Annual reports on energy retail competition 

Energy sector transformation is accelerating. Retail competition is stronger. New energy entrepreneurs are offering customers more varied products and better priced deals. Gains for customers are real but at risk because of rising wholesale generation costs.

The AEMC does annual reviews of the state of competition in retail energy markets across the national electricity market which covers Queensland, New South Wales, Victoria, South Australia, Tasmania and the Australian Capital Territory.

The purpose of the reviews is to make recommendations to energy ministers on ways to help families and business become better informed and more confident energy shoppers. Our first consumer blueprint was published in 2013.

Since then the reviews have extended our consumer research and consultation with community and small business groups, financial planners, and energy retailers – to inform governments and the retail industry on what’s needed to improve things for energy consumers.

Read more about energy retail competition trends over time:

2017 Retail energy competition review

2016 Retail energy competition review

2015 Retail energy competition review

2014 Retail energy competition review

2013 Retail energy competition review (NSW) including Consumer Blueprint

2011 Retail electricity competition revivew (ACT)

2008 Retail energy competition review (SA)

2008 Retail energy competition review (VIC)

The 2017 report in detail

The 2017 review found that while retail competition is stronger and delivering real benefits for consumers, higher costs of wholesale generation are driving up retail prices. This is putting these benefits at risk.

Energy consumers have more choices to manage their energy use and are looking to take up new technology options:

  • 20% of consumers surveyed now have solar panels
  • 21% are likely to adopt battery storage in the next two years
  • 18% are likely to take up a home energy management system in the next two years.

By shopping around some households can save 38% or $507 on their yearly electricity bill and 30% or $285 on gas. These potential savings are larger than last year.

Also, residential consumers are more aware of their choices: more than 90% of energy consumers know that they can choose their retailer, and around 80% of residential consumers actively chose their current energy offer.

However, 30% of consumers are unable to identify the type of plan or offer they are on, and consumers find it harder to compare energy offers than they do in banking, insurance and telecommunications. Consumer awareness of the government’s Energy Made Easy comparison website remains at 9%.

The report makes a number of recommendations to make it easier for customers to take advantage of competition and make the best energy choices for their household or business.This includes a range of programs to build awareness of cost savings, concession and hardship schemes, comparison websites and other essential information to help consumers choose the offer or product that’s right for them.

The review also found that while competition is driving innovation and new choices for consumers in the retail market, these benefits are under threat by a wholesale (generation) market with rising costs:

  • Rising wholesale costs are being driven by a range of factors, including the increasing costs of hedging contracts.
  • Fewer generators can provide hedging contracts due to the lack of an emissions reduction policy that is properly integrated with the energy market, while generator retirements are reducing the supply of contracts.
  • This, along with higher gas prices, is increasing the costs of doing business for electricity retailers, especially smaller retailers with innovative offerings. The risk of these electricity retailers leaving the market is growing.

This risk to retail competition offsets the positive trend of decreasing market concentration. The review found that the market share of the big three retailers - AGL, Origin and Energy Australia - who currently supply 70% of customers in the national electricity market, decreased, while the market share of second tier retailers is increasing.

The review also looked at retailer gross margins. It found the gross margins of the big three retailers were similar to the gross margins of smaller second tier retailers across New South Wales and Victoria in 2015-2016, although gross margins of the big three were higher in Victoria than in other jurisdictions. The report noted there are limitations in interpreting gross margins, and suggested the ACCC investigates the differences in retailer costs for different jurisdictions as part of its inquiry into retail electricity supply and pricing.