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“Do Victoria’s households leave less money on the table..."

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Level 11, Victoria University

300 Flinders Street

Melbourne, VIC 3000

Australia

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VEPC invites you to a seminar: “Do Victoria’s households leave less money on the table when they switch electricity retailers?”

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Governments, regulators and customer groups in Australia have urged customers to switch retailers to get better deals. Customers have responded and switching rates are high. A common view is that over almost a decade of unregulated competition a two-tier market has evolved, in which “switchers” avoid the “loyalty tax” paid by “remainers”. We analyse a little over 48,000 Victorian household electricity bills to compare outcomes for switchers and remainers. The typical remainer left $281 per year (20% of their bill) on the table. However, after controlling for various factors, switchers only leave $45 less on the table. This calls into question the common view of a market bifurcated between switchers and remainers. Competing explanations include that customers value attributes other than prices when they search and switch, that rents have already been competed away, that customers find tariff structures and discounts confusing or that they get poor advice. We conclude that customers mostly search for lower prices, that rents have not been competed away and that tariff structure complexity does not seem to be a problem. Discounts that are not as they seem and poor advice from price comparison service providers likely explains part of the market’s failure to give most customers what they seem to be searching for. While successful retail markets may depend on demand-side participation, this is not sufficient. Customers must be able to participate effectively if they are to benefit from the market.

Join us for coffee/tea after the seminar 11.30am.

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Level 11, Victoria University

300 Flinders Street

Melbourne, VIC 3000

Australia

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