The Independent Competition and Regulatory Tribunal (ICRC) regulates standing offer electricity prices for ActewAGL Retail in the Australian Capital Territory. 

Findings

  • There was a 19% fall in the number of small electricity customer in the Australian Capital Territory on the standing offers. This was the biggest change in the National Electricity Market (NEM).
  • The median market offer fell by 0.3% from March 2018 to March 2019 in the Australian Capital Territory.
  • Customers on the median standing offer could save $504 by switching to the minimum market offer.
  • Competition has increased for both electricity and gas consumers over the past year. Three new retailers entered the Australian Capital Territory market – Energy Locals, Powerclub and Red Energy – bringing the total of retail brands in the Australian Capital Territory to eight. The market share of ActewAGL Retail has fallen from 90.7% to 88.3% as the trend towards switching between retailers rises.
  • The Australian Capital Territory continues to have the lowest rate of switching at 9% compared to 29% in Victoria, but shopping around is now more important than ever.
  • Offers marketed as heavily discounted don’t necessarily offer the best deals in the Australian Capital Territory. There are now a number of offers in the ACT that are just as competitive as those with discounts, without requirements such as ‘pay-on-time’.
  • Satisfaction with the level of customer service increased by 11% in the Australian Capital Territory between April 2018 and 2019, the largest increase across the national electricity market overall.
  • The number of customers on hardship programs increased by 34% during 2017-18 to just over 1,600, but the level of debt they had when they entered the scheme was lower

Looking forward

Standing offers will continue to be set by the Australian Capital Territory regulator. The continuation of retail price regulation in the Australian Capital Territory, and the size of the market, was cited by retailers as a barrier to entry. However, despite theses barriers to entry, the findings above indicate that retail competition is increasing the Australian Capital Territory.

The AEMC will monitor the impact of reregulation in other jurisdictions and provide information to the Australian Capital Territory Government on any actions relevant to their own regulated price regime.

Overview

The Australian Capital Territory’s electricity market is the smallest in the NEM, and its gas market is the second smallest.

For the electricity market:

  • in March 2019, there were eight electricity retail companies and brands
  • these companies supply approximately 187,000 small electricity customers, as of December 2018
  • PowerClub, Red Energy, ReAmped Energy and Energy Locals entered the Australian Capital Territory market this year.

For the gas market:

  • there were three gas retail businesses and brands in March 2019
  • these brands supply approximately 125,000 small gas customers, as of December 2018
  • no new gas retailers have entered the market since March 2018.

The Australian Capital Territory introduced full retail contestability for gas in 2002 and for electricity in 2003. At this time, it removed retail price regulation for gas but retained it for electricity. The Independent Competition and Regulatory Commission set regulated standing offer electricity prices. The Australian Capital Territory adopted the National Energy Customer Framework (NECF) on 1 July 2012.

Retail market structure

Analysing market structure provides perspective on the effectiveness of retail competition in electricity and gas markets, and in-turn the outcomes for consumers. The Commission has analysed a number of factors that can affect the performance and conduct of retailers and key findings for New South Wales are outlined below. .

  • Electricity market concentration, as measured by the Herfindahl-Hirschman index (HHI), declined by 8.8% (700 points) in December 2017 to 7,302 in December 2018. The Australian Capital Territory remains the second most concentrated market in the NEM based on the HHI, as it has been since 2011.
  • Gas market concentration, as measured by HHI, declined by 3.7% (308 points)points to 8,028 from June 2017 to June 2018. The Australian Capital Territory is the fifth most concentrated gas market.

Changes in retail market concentration by jurisdiction are set out in the figure below. It shows the retail electricity market in the Australian Capital Territory has become less concentrated over time.

Short-term changes in market share, 2015-16 to 2017-18 (electricity) — Residential

*Source: AER and ESC data. AEMC analysis* Description: Queensland refers to South East Queensland. The market share measures (and related HHI calculations) were taken from the fourth quarter of each financial year. The exemption to this is the 2018-19 year, where the measure is taken from the second quarter of the financial year and therefore does not represent the entire year.

