Findings

  • The median market offer fell by 2 to 4% across the three network areas from March 2018 to March 2019 in NSW.
  • Customers on the median standing offer could save between $389 to $584 by switching to the minimum market offer depending on the network area in 2019.
  • Competition increased for both electricity and gas consumers over the past year. Four new electricity retailers entered the NSW market – Sumo Power, ReAmped Energy, Powerclub and DC Power Co – bringing the total of retail brands in NSW to 32. The market share of the big 3 retailers has fallen from 88 to 84 per cent.
  • Shopping around is now more important than ever. Offers marketed as heavily discounted don’t necessarily offer the best deals in NSW. There are now a number of offers in NSW that are just as competitive as those with discounts, without requirements such as ‘pay-on-time’.
  • Satisfaction with the level of customer service fell by 6% in NSW between April 2018 and 2019, despite increasing overall across the national electricity market. Similarly, while perceptions of value for money rose or stayed stable elsewhere, they fell by 1% in NSW
  • The number of customers on hardship programs increased by 14% during 2017-18 to just over 36,750, but the level of debt they had when they entered the scheme was lower

Looking forward

Electricity price regulation will be reintroduced on 1 July 2019 through the Australian Government’s default market offer (after prices were deregulated 5 years ago). This will reduce the prices paid by the 14% of small customers in New South Wales that remain on a standing offer (down by 5% over 12 months).

The AEMC will monitor the impact of the default market offer and advise the NSW Government on any actions required to minimise any disadvantages for small customers who use a large amount of energy and vulnerable consumers already on market deals.

Overview

For the electricity market in New South Wales:

  • in March 2019, there were 27 retail electricity businesses (32 electricity brands)
  • DC Power Co. PowerClub, ReAmped Energy and Sumo Power all entered the market in the past year
  • there was approximately 3.51 million small electricity customers as of December 2018.

For the gas market in New South Wales:

  • there were nine gas retail businesses (12 gas retail brands) in March 2019
  • there has been no change in the number of gas retailers in the past year
  • there was approximately 1.42 million small gas customers as of December 2018.

Full retail contestability was introduced for electricity and gas customers in 2002, with the New South Wales Government removing retail price regulation for electricity on 1 July 2014 and for gas on 1 July 2017. On 1 July 2019, standing offers in New South Wales will be capped under the Commonwealth’s default market offer (DMO), as set by the Australian Energy Regulator (AER)

The Independent Pricing and Regulatory Tribunal monitors and reports annually on energy retail prices.

New South Wales adopted the National Energy Customer Framework (NECF) in July 2013 with a number of variations.

Retail market structure

The structure of a market influences the conduct of its participants and in turn the performance of the participants and outcomes for consumers as a whole. The Commission analyses a range of factors, including market concentration, customer switching and barriers to entry, expansion and exit to assess market structure. The key findings of this analysis for New South Wales are outlined below.

  • Electricity market concentration, as measured by the Herfindahl-Hirschman index (HHI), declined by 3% (76 points) to 2,481 from December 2017 to December 2018.
  • New South Wales remains the second least concentrated market in the NEM based on the HHI, as it has been since 2011.
  • Gas market concentration, as measured by HHI, declined by 7.2% (249 points) to 3,216 from June 2017 to June 2018. New South Wales is the third least concentrated gas market.

The retail electricity market is becoming less concentrated overtime as shown in the below figure.

Short-term changes in market share, 2015-16 to Q2 2018-19 (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 exception 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. For the best experience please view this chart on a desktop computer

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 as 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 New South Wales, a number of retailers commented that:

  • increased political and regulatory intervention across the NEM was increasing risk and administrative burden
  • they were critical of the Commonwealth Government’s proposed DMO (noting that interviews were held before the Commonwealth Competition and Consumer (Industry Code – Electricity Retail) Regulation 2019)
  • 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 New South Wales customer as follows:

  • For residential non-solar offer - annual consumption of 3,800kWh (Ausgrid), 4,900 (Endeavour Energy) and 4,600 (Essential Energy), all with no controlled load.
  • For residential solar offers – as above and with a 3kW solar PV system on a flat tariff.
  • For small business offers - annual consumption of 20,000 kWh.
  • For residential gas offers - annual consumption level of 24,387MJ.

Standing and market offers

The below table shows the proportion of small customers on standing offers for electricity and gas and shows that in New South Wales, with 86 per cent of electricity customers and 87 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 median residential electricity bill was generally closer to the minimum electricity bill in New South Wales (Ausgrid) with the majority of electricity bills in the lower range of the distribution.
  • Across most regions the median gas offer was closer to the minimum gas offer in the market with a cluster of offers in the lower price range.
  • The median residential gas standing offer increased slightly in New South Wales (Jemena Coastal Network).
  • The lowest priced small business electricity market offer generally fell across the regions.

Median residential standing and market offer bills

Pricing behaviour of retailers – standing and market offers

As shown in the figure below, New South Wales has had an increase in the number of lower priced offers available in the Ausgrid distribution zone, relative to 2018. The results also show that there has been an increase in the number and proportion of no-discount and fixed priced offers, and that these offers are amongst the lowest price offers in the market.

The second figure below also shows that the lowest offer in the market is from a new or emerging retailer. Similar trends are also observable in Essential Energy and Endeavour Energy distribution zones.

Distribution of representative bills by offer type

Distribution of representative bills by retailer type

Discounting of the big 3

In order to assess achievable discount levels available to customers, the Commission sought and gathered data from retailers. The below figure presents this data across jurisdictions for the big 3 to provide trends in discount levels over the two years.

