Is falling for big energy discounts a huge mistake?

We’ve all seen the energy discount ads and promotions – 40% off electricity, 34% off gas etc.! Many electricity retailers offer large discounts to entice new customers and fight competition in the market. But as enticing as they sound, do these discounts actually help consumers save money? Or is this a tactic to do the very opposite – inflate bills and drive more revenue for energy retailers?

The widespread discounting by energy retailers is leading to much confusion among Australians, as noted by the Australian Competition and Consumer Commission in its latest retail electricity pricing report. [1]

The discounts offered by energy retailers are often packaged in a way to benefit the retailer, not the consumer. There are many underlying factors that are easy to miss. Firstly, most discounts are not permanent; more often than not, discounts are offered during sign up stage and then customers are quietly moved to a higher tariff within a few months or a year.

Also retailers who offer big discounts generally set high electricity rates from which the discount is taken[2] and some retailers don’t clearly tell you whether they’re offering a discount on the whole bill or just your energy usage and not the daily connection charge.

Some discounts have conditions attached to them such as pay-on-time or direct debit. If you end up paying a bit late, you’ll be slapped with a higher penalty. Many retailers also offer ‘secret discounts’ to consumers who threaten to switch providers for a better deal. While these consumers benefit from the discount for a short term, they need to regularly shop around to ensure they don’t end up  paying high tariffs.

According to a report by the Grattan Institute, the rife confusion in energy pricing has dissuaded consumers from looking for better deals. As a result, many Aussies, including some of the most vulnerable ones, are paying much more than they need to for basic amenities.[3]

This current state of energy pricing in Australia is distressing. We believe that this needs to change and the emphasis needs to be put back on the customer. Our first step towards creating change is to offer consumers an alternative model of pricing and service. Click here to know more or get in touch with one of our friendly consultants to learn more about our upcoming services on 03 8630 2825.

 

[1] https://www.smh.com.au/business/consumer-affairs/why-a-zero-discount-energy-bill-could-be-your-cheapest-option-20180423-p4zb6t.html

[2] https://grattan.edu.au/wp-content/uploads/2017/03/Price-shock-is-the-retail-market-failing-consumers.pdf

[3] https://grattan.edu.au/wp-content/uploads/2017/03/Price-shock-is-the-retail-market-failing-consumers.pdf

 

Elysian Energy
Elysian Energy