OnDemand WTP Pricing Research

New regulations expose energy price gouging through ‘free’ comparison sites | The Conversation

A new regulation has highlighted the thousands of offers electricity retailers make to new customers, mostly through commercial comparison sites. These sites typically do not include the best possible offers, funnelling consumers into higher-cost plans in exchange for fees from energy companies.

From January 1 companies selling electricity in New South Wales, South East Queensland and South Australia are required to publish all of the offers they make to new customers on the Australian Energy Regulator’s Energy Made Easy price comparison website. Retailers in Victoria are subject to Victorian regulations.

I analysed Origin Energy and Energy Australia’s offers to assess whether they are making better offers through the commercial comparison sites, than they make to customers directly. Using the retail market in Sydney as a case study, none of the offers that Energy Australia made available through commercial sites were cheaper than the offers it made to customers that signed up directly. In the case of Origin Energy, there were two offers on commercial sites that were better than the offers they made directly.

Typically prices in the offers available through the commercial sites were 5%-12% higher than offers the retailers made directly. One commercial comparison site had an Energy Australia offer that was 34% more expensive than if the household had signed up to Energy Australia directly.

The same picture is seen in the rest of New South Wales, Queensland and South Australia.

Commercial comparison sites earn a commission (or “referral” fee) from the retailers for the consumers they send to those retailers. Since they are paid by the retailers, the commercial comparison sites describe their service to electricity consumers as “100% free”, “no cost to you” and “free to use”.

But providing better deals to consumers may bite the hand that feeds: retailers can be expected to be willing to pay higher commissions for customers that pay higher prices. Commercial comparison sites therefore have an incentive to provide the appearance – but not necessarily the reality – of a competitive market.

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New regulations expose energy price gouging through ‘free’ comparison sites.