8 minute read

Our response to the AEMC report on retail competition

On Friday 15 June, the Australian Energy Market Commission (AEMC) released the Retail Energy Competition Review.

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AGL Energy
18 June 2018

The COAG Energy Council requires the AEMC to complete the review annually with a focus on the state of competition and outcomes for consumers in competitive retail energy markets across the National Energy Markets (NEM).

The main finding of the 2018 Report is trust, transparency and retailer inertia are the key challenges to delivering a better deal for energy consumers.

The 2017 AEMC Report concluded that:

So, what has changed in the retail sector for the AEMC to find innovation was leading to positive customer outcomes in 2017 but in the 2018 Report they claim innovation has stalled?

The key findings in the 2018 report that has led to the change in position were:

  • Pricing practices of retailers are complex and confusing for customers to navigate.
  • Discounts claims are hard to compare.
  • Many discounts are conditional.
  • Increasing price dispersion driven by discounting, not effective segmentation.

The 2018 report concludes while there have been new retailers entering the market during the year, all retailers have been slow to embrace product and tariff innovation and this has led to poor customer outcomes. This, combined with retail price increases in 2016/17 has led to a decline in consumer confidence.

It is important to note that while the report is titled 2018, much of the data presented in the report is based on information provided by retailers for the end of 2016/17. Hence, many of the trends identified in the report through this data are up to 12 months old.

What is AGL doing to remove complexity and improve customer outcomes?

The report acknowledged that 2017/18 has been a big year for the energy retail sector, with unprecedented government focus and intervention in the sector.

We support the report’s claim that retailers can do more to remove complexity and therefore improve customer outcomes. AGL’s Customer Transformation program, which kicked off two years ago, aimed to address this very issue. The focus of the program was to put the customer at the heart of our decisions and to make our customers advocates rather than detractors.

Through this Customer Transformation program, we have delivered several measures to address the issues the AEMC identified as inhibiting innovation in the retail sector, including:

  • We agree tariff structures are complex and can be confusing for customers, which is why a year ago we began calling for an industry-wide solution to standardise how energy offers are presented so customers can easily compare plans. Since then we have been actively supporting work by the AER on its retail pricing information guidelines and feeding in research results on what comparator designs customers prefer.
  • Our customers have told us they find discounts confusing, which is why we introduced AGL Essentials in January 2018 as a fixed low-rate offer presented as a dollar amount per day. After trialling this in Victoria, we will extend this product to all States from July 2018.
  • We understand the concern around conditional discounts, which is why we introduced guaranteed discounts for hardship customers through our A Fairer Way program, along with ensuring concession card and hardship program customers are not charged late fees.
  • We agree loyal customers should be rewarded so we introduced loyalty discounts for electricity customers who have been on standing offers with AGL for two years or more in Victoria and South Australia.
  • AGL began proactively writing to ‘standing offer’ customers in March 2017 encouraging them to get in touch so we could move them to a better plan.

Our focus on improving customer outcomes goes beyond the point of sale experience. For existing customers, we have also introduced several new services to make it easier for customers to engage with us:

  • We understand one of the biggest pain point for customers was the unexpected high bill that resulted from estimated reads. To address this, in June 2017 we rolled-out the technology to allow our customers to provide self reads.
  • More recently we released Energy Insights to our Victorian customers and from late 2018 to our Queensland customers with digital meters. Energy Insights is a report we provide to our customers free of charge that provides them with insights on how they are using electricity and, based on their consumption behaviour, some tailored energy efficiency tips.

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Reflection

There is still plenty to be done for energy retailers to regain the trust of Australian consumers. For our part, we are working to find more ways to take the complexity out of understanding energy – as evident in our work with the NSW Energy Department and Energy Consumers Australia to trial a new bill design that focuses on what a customer wants on a bill, rather than the current regulatory obligations.

Article compiled by Con Hristodoulidis, Senior Manager Regulatory Strategy.



[1] Page xi, 2017 AEMC Retail Energy Competition Review