Independent rivalry

Consumer switching activity can provide an insight into the level of independent rivalry among retailers in a market and also influences levels of market share. Information about consumers switching between different types of retailers (such as switching from one big 3 to another, or from the big 3 to tier 2 retailers) provides an indicator of progress in achieving effective competition in a market. Further, the rate of switching between the big 3, and from tier 2 retailers to the big 3, provides an insight into how effectively retailers who have historically enjoyed the benefits of incumbency are competing for consumers.

Switching rates between retailers is shown in the figure below.

Consumer switching within and between retailer tiers, 2012 to 2018

Source: AEMO data. AEMC analysis. Description: Queensland refers to South East Queensland. Big 3 in the Australian Capital Territory includes ActewAGL.

Retailer views on market structure

In addition to examining observable market share data and trends, the AEMC conducts a retailer survey and interviews to obtain insights from retailers of various sizes about what they believe is affecting market structure, the state of competition in the energy market and factors that retailers consider will influence the market in the future.

For the Australian Capital Territory, a number of retailers commented that:

  • the size of the Australian Capital Territory market and price regulation remain as barriers to entry for some smaller retailers
  • it had become slightly easier to get access to wholesale gas contracts over the past year, after the Prime Minister’s gas roundtable in September 2017.

Pricing practices, products and innovation

The AEMC examines how retailers compete for customers through price and non-price offerings in relation to small consumers in both the electricity and gas markets.

To analyse pricing and product innovation, the Commission examined a range of possible bill outcomes for a representative Australian Capital Territory consumer. The results are as follows:

  • For residential non-solar electricity offer - annual consumption of 7,151 kWh with no controlled load.
  • For residential solar offers - annual consumption of 7,151kWh with no controlled load with a 3kW solar PV system on a flat tariff.
  • For small business electricity offers - annual consumption of 20,000 kWh.
  • For residential gas offers - annual consumption level of 38,451 MJ

Standing and market offers

The below table shows the proportion of small customers on standing offers for electricity and gas. In the Australian Capital Territory 49 per cent of electricity customers and 51 per cent of gas customers are on market offers.

Proportion of small customers on standing offers in 2018

ELECTRICITY STANDING OFFERCHANGE FROM 2017 TO 2018GAS STAND- ING OFFERCHANGE FROM 2017 TO 2018
Queensland*24%↓ 4%
South East Queensland15%↓ 5%
New South Wales14%13%↓ 2%
Australian Capital Territory51%↓ 19%49%↓ 19%
South Australia9%↓ 3%11%↓ 2%
Tasmania**92%↑ 2%
Victoria***6%↓ 1%7%↓ 2%

Source: AER retail statistics and the ESC's Victorian Energy Market Report 2017-18. Note: rounded figures may not sum to 100 per cent. Data as of December 2018, except for Victoria which is based on 2017-18. Note: *Gas statistics are Queensland-wide and electricity statistics are for the deregulated region (South East Queensland). **While Tasmania has three gas offers, the AER does not publish customer numbers. ***Victorian numbers are based on residential customers only.

The figure below shows:

  • The lowest priced market offer fell in the Australian Capital Territory.
  • The representative consumer saw the largest increase in the median residential electricity standing offer bill in the Australian Capital Territory where it increased by around nine per cent.
  • The median residential gas standing offer increased slightly in the Australian Capital Territory.
  • The reduction in the range of standing offers in the Australian Capital Territory reflects the small number of standing offers available.

Median residential standing and market offer bills

Pricing behaviour of retailers – standing and market offers

As shown in the figure below, the Australian Capital Territory has seen a significant increase in the number of offers available on Energy Made Easy, with numerous lower priced offers. However, there have also been a number of new standing offers at higher prices than in 2018.

Similar to other jurisdictions, there has been an increase in the number and proportion of no-discount and fixed priced offers, and these offers are amongst the lowest priced offers in the market. However, consistent with our market structure analysis (and shown in the second figure below) there are less available offers from new and emerging retailers in the Australian Capital Territory.

