The mystery of the missing bill shock…

Like all good energy nerds, I keep track of my old electricity bills. I recently stumbled across an old spreadsheet with some analysis of different retailer offers from the time my wife and I moved into our house back in 2010. I was curious to see how much our bills had changed so I started comparing them to my recent bills. I was astonished to find that…they are almost exactly the same! In fact, my electricity costs are slightly lower (in nominal terms) now than when we moved in over a decade ago. But how can this be? Haven’t we been being hit with ever larger bills each year thanks to incompetent governments/greedy retailers/environmental boondoggles/pick your own scapegoat? Why else would governments and regulators have clamped down and re-regulated retail prices?

First, a few caveats. The analysis below has been normalised to consistent usage levels. Last year I did spend more on electricity because we were home a lot more (can you guess why?) and my usage went up. Also, I am now with a retailer (Amber) that has an unusual business model: they pass through the wholesale price directly (along with the other costs they incur) and then add a fixed fee on top. So, I’ve had to use the average wholesale costs they’ve charged me. Prices have been fairly low in the last few months and a few price spikes if we have a heatwave in the summer would drag the average price up. Even if this does happen, I’m confident I won’t be paying any more in real terms than back in 2010.

Having filled in the gaps in between then and now, I found that my electricity costs had bounced around somewhat, as shown in Chart 1 below. Another unexpected outcome is that the fixed component of the bill has not increased.

Chart 1: nominal annualised costs by year, with fixed and usage (per kWh) charges separated

Source: author’s analysis of own bills, see note 1 below for further info

  • Back in 2010, I got connected via the default local area retailer, AGL. Naturally, I started off on their standing offer (although at that time, their market offer in my area was only a 5% discount).
  • I pretty quickly realised I could do better and after some spreadsheet analysis selected Energy Australia (EA), then owned by the NSW government. My first bill with them was the cheapest across the entire period. Over the 4 years I was with them (and they got bought by TruEnergy), the underlying costs were rising. Even though my original contract expired, they kept me on a discounted market offer, it’s just that better offers were becoming available.
  • Finally, in 2015, I got my act together and used Victorian Energy Compare (see note 2 below) to find a cheaper deal with Pacific Hydro (now Tango). Remarkably they kept me on the same market offer (no discounts, just good rates, for three years.
  • In 2018, I went back to the comparison site and found an even better deal, with Globird. This was a more typical highly discounted pay-on-time offer (but easy to ensure the discount by setting up a direct debit). However, after a year their rates went up quite a bit – it’s not clear how much of this was driven by costs – this was about the time that the wholesale price shock from Hazelwood’s closure fed through to retail bills – and how much was Globird unwinding their introductory offer so they could actually make some money.
  • Then in March this year, I switched to my current supplier, Amber. My timing was impeccable as I missed out on last summer’s prices and caught the wholesale price on a downward trend.

Chart 2 shows the annualised costs in real terms. This makes it even more obvious how good my current deal is and how the real costs are trending down over time.

Chart 2: real annualised costs by year ($2010)

Source: As chart 1

The three years where costs poke above the trend line are the years I should have made more effort to shop around. Each trip to the comparison website only took me about half an hour, assisted by my distributor’s energy portal which allowed me to upload my consumption data to get the most appropriate offers for my circumstances. Then registering with the new supplier another half hour, so maybe an hour all up.

Of course, this anecdotal view of one household doesn’t contradict the detailed analysis of the ACCC and others on rising costs and prices. My experience may not be shared by vulnerable households or others who struggle to access the best deals for whatever reason.

However, it does illustrate the value of regularly shopping around if you can. It also suggests the dominant narrative of ever increasing prices and rip-off retailers is not the whole story. Maybe there’s something in this competition lark after all…

Notes

1 Detailed notes on data:

  • Annualised costs based on 2300kWh pa – this is our historical annual household usage, as we are a two-person home with reticulated gas for heating/cooking/hot water.
  • Household is in the United Energy distribution area (SE Melbourne).
  • I didn’t neatly change retailers on 1 January, so there is some simplification in the timing of retailer switches, and tariff changes.
  • CPI deflator for the real costs is based on June CPI each year.

2 Comparison website is Victoria only. Customers in other eastern states should use Energy Made Easy. There are numerous commercial switching sites, but these may not include all available offers. Conversely their commission-based model means they are more geared up to actually help you switch, whereas the government-run sites, while comprehensive, simply give you the information, and you have to do your own follow-through.