, but these consumers would net more savings by getting off the DMO altogether.
Energy Minister Angus Taylor celebrated the proposed reduction, crediting the government’s policy with delivering savings to Australian households.
“These are significant reductions to cost-of-living,” he said in a statement.
But the jury is still out how the default offer has impacted the market, according to Tony Wood, energy program director at the Grattan Institute.
Mr Wood said while the policy made those who don’t negotiate better off, it’s unclear whether retailers responded by increasing market offer prices above what they would have otherwise been.
In other words, it’s possible the default offer prevented some savings from wholesale price declines from flowing through to those who negotiate.
“It’s not clear yet how that’s played out,” Mr Wood told The New Daily.
One thing is clear: declines in electricity prices are being driven by falls in the wholesale market, not the default price policy, Mr Wood said.
Annual wholesale electricity prices fell to $35 – $70 per megawatt hour over the December quarter, the lowest levels sine 2015, according to AER figures published on Thursday.
It was driven by falling coal prices and a record increase in renewable supply, which accounted for 17 per cent of total output over the quarter.
And the good news is those wholesale prices, which constitute around 30 – 40 per cent of retail prices, are likely to continue falling over 2021.
In fact, prices are falling so far that coal-driven electricity giant Origin saw its half-year earnings decline by 98 per cent this week.
“Loyalty is not rewarded”: How to find a good deal
That’s bad news for Origin but great news for consumers, particularly those willing to jump on their computer or phone and find the best deals.
Ms Alberici is employed by Compare the Market but encourages consumers to shop around however and whenever they can.
The best place to start is auditing current bills and being prepared to walk away if you can’t get a better deal.
“Your loyalty is not being rewarded,” Ms Alberici said.
From there you’ll need a new deal and government-run services can help.
Western Australia and the Northern Territory aren’t in the National Energy Market and also aren’t included in the DMO, so compare with care.
Compare the Market also doesn’t compare all brands in the market, or all products offered by all brands, there could even be better deals out there.
So make sure to do your own research — your savings will thank you.