Distribution of representative bills by offer type

Distribution of representative bills by retailer type

Switch and save

By switching from the median standing offer to the cheapest market offer, residential and small business consumers can save the following.

Switching from standing offer to market offer savings - Australian Capital Territory

NetworkCustomers on standing offers (%)Annual bill saving (% of bill)
Residential electricityEvoenergy50%$504(26%)
Residential Gas49%$273(19%)
SME Electricity70%$1733(29%)

Source: Energy Made Easy (accessed 1 March 2019). Note: Standing offer proportions are for the whole state while the savings are based on the indicated distribution zone.

Consumer behaviour

In order to determine consumer behaviour the AEMC examines consumer:

  • preferences
  • sentiment and confidence
  • trust in the energy market
  • actual and intended activity.

In an effectively competitive market the expectation would be for consumers to have increasing confidence in their ability to make decisions over time.

Residential consumers

Data on residential consumer sentiment is sourced from the ECA's biannual Energy Consumer Sentiment Survey (the ECA Survey). Survey results have been compared on a year-to-year basis due to seasonality in the biannual survey responses. The ECA survey results show that September/October results are generally more pessimistic than April.

Key changes in residential consumer behaviour in the Australian Capital Territory were:

  • More customers switched retailers in the past year than in the previous year (9.03 per cent in 2018 compared to 6.33 per cent in 2017).
  • Slightly more consumers indicated an intention to switch retailers in the next 12 months (18 per cent in April 2019 compared to 16 per cent in April 2018).
  • The main reasons stated by consumers for switching were they searched for a better deal on a comparison website (32 per cent) and/or were not satisfied with the value for money from their retailer (35 per cent).

Overall customer switching electricity

Source: AEMO data, AEMC analysis. Description: Data does not include where a customer has changed plans with their current retailer. Queensland refers to South East Queensland.

Overall customer switching gas

Source: AEMO, AEMC analysis. Description: Data does not include where a customer has changed plans with their current retailer. Queensland refers to South East Queensland.

Residential consumer confidence in the energy market in the Australian Capital Territory increased in 2019. In April 2019 (compared to April 2018), confidence in the Australian Capital Territory that:

  • the market is working in consumers’ long-term interests was 18 per cent (up four per cent)
  • they can make good decisions was 54 per cent (stable with 2018)
  • they can access easily understood information was 45 per cent (down four per cent).

Residential consumer sentiment survey – conduct results

Small business behaviour

Data on small business behaviour is largely based on research conducted by Colmar Brunton for the Commission in March and April 2019.

Key changes in small business consumer behaviour in the Australian Capital Territory were:

  • engagement has somewhat decreased in the past year with a reduction in businesses’ propensity to switch from 56 per cent in 2018 compared to 50 per cent in 2019.
  • the level of confidence among businesses to find the right information to select a retailer or plan decreased five per cent to 36 per cent in 2019.

For all the Australian Capital Territory small business sentiment survey results, see the Colmar Brunton report.

Outcomes for consumers

In order to assess the outcomes small consumers are achieving from the market, the AEMC examines small consumer perceptions and observable data on the following:

  • consumer satisfaction as measured by consumer surveys
  • observable data on:
    • the level of consumer complaints to retailers and Ombudsmen
    • disconnections
    • customers in hardship.

In a well-functioning competitive market, customers who engage can drive better outcomes for themselves and the market overall by influencing the design of products and levels of service provided. A high proportion of customers who are generally satisfied with difference aspects of the market can signal an effectively competitive market.

Residential consumer satisfaction

In April 2019, compared to April 2018, satisfaction in the Australian Capital Territory with:

  • the level of competition was 28 per cent (up eight per cent)
  • customer service from electricity retailers was 62 per cent (up 11 per cent)
  • the value for money of electricity retailers was 40 per cent (up three per cent)
  • customer service from gas retailers was 61 per cent (up five per cent)
  • the value for money of gas was 49 per cent (up seven per cent).

