Switchwise.com.au Blog

Archive for September, 2009

Door knockers creating legal issues for Maribyrnong residents

Tuesday, September 15th, 2009

I recently received a letter from Councillor Michael Clarke, Mayor of Maribyrnong City Council, advising of the legal problems being faced by his residents, particularly recent immigrants, as a result of the door-to-door sales practices being employed by energy companies and/or their sub-contractors.

The legal problems apparently result from the usual promises made about getting a better deal by switching at the doorstep and a failure to clearly communicate important terms such as termination fees. Often, the door knockers are asking the children of non-English speaking parents to act as translators! As a native English speaker I find it is often difficult to understand what is being offered by the person standing on my doorstep; a person with limited or no knowledge of the English language would not stand a chance of understanding what they are getting themselves into.

The Mayor intends to make a formal submission to the Essential Services Commission to stop such practices. I also do not understand why the energy companies persist with door to door sales given all the problems it creates both for their customers and themselves in terms of brand damage. High pressure sales techniques such as door knocking have been quite successful in getting customers to change providers but in my opinion should be outlawed.

Have you had problems with door-knockers? We’d like to hear your story.

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NSW Government announces new electricity sell-off plan

Monday, September 14th, 2009

Further to our post in March, the Rees Government has announced an unusual plan to privatise NSW Government owned electricity assets. The plan comprises:

  1. A trade sale of the three energy retailers it owns – Energy Australia, Integral Energy and Country Energy;
  2. The sale of trading rights in power supplies from its three electricity generators;
  3. The sale of seven power station development sites; and
  4. A potential sale of the Energy Australia gas business.

However, if the sales process does not result in the creation of a new player in the generation market, the Government will press ahead with creating a new, vertically integrated energy company based around Integral Energy and selling it off via an IPO. The Government has also threatened that this might occur anyway should the bids not meet its price expectations.

The sale process appears quite unorthodox, with bidders being able to pick and choose which assets they might wish to acquire. I’m sure that will make the Government’s (or its advisers’) task of comparing bids challenging to say the least.

AGL and Origin Energy have both previously expressed interest in acquiring assets in the sell-off to strengthen their positions in the NSW market. They are also the strongest local bidders given their solid balance sheets. However, the Government needs to ensure strong interest from overseas companies such as International Power (owner of Simply Energy) and China Light & Power (owner of TRUenergy) as well as from private equity in order to maximise the sales proceeds (and degree of competition).

So what might this all mean for consumers? If AGL and Origin snap up two of the retailers then it could lead to less competition in the NSW retail market, although the market is currently not very dynamic. However, if a strong third player is created then there might start to be a reasonable degree of competition leading to better discounts and products for consumers.

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Smart meters – are they worth the cost?

Thursday, September 10th, 2009

As smart meter roll-outs commence in Victoria, concerns are being raised about the additional charges that will be levied on households and businesses to cover the cost of buying and installing the smart meters.

According to the Australian Energy Regulator’s draft determination on Victorian smart meter costs and charges, an average household would be charged around $53 per year extra for metering charges in 2010 to contribute to the cost of the smart meter roll out. The extra charges would be payable by all households in 2010, regardless of whether a new smart meter has been installed at the property – in many cases this might not happen until 2012 or 2013.

The proposed new annual charges for 2010 would be as follows for each of the five Victorian electricity distribution networks:

  • Citipower – Melbourne CBD and inner suburbs - $104.79 pa
  • Powercor – outer western suburbs and western Victoria - $96.67 pa
  • Jemena – northern and inner western suburbs - $67.79 pa
  • United Energy – eastern/south eastern suburbs, Mornington Peninsula - $71.80 pa
  • SP Ausnet – outer eastern and eastern Victoria - $75.88 pa

A further $25 average annual increase is expected in 2011.

What will Victorian consumers get in return for parting with this extra cash? Smart meters are claimed to offer consumers the ability to better manage their power usage by having more detailed information on the amount of electricity they use at different times of day and the associated costs. This would lead to reduced power consumption at peak times (due to higher costs) and thereby lower the overall cost to the consumer. However, there are some problems with achieving this claimed benefit:

  1. Whilst we can all do our bit to reduce our power usage (e.g. switching off appliances at the wall), how much can households really change their consumption patterns in a meaningful way? Consumers who are usually at home during the day might have some flexibility on when they decide to turn on certain appliances. However, if you are at work during the day you are most likely to use most of your electricity outside of peak periods so there’s unlikely to be much benefit for you.

    It is important to note that wholesale electricity prices are largely driven by peak demand and the main impact households have on peak demand is at times of extreme weather conditions, such as those experienced on Black Saturday earlier this year. People aren’t going to stop turning on their air-conditioners when it’s 45 degrees outside (but they will be able to see how much it might be costing them!).

  2. It appears we are years away from having the necessary systems in place to communicate pricing information from wholesale electricity markets to distributors, retailers and ultimately back to the home. Without price signals there won’t be any real change in consumer behaviour.
  3. In all parts of Australia, except Victoria, retail electricity prices are still regulated by state governments. For smart meters to perform their role requires government action to remove price caps and allow the market to set prices, which can be a politically difficult decision to make.

For retail and distribution companies there do appear to be some cost saving opportunities from smart meters including:

  1. Reading meters remotely (electronically) would save a significant sum compared to the current quarterly home visit.
  2. Remote connection/disconnections would save costs, especially where home visits are required, but there may be some union issues to overcome, especially in Queensland.

    The objective is for such cost savings to eventually offset the additional costs of the smart meters and that consumers would benefit in the medium- to long-term. It will be interesting to observe what actually transpires in this regard over the next 5 years.

    An important flow on benefit would be more regular & more accurate billing. This would improve cashflow for retailers and theoretically remove all the problems and customer support costs associated with estimated bills & billing errors.  However, this assumes that any solution implemented would be done properly and does not create more issues than it solves.

    I would appreciate your feedback on whether you think smart meters would be of real benefit to you and help you use electricity more wisely.

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