Energy companies charging too much, finds Vinnies report
The removal of price controls has resulted in soaring retail margins from energy retailers, finds new research by St Vincent de Paul Society.
"The retail component of bills is too high in the deregulated, competitive electricity market," the report said. "This is either because the cost of competition is high or because competition is ineffective.
"We have an energy retail market that ensures customers are paying over the odds for an essential service unless they annually dedicate time to compare energy plans and switch retailer."
The retail margin has risen to $600 per customer and is by far the largest component of an energy bill. The survey found that in some household in Victoria (which has been deregulated for several years) as much as 45 per cent of the electricity bill is paid to the retailer and only 11 per cent of the bill covers electricity used. In New South Wales, the retail component sits around 30 per cent.
The St Vincent De Paul Society report also noted that many households cannot shop around for the lowest prices, with these household often paying 50 per cent more for electricity than households who had looked for a better deal.
"There will always be customers who will not or cannot participate in the market, and allowing retailers to charge them a significant premium, just because they can, is not an acceptable outcome," Gavin Dufty, policy and research manager with the St Vincent de Paul Society, told The Sydney Morning Herald.
The report said that even when households looked around for cheaper contracts, those deals typically only ran for a year. It means that in order to remain competitive, households need to devote time every year to look for cheaper energy deals.
"With the outrageous retail premiums that customers are currently being charged, we need the market model fixed rather than just blaming consumers for failing to shop around," Mr Dufty said. "Unlike other markets, people can't exit the [energy] market.”
Mr Dufty called for the government to overhaul the energy market, saying the evidence points to the costly and ineffective competition in the market.
Source: The Sydney Morning Herald
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