Big energy retailers promoting no discount plans are not yet ‘walking the walk’ when it comes to helping Australians make better-informed power decisions, according to a senior figure in the industry.
Amy Childs, Director of Momentum Energy, predicts that big power discounts will soon become a thing of the past, as industry regulators begin to fight back against retailers that offer big discounts based on inflated standard prices.
Momentum Energy markets itself as a retailer keeping things simple, with no conditional discounts offered to new customers.
Ms Childs told Canstar Blue she will “celebrate” the death of power discounts as a win for consumers, at a time when several other providers have followed the likes of Momentum in launching zero percent discount offers focused on transparent rates.
“We don’t offer discounts to new customers. Full stop,” she said. “And while some of our competitors are introducing no-discount products, some of them are promoting discounts at the same time. So they’re not really walking the walk yet.
“It’s true that ‘no discounting’ has been a key point of difference for us. In the middle of a cut-throat discount marketing war, we made a business decision to take a stand against confusing discounts. It wasn’t an easy decision to make. But we felt very strongly that it’s the right thing to do because it helps make prices simpler for customers to understand.
“Look at it this way – advertising a big discount can hide a really average rate. But advertising 0% off means we’ve got nothing to hide behind. So customers make decisions based on our rates and service.”
In recent months, Australia’s two biggest energy retailers – AGL and Origin – have both launched new products with no conditional discounts, while also continuing to market big discount deals.
Canstar Blue’s electricity database shows that their plans with no discounts often work out cheaper than those promising big savings.
Despite the fact that other retailers are following Momentum’s position as a retailer that keeps things simple, Ms Childs said she would welcome the day that big discounts become a thing of the past.
“Honestly, I’d be delighted if everyone follows suit,” she said. “And it may take a year or two or three, but I genuinely believe this focus on heavy discounting will ultimately die out. It just has to – discounts are one of the things that are now make energy pricing so complicated.
“People just switch off from properly engaging with the energy market because it’s all too hard. That’s not the way a market should operate. So when discounts are officially dead, we’ll celebrate it as a victory for the consumer.
“For us, it’s all about creating a level playing field. We’d like to see a market where people can compare like for like – so they can make an informed decision based on price and service.”
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Regulators crack down on dodgy discounts
The end of big discounts could be some way off, but they may at least become a little less confusing, with industry regulators introducing a new rule that will see providers banned from offering discount deals based on higher rates than their standard pricing.
Under the new rule, introduced by the Australian Energy Market Commission (AEMC), retailers could be fined up to $20,000 if they are found to be offering customers discounted deals that are not as beneficial as they seem.
Currently, most electricity retailers provide some form of conditional discount applied to their standard pricing. However, some retailers have been applying their biggest discounts to plans with usage rates even higher than their normal pricing, meaning customers are often left paying more than expected.
In addition to the new rule, the AEMC has also recommended strengthening the Australian Energy Regulator’s (AER) ability to enforce exactly how power retailers present their offers to consumers.
AEMC chairman John Pierce said that the rule would now prevent retailers from inflating the base prices from which they applied the discount, which made discounts appear more beneficial than they were.
“Discounting can work to benefit consumers as long as the details are properly disclosed,” Mr Pierce told Fairfax Media in May.
“But dodgy discounts deliberately designed to confuse consumers are not acceptable. Confusion around retail price offerings also means most consumers don’t grasp the opportunities on offer.
“That’s why it’s important to have rule requests like these – so competition in the retail market delivers for consumers.”