Energy supply deals not always what they seem

by | May 19, 2014 | Business

Deregulated, corporatised, but electricity prices have doubled in five years. Photo: Jessica Shapiro

In early March, the general manager for sales and marketing at Energy Australia, David Hamilton, wrote to a customer with a new electricity and gas offer.

Hamilton, unwittingly, picked the wrong customer that day.

Now, the profits of the industry hinge on hoping customers get the worst deal possible by doing nothing.

Although his new discount offer was posed in a form letter mailed out to thousands of Energy Australia’s customers, one of those customers was Geoff Dunsford, retired actuary from Lindfield in Sydney.

Dunsford, a man with a keen eye for detail, parsed the letter with scepticism. He knew he had previously locked in a 12 per cent discount on his electricity charges and 8 per cent off gas charges until his two-year contract ran out. The letter from Energy Australia offered 4 per cent off both under a new one-year contract.

So he got on the phone – braved the automated voice menus, the musak and the friendly marketing messages – and eventually got to speak with a human being.

”When I protested, I was offered 15 per cent off electricity and 12 per cent off gas under a two-year contract,” Dunsford says. Had he accepted the ”new offer” contained in the letter, he would have been $600 a year worse off.

Dunsford then wrote back to the EA executive David Hamilton, saying the offer was ”highly deceptive and misleading conduct” and demanded an explanation.

”You then ‘make it as simple as possible’ for me to accept this offer by relieving me of ‘taking any action to accept the contract variation’,” says his letter to Energy Australia. ”This is a clear encouragement to do as you suggest – particularly as you fail to mention that there are alternative contracts available, (like the 15 per cent-12 per cent discount structure I was able to obtain on protesting).

”Had I done as you suggest in the letter, this would have resulted in my paying your organisation $600 a year more for the same electricity and gas. This is highly deceptive and misleading conduct and I would be grateful for an explanation.”

Two months later, Dunsford is still waiting for an explanation.

A spokeswoman for Energy Australia did respond to BusinessDay, however. While declining to address the allegations of misleading behaviour she said the company encouraged customers to phone for help and letters were mailed out to notify of any pending changes to services and contracts.

The lesson is that customers are likely to lose if they do nothing. Price deregulation is already in place in Victoria and South Australia. In NSW it comes into effect on July 1, hence the flurry of correspondence from companies.

Dunsford’s experience is mirrored by research from Choice: ”If you haven’t reviewed your energy plan recently, the chances are you are paying too much.”

This presents a rich irony. Here we have an industry that has been deregulated and corporatised – and in Victoria, privatised – but where electricity prices have doubled in five years. And now, the profits of the industry hinge on hoping customers get the worst deal possible by doing nothing.

In fairness to Energy Australia, all retailers are hoping for the same outcome: zero action from customers.

As Geoff Dunsford says, prices were a lot lower and trust in the service provider a lot higher in the days when there was just a state electricity commission and no plethora of network, distribution, retailing and generation companies.

There is another element that appears to deter customers from pushing for a better deal, and that is complexity. Dunsford, unlike the typical customer, did bother to read the 44-page ”Energy Australia Market Retail Terms and Conditions” relating to his contract.

”I don’t remember any of this being necessary when we just got the Electricity Board to connect us, send us bills, pay them, or if not, disconnect us,” he says. ”While there has been significant advertising of alternative contracts, all this does for many people is to sound as if they are making something we know is simple, unnecessarily complicated.”

As it is, we need some consumer protection, just like dealing with investment and financial advisers. If we can’t wind back the clock, at the very least, any offer letter from a distributor should disclose the existence of alternatives that it has available.


Michael West

Michael West

Michael West established to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.

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