If you’re thinking of using an energy comparison site to switch to a cheaper provider, hold on: you are about to enter a confusing, opaque world absolutely teeming with conflicts of interest.
But what you may not know is that you can avoid all this by simply using the government’s own comparison website, which is just as good, free to use, and has no commercial conflicts.
In a damning report on the energy market this week, consumer watchdog the ACCC found commercial comparison websites are rarely what they seem, often misleading customers about the best deals on the market.
At the centre of the ACCC’s criticism was the business model of these sites. Nearly all of them operate on a ‘commission’ model, meaning the energy retailer pays the comparison website a fee whenever a consumer clicks through to the retailer.
The other major criticism was that they rarely list all the retailers on the market.
This has two effects. First, it means your choice is limited to the energy retailers that have struck deals with the comparison site you’re using.
And second, the need to pay comparison websites increases energy retailers’ overheads, which increases the overall cost to the consumer.
Okay, you might say. So there’s a potential conflict of interest. But they also help me do something I couldn’t do on my own, right?
Well, not really. State and federal governments run their own comprehensive comparison websites that are completely free to use and totally free of commercial conflicts of interest.
And unlike the commercial comparison websites, the government websites list all the available retailers in your area. Retailers must by law give them the information.
So while it might be true that commercial comparison sites are useful in other areas, when it comes to energy there appears to be very little need for them.
If you live in NSW, Queensland, the ACT, South Australia or Tasmania, then you can go to the Australian Energy Regulator’s ‘Energy made Easy’ website.
Once there, you put in your postcode and other information, and you will be provided with a list of all the available retailers from cheapest to most expensive.
If you live in Victoria, which is differently regulated from the other states, you can go to the state government’s own comparison website, which works in the same way.
Most residents of Western Australia and the Northern Territory do not have a choice of energy retailers, so the issue of comparison websites is irrelevant to you if that’s where you live.
Comparison sites respond
The ACCC boiled down its concerns to two points, that comparison sites “do not always make recommendations that are in the best interests of consumers”; and they “do not always adequately disclose the number of retailers and offers that they consider in making a recommendation to a consumer”.
On the former point, the report said: “Intermediaries often receive different levels of commission from different retailers, which creates an incentive to promote one offer over another, depending on the available commission.
“Unless the offer with the highest commission is the lowest priced offer for the consumer, this incentive will conflict with the consumer’s interest.”
The ACCC concluded: “Governments should ensure ongoing funding to raise awareness of government-run comparator websites.”
The New Daily put the ACCC’s criticisms to all the comparison websites listed in the report.
Six responded to the questions: comparethemarket.com.au, finder.com.au, iSelect, Mozo, Canstar, and WATTever.
All six confirmed they receive commissions from retailers – most commonly when the user signs up to an energy retailer through the comparison site.
All but iSelect claimed to be transparent about these payments (iSelect did not answer the question). However, in most cases the information was not obviously displayed to users, meaning if you do not look for it you could easily miss it.
Of the six, only WATTever and finder.com.au claimed to list all available providers. Comparethemarket.com.au had the smallest number of retailers.
In finder.com.au’s case, while it does appear to name all the providers on its website, pride of place is given to eight retailers. These eight retailers pay finder.com.au a commission whenever a user clicks through.
As for the claim that retailers were more heavily promoted the more they paid, this was generally rejected.
A spokesperson for comparethemarket.com.au said retailers were paid different rates, but categorically denied any preference was given to the retailers that pay more.
“We pride ourselves on the integrity of our comparison service so it is critically important that the way we make our money doesn’t affect the energy plans that are presented to customers,” the spokesperson said.