REVEALED: Secret cause of your high bills

THE government has renewed its focus on power prices since Scott Morrison became Prime Minister, and now describes making energy more affordable as its highest priority.

Today it got to announce some good news.

Electricity and gas retailers will be required to notify customers of price changes at least five days before they take effect under a new rule starting in February next year.

Energy Minister Angus Taylor and his NSW state counterpart Don Harwin said the change would "ensure customers have time to shop around for a better and fairer deal".

"Currently, gas and electricity retailers are not obliged to inform customers of price changes until their next bill, which can be months after the price change has occurred and can result in customers paying much more than they expected or have budgeted for," they said.

Other recent rule changes have forced power companies to tell customers when their discounts are about to finish, and required them to accept customers' self-reads instead of settling for estimated meter readings, which are often more costly.

These are incremental changes - none of them will make a huge difference to your bills on their own - but the ministers' emphasis on customers "shopping around" is an encouraging sign.

They have correctly identified the core problem with power prices.

Each side of politics has its pet issues in the energy debate. The right likes to blame climate change policies like the carbon tax, and more recently the Renewable Energy Target, for rising prices. The left often talks about privatisation and the gold-plating of energy infrastructure.

Those are all genuine factors, and they've helped contribute to a 56 per cent increase in prices in real terms over the last decade, but they ignore the key cause - a chronic lack of competition in the energy market.

The Australian Competition and Consumer Commission's (ACCC) Retail Electricity Pricing Inquiry report, published in July, could not have made that problem any plainer.

We are paying far more than we should for power. Pic: iStock
We are paying far more than we should for power. Pic: iStock

Who is to blame? Pretty much everyone.

Governments on both sides of politics have made poor decisions, leading to increased concentration in the sector. Too few companies have too much market power.

The retailers themselves have made their offers to customers deliberately confusing. As a result, it's way too hard to compare different options.

Finally, customers have become "disengaged" and "inactive", to use the ACCC's own words. Put more bluntly, we are all too lazy to shop around. We're too confused by the policies on offer, and instead of putting in the effort to find the best deal, we just give up.

"Too many consumers and small business customers have given up trying to understand offers and switch in a confusing retail electricity market. Big changes are required to make it easier for consumers and businesses to understand market offers and improve competition," ACCC chairman Rod Sims said.

Energy retailers primarily compete by offering discounts to attract the more price-sensitive customers among us. The problem is, there is no common figure against which to judge those discounts.

One company might offer you a 25 per cent discount, while its rival only offers 20 per cent. But if the first company's baseline price is significantly higher, its seemingly more generous discount will actually leave you worse off.

"There is no easy way to compare the headline discount of one retailer to that of another. In many cases, consumers will be better off with offers that have lower discounts attached to them but which have a lower underlying tariff rate," the ACCC said.

One of the body's key recommendations was the introduction of a new "default market offer", set by the Australian Energy Regulator, which would make those tariff rates consistent across all energy retailers and make it far easier to compare discounts.

In August, shortly before he was removed from the prime ministership, Malcolm Turnbull announced the government would implement the default price, and implied no company would be able to charge above it.

"There should be one standard, fair, default price for energy, so that as energy retailers compete and offer discounts, you can easily compare it to what you're paying," he said. "We'll set a price expectation, which should be the most anyone pays."

More help might be on the way as well.

Earlier this week, news.com.au reported on the government's plans to create a Consumer Data Right, which would allow you to take charge of your own personal data and decide which service providers to share it with.

RELATED: How your data is making other people insanely rich

The data right will be trialled in the banking and financial services industry first, starting in July next year. But Prime Minister Scott Morrison told us he wanted to see it applied to the energy sector next - a move already endorsed by the ACCC.

"Data currently available is of limited use to consumers, and also any third party wanting to provide services to a consumer," its report stated.

"The application of the Consumer Data Right to the electricity sector will see opportunities for electricity usage data to be made available to consumers and, importantly, agents of consumers where consent is provided.

"This will then enable consumers themselves to make better use of data, and present opportunities for innovation by third parties providing services to consumers in finding the best electricity offer."

So, for example, you could give your energy usage data to a comparison website, which would then tell you where to find the best deal.

Speaking of which, another of the ACCC's recommendations was to introduce a mandatory code for such websites to ensure they are choosing offers based on your interests, rather than the commissions they could receive for signing you up.

You can see all 56 recommendations here. If implemented, they could save the average Australian household almost a quarter of its electricity bill, or about $290-$415 per year.

Energy prices have been a bitter political issue for as long as anyone can remember, and that isn't about to change. But the government's emphasis on helping customers shop around is a sign something useful could finally be achieved.


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