Residential consumer sentiment survey – outcomes results

Small business satisfaction

In 2019 (compared to 2018), small business satisfaction in the Australian Capital Territory with:

  • customer service from electricity retailers was 42 per cent (down 11 per cent)
  • the value for money of electricity was 25 per cent (down 14 per cent)
  • choice of energy companies and plans was 10 per cent (up three per cent).

For all the Australian Capital Territory small business sentiment survey results, see the Colmar Brunton report.

Complaints, hardship and disconnections

The key statistics related to complaints, hardship and disconnections for the Australian Capital Territory include:

  • Complaints to retailers decreased by 84 per cent from 2016-17 to 2017-18. The AER noted this is mainly due to the reduction in complaints reported by Origin Energy which has changed its complaints recording method to be in line with the other retailers.
  • Complaints to the Ombudsman decreased by 64 per cent in 2017-18.
  • The number of customers on hardship programs between June 2017 and June 2018:
    • for electricity increased from 659 to 987
    • for gas increased from 552 to 636
  • The average debt of electricity customers on entry into hardship programs decreased from $1,784 in 2016-17 to $1,449 in 2017-18.
  • Disconnection rates have increased by:
    • 17 per cent from 427 in 2016-17 to 501 in 2017-18 for residential electricity customers
    • 29 per cent to 27 per cent for residential gas consumers.
    • nine per cent increase for electricity small business from 74 in 2016-17 to 84 in 2017-18. The Australian Capital Territory had the smallest increase in business consumer disconnection rates in the past year.

Summary of key statistics

The below table provides a summary of the key market statistics for the Australian Capital Territory.

Australian Capital Territory: Electricity

CategoryMeasurePeriod2014 review2015 review2016 review2017 review2018 review2019 reviewsource
ACT
Market characteristicsNumber of small customers*As at end of previous financial year0.166m0.17m0.173m0.176m0.18m.185mAER retail statistics
Number of retail brands/ businessesAs at end of previous calendar year3/34/45/58/8AEMC analysis, AEMO data
Independent rivalryMarket concentration (HHI)9,1979,1658,7028,3158,0027,363
Market share of Big 3100%99.87%99.90%
Customer activitySmall customers on market offers19%22%24%25%30%39%AER retail statistics
Competitive retail prices*Range of bill outcomes - EvoenergyBetween January and March$1,24-$1,568 ($327 difference)$1,239-1,524 ($285 difference)$1,29-$1,455 ($164 difference)$1,477-$1,914 ($437 difference)$1,472-$2,227 ($755 difference)AEMC analysis, Energy Made Easy website

* 2018 data is based on a representative customer in Australian Capital Territory. Range of bill outcomes is based on the least to the most expensive (standing or market) offer available in the DNSP area. Bills are based on data extracted from Government comparison websites: Energy Made Easy on 5 January 2017 and 21 March 2018.

Australian Capital Territory: Gas

CategoryMeasurePeriod2014 review2015 review2016 review2017 review2018 review2019 reviewsource
ACT
Market characteristicsNumber of customers ('000)As at end of previous financial year115.00119.00120122.00AER retail statistics
Number of retail brands / businessesAs at end of previous calendar year2/23/3AEMC analysis, AEMO data
Independent rivalryMarket concentration (HHI)As at end of previous financial year9250.009232.008837.008,4038,1047472.00AEMC analysis, AER data
Market share of ActewAGL0.960.9492%91%86.00%
Customer activitySmall customers on market offersAs at end of previous calendar year0.210.2423%32%AER retail statistics
Competitive retail pricesRange of bill outcomes- EvoenergyBetween January and March$785-$860 ($75 difference)$1,226-$1,464 ($238 difference)$1,186-$1,509 ($323 difference)AEMC analysis, Energy Made Easy website

The review

The Australian Energy Market Commission (AEMC) conducts an annual review of the state of  competition in the retail energy market at the request of the Council of Australian Governments (COAG) Energy Council. The 2019 review is the sixth review. The AEMC adopts a structure-conduct-framework performance to assess the state of competition and the outcomes consumers are achieving from it.