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New energy discounts offer an opportunity for over 2 in 5 Aussies

5 min read
16 Sep 2019

Pre 1 July 2019, energy customers could slash their electricity bill by nearly half on energy contracts with conditional discounts, however in the new DMO environment guaranteed ‘or unconditional discounts’ could deliver more long term savings.

The Australian Energy Regulator (AER) report on ‘Affordability in Retail Energy Markets’ found that energy customers could reduce their bill by up to 42% with conditional discounts, providing they meet all the requirements of their offer.[1]

  • A conditional discount is a rebate offered by energy retailers, contingent on customers meeting certain conditions like paying bills on time or paying via direct debit.
  • A guaranteed discount is not conditional on any action on the part of the customer.

How much could Australians save with a conditional discount?

The AER report revealed that with conditional discounting, energy customers could save (annually):

  • $482 in New South Wales
  • $367 in South Australia and Victoria
  • $349 in Queensland
  • $225 in the ACT.[2]

However, customers can also incur hefty penalties for not meeting certain discount conditions, such as paying their bill on time.

Alarmingly, Aussies on payment plans achieve their pay-on-time discounts only half of the time (56%) and only 42% of the time for hardship customers.[3]

According to the Federal government, some customers signed up to pay-on-time discounts who miss one payment deadline per year could be slugged between $500 and $1,000 more on  their energy bills.[4]

As a result, the Australian Competition and Consumer Commission (ACCC) established a new Electricity Retail Code in July 2019, banning retailers from advertising conditional discounts in their headline offers. Any conditional discount presented or advertised to customers must now also clearly state any terms and conditions.[5]

This year, the Default Market Offer (DMO) was also introduced to provide a reference price from which all discounts have to be calculated to help customers better determine which offers will lower their bill when shopping around for energy plans. The DMO also replaced standing offers (basic electricity contracts with no discounts) in New South Wales, South Australia and South East Queensland.

Money expert at comparethemarket.com.au, Rod Attrill said customers could still benefit from conditional discounts by being diligent in meeting their requirements.

“The proportion of market offers with conditional discounts markedly decreased since DMOs came into effect. Those discounts can range between three per cent and 35% across most states,[6]” said Rod.

“While conditional discounts can offer bigger savings, they could also cost customers a lot more in the long run if they failed to meet their discount conditions once or twice. Aussies should consider plans with unconditional discounts if they feel they are unable to meet all conditions relating to any ‘conditional discounts’, like being able to pay bills by their due date.”

According to the AER report, the proportion of guaranteed discounts available on the market has more than doubled for residential offers in the last six months to July 2019, creating more competition in the energy market.[7]

“That’s why it’s crucial customers check whether their conditional discounts still offer better value compared to guaranteed discounts. Some energy retailers may offer unconditional discounts of up to 15% or more,” said Rod.

How much could you save with a guaranteed discount?

Based on quotes from comparethemarket.com.au, an average energy customer on a 15% guaranteed discount could save annually in the ballpark of:

  • $235 in Queensland[8]
  • $219 in New South Wales[9]
  • $290 in South Australia[10]

Energy providers are also beginning to offer other types of discounts to drum up business like loyalty credits where customers get money off their next quarterly bill, or once they reach a year on their contract and even free movie tickets for an introductory period.

Energy retailers have overhauled their discounting practices since the DMO and other energy regulations were introduced this year. Some of the changes include:[11]

  • a ban on retailers advertising conditional discounts as their most prominent discount,
  • the requirement on retailers to disclose their estimated annual cost and compare this to the reference price and showing the difference as a percentage.

 Want to compare energy discounts?

The easiest way to save on energy long-term is to shop around for a better deal. You can compare energy plans and discounts offered by some of the biggest energy retailers in Australia in minutes with our free comparison tool.

Sources:
[1] Australian Energy Regulator- Affordability in retail energy markets (2019).
[2] Australian Energy Regulator- Affordability in retail energy markets (2019).
[3] Australian Energy Regulator- Affordability in retail energy markets (2019).
[4] Australian Government Department of the Environment and Energy- Cracking down on sneaky late payment fees (2019).
[5] Australian Competition and Consumer Commission- Guide to the electricity retail code (2019).
[6] Australian Energy Regulator- Affordability in retail energy markets (2019).
[7] Australian Energy Regulator- Affordability in retail energy markets (2019).
[8] Quote search completed on 09/09/19 for a residential electricity plan in Toowong modelled on an annual usage of 4,600 kWh per year for a property with no solar panels.
[9] Quote search completed on 09/09/19 for a residential electricity plan in Sydney modelled on an annual usage of 3,900 kWh per year for a property with no solar panels.
[10] Quote search completed on 09/09/19 for a residential electricity plan in Adelaide modelled on an annual usage of 4,000 kWh per year for a property with no solar panels.
[11] Australian Energy Regulator- Affordability in retail energy markets (2019).

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Written by Megan Birot

Megan considers herself a savvy saver. She aims to make finance fun and inspire people to make decisions best suited to their budget and lifestyle. Her number one tip is: “saving doesn’t have to be boring, get creative and reap the rewards.” Megan has a background in journalism and particularly loves to write about health and money. She hopes to one day pen a best-selling book but the topic is a well-guarded secret.

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