23 February 2016
There is death and there are taxes. Then there are electricity bills. You can’t avoid them really and according to Victorian Energy Compare 91% of Victorians pay more than they need to for their electricity.
It’s human nature that most of us get the power connected to our property and then forget about it. The thought of changing to a provider with a better offer falls way down the ‘to do’ list behind all the other day-to-day pressures on our plates. We’re exposed to plenty of offers every week on the TV, radio, online and in the newspaper. ‘If only we had the time and the interest to look into it’ we tell ourselves.
According to St Vincent de Paul, households can save up to $600-$800 on electricity by switching from the worst to the best offer. When you combine this figure with the savings we outlined in our blog last November about switching from halogen lights to LED, it is a pretty compelling reason to compare your electricity retailer with the best offers in the market each and every year.
The devil is in the detail
Energy plans can be confusing due to differences in usage rates, supply charges, contracts and exit fees and incentives and discounts. By improving your understanding of your bills, however, you can take the first steps to making significant annual savings.
We sat down with Lois Schmidt, sustainability advisor at SuniTAFE and president of the Sustainable Living in the Mallee (SLIM) group. It’s fair to say that after one hour on the phone and two hours face-to-face, not only did I learn many valuable insights into electricity pricing, but even Lois can get confused when comparing the variations in different retailers plans. If comparing retailers’ plans can spin Lois’ head, how are we mere mortals expected to know a good or bad plan when we come across one?
So it’s a good thing we took a lot of notes and penned this blog post to distil the key points for our readers.
Start by understanding your usage and what you’re paying per kilowatt/hour (kWh)
“Start by taking out your power bill and working out your average daily consumption. Look at how many cents you are paying per kilowatt/hour (kWh) for peak and off-peak” says Lois. “You base all decisions on this number and that’s where you can save money.”
Understanding your current kilowatt/hour price enables you to compare ‘apples with apples’ when reviewing another plan. Being familiar with your daily usage (peak/off-peak) will help you choose the plan best suited to your particular circumstances, which may not be the same as your neighbour.
Compare offers from retailers on independent government websites
Armed with the knowledge of what you’re currently paying, it is important to compare your deal with other offers in the market from more than 15 retailers on independent government-backed price comparator websites like Victorian Energy Compare (SwitchOn.vic.gov.au) or EnergyMadeEasy.com.au for New South Wales readers.
Victorian Energy Compare claims that more than half of visitors to its site have found they could save $330 off their annual energy bill.
Look at these independent price comparator websites and answer the questions – such as your current kilowatt/hour rate, the number of rooms in your house and whether you have a second fridge! – to find a better deal. If you don’t have a computer, go to the library for internet access (first hour per day is free for library members).
“It is important to select the best deal for your personal circumstances, bearing in mind that an older, retired person at home all day has different consumption to someone who is at the office 9-5 and uses the computer and TV late at night” says Lois. “A retiree at home all day might be better off choosing a plan with a lower kilowatt/hour rate at peak times while a family or daytime office worker may be better off with a plan featuring a lower off-peak price. There’s no single best deal on the market for everyone, only the best deal for your circumstances.”
Sometimes you simply need to pull out a calculator and piece of paper when comparing electrical retailers.
Large discounts do not necessarily lead to the best deals
Be careful with discounts – large discounts may not be as good as they first appear if the offer features a higher kilowatt/hour price than your current plan. If you’re currently paying 25 cents per kilowatt/hour peak and 10 cents per kilowatt/hour off peak, it may still work out better than a promotion offering large discounts (but higher supply charges and higher peak/off-peak pricing).
This is why it’s imperative to study your previous bill (or better still, your last 12 months to take into account winter/summer consumption) to work out how much you’re using on a daily basis, and then comparing the rates of a new offer (including supply charges) to your last bill(s) to calculate whether you will be better off changing. You will likely need a calculator and big sheet of paper!
The following example from the Consumer Utilities Advocacy Centre illustrates that a smaller discount on a lower kilowatt/hour rate is a better overall deal that a large discount on a more expensive kilowatt/hour rate. Don’t be lured by juicy discounts that require you to switch both your electricity and gas; they are not valid for Swan Hill as we do not have natural gas but ask if they have a deal for LPG.
Victorian Energy Compare suggests you ask the following questions to a new retailer before changing:
- What is the cost per kilowatt hour?
- Are there any fixed costs or service fees?
- How long is the contract?
- If I get a longer contract, is it cheaper?
- Can prices go up during the contract?
- Do I get a bonus for early payment or an extra fee for late payment?
- How do I pay? Bank account, credit card or cash?
- Are there exit fees if I want to leave the contract early? If so, how much are they?
Once you are satisfied that the plan is the best deal for you, ask for an offer summary.
“I always make the person from the electricity company read back to me the details of the offer, especially the price per kilowatt hour, to make sure I’m signing up to the deal that was advertised” adds Lois.
Double-check the details during the cooling off period
Once you have made the decision to change electricity retailer the process is quite easy – your new provider will do all the work for you once you agree to move to them.
If you change your mind you have a 10 day cooling off period. During this cooling off period you should double-check that their prices are, in fact, the same as the day you agreed to the contract as this is your last chance to verify that you agree with the pricing.
Lois’ tips when changing retailer:
- Never agree to a contract longer than 12 months
- Concession card holders – don’t forget to inform your retailer if you have a concession card – a discount may apply.
- Compare advertised offers regularly to find cheaper energy plans and consider changing annually to save money.
- If you find a great deal, call your current provider first, explaining “provider X is offering an 80 cents per day supply charge, 19.67 cents a kilowatt/hour peak and 10.84 cents a kilowatt/hour off peak. Can you beat or match that to keep my business?” More often than not your provider will match any advertised deal to keep you.
Dealing with door-to-door salesmen
“Never do a deal on your doorstep” says Lois.
Salesmen can be extremely persuasive and hard to turn away once they’ve said hello and engaged you in conversation but it is important to turn them away. You will not get a better deal on your doorstep that you couldn’t already get over the phone or online without having someone standing in your hallway pressuring you to sign something.
- Do not do deals on your doorstep
- Do not let anybody in your house
- Do not show a stranger your power bill or electricity meter
- Do not provide your NMI number from your bill
“Understanding your bill helps you to start asking questions, and that gives you the power to start saving money” concludes Lois.
Next month: Part B – How much electricity should a typical household your size use and surprising tips for cutting your consumption.
Glossary of key terms:
- Distributor – A distributor own the poles and wires that deliver electricity to your home or business (Powercor is the sole distributor in North West Victoria).
- Retailers – around 16 electricity retailers who sell electricity direct to the public
- Supply charge – A fixed charge that is also called the ‘service to property’.
- Kilowatt hour (kWh) – Electricity energy consumption is measured in kilowatt hours. A kilowatt (kW) is 1000 watts of electrical power.
- Time-of-use – These tariffs provide different pricing according to the time of day, broken into Peak and Off peak (also called control load) times.
- Flexible pricing – a variation of peak and off-peak (time of use) plans, flexible pricing also features ‘shoulder rates’ wedged between peak and off-peak times.
- Shoulder rate – see flexible pricing.
- Step 1 and Step 2 – some plans break peak and off-peak pricing into ‘steps’, one price for the first slice up to a certain threshold, or step of energy consumed, and a different price for energy consumed thereafter. Some retailers offer cheaper electricity in step 2 while others charge more (this is where understanding your current usage is important).