Discounting levels of big 3 retailers — 2016-17 and 2017-18

DOWNLOAD CHART DATA [1.78 kB CSV]

Source: Retailer data, AEMC analysis.

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 - New South Wales

NetworkCustomers on standing offers (%)Annual bill saving (% of bill)
Residential electricityAusgrid13%$389(27%)
Endeavour$540(31%)
Essential Energy$584(30%)
Residential GasJemena Coastal Network12%$192(20%
Jemena Country Network$171(18%)
Evoenergy ShoalhavenN/A
SME ElectricityAusgrid21%$2660(35%)
Endeavour$1904(31%)
Essential Energy$2604(33%)

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.

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 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 New South Wales were:

  • More customers switched retailers (20.6 per cent in 2018 compared to 18.9 per cent in 2017).
  • A similar number of surveyed consumers indicated an intention to switch retailers in the next 12 months (18 per cent in April 2018 and April 2019). The main reasons stated by consumers for switching were they searched for a better deal on a comparison website (31 per cent) and/or were not satisfied with the value for money from their retailer (31 per cent).

Residential consumer confidence in the energy market increased in 2019. In April 2019 (compared to April 2018), confidence in New South Wales that:

  • the market is working in consumers’ long-term interests was 31 per cent (up six per cent)
  • they can make good decisions was 61 per cent (up two per cent)
  • they can access easily understood information was 50 per cent (up one per cent).

Residential consumer sentiment survey – conduct results

Small business behaviour

Key changes in small business consumer behaviour in New South Wales were:

  • engagement has somewhat increased in the past year withan increase in businesses’ propensity to switch from 54 per cent in 2018 compared to 57 per cent in 2019.
  • the level of confidence to find the right information to select a retailer or plan decreased significantly by 18 per cent, down to 43 per cent in 2019.

For all the New South Wales 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 New South Wales with:

  • the level of competition was 48 per cent (up three per cent)
  • customer service from electricity retailers was 59 per cent (down six per cent)
  • the value for money of electricity retailers was 45 per cent (up one per cent)
  • customer service from gas retailers was 67 per cent (down one per cent)
  • the value for money of gas was 60 per cent (down four per cent).

Residential consumer sentiment survey – outcomes results

Small business satisfaction

In 2019 (compared to 2018), satisfaction in New South Wales with:

  • customer service from electricity retailers was 52 per cent (down six per cent)
  • the value for money of electricity was 32 per cent (down nine per cent)
  • choice of energy companies and plans was 15 per cent (down six per cent).

For all the New South Wales small business sentiment survey results, see the Colmar Brunton report.

Complaints, hardship and disconnections

Key statistics related to complaints, hardship and disconnections for New South Wales include:

  • Complaints to retailers decreased by 63 per cent from 2016-17 to 2017-18 (the AER has 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 one per cent in 2017-18.
  • The number of customers on hardship programs between June 2017 and June 2018:
    • increased from 25,604 to 30,425 for electricity
    • decreased from 6,627 to 6,334 for gas.
  • The average debt of customers on entry into hardship programs:
    • for electricity, decreased from $1,126 in 2016-17 to $1,034 in 2017-18
    • for gas, decreased from $817 in 2016-17 to $755 in 2017-18.
  • Electricity disconnection rates have:
    • increased by 18 per cent from 27,380 in 2016-17 to 32,315 in 2017-18 for residential customers
    • increased by 25 per cent for small business customers from 2,131 in 2016-17 to 2,654 in 2017-18. New South Wales had the second largest increase in business consumer disconnection rates in the past year.
  • Gas disconnection rates have, in 2017-18:
    • decreased for residential customers by 5 per cent to 5,250 disconnections
    • increased for business customers by 51 per cent to 277.

Summary of key statistics

The below table provides a summary of the key market statistics for New South Wales.

New South Wales: Electricity

CategoryMeasurePeriod2014 review2015 review2016 review2017 review2018 review2019 reviewsource
NSW
Market characteristicsNumber of small customers*As at end of previous financial year3.27m3.32m3.36m3.39m3.46mAER retail statistics
Number of retail brands/ businessesAs at end of previous calendar year15 / 1320 / 1626 / 2228 / 2332/27AEMC analysis, AEMO data
Independent rivalryMarket concentration (HHI)3,1702,9882,8542,7142,5562,408AEMC analysis, AER data
Market share of Big 396%93%91%89%85%84%
Customer activitySmall customers on market offers*61%67%71%77%81%85%AER retail statistics
Competitive retail prices**Range of bill outcomes - AusgridBetween January and March$1,412-$1,929 ($517 difference)$1,051-$1,612 ($561 difference)$1,165-$1,847 ($682 difference)$1,177-$1,989 ($812 difference)$1,033-$1,833 ( $800 difference)AEMC analysis, Energy Made Easy website
Range of bill outcomes - Endeavour Energy$1,414-$1,963 ($549 difference)$1,047-$1,458 ($411 difference)$1,132- $1,870 ($738 difference)$1,118-$2,051 ($932 difference)$1,182-$2,161 ($979 difference)
Range of bill outcomes - Essentia l Energy$1,849-$2567 ($718 difference)$1,343-$1,984 ($641 difference)$1,477-$2,441 ($964 difference)$1,347-$2,254 ($907 difference)$1,369 - $2,383 ( $1,014 difference)

** 2018 data is based on a representative consumer with an annual consumption of 4,215 kWh and no controlled load. 2017 data is based on a representative customer in New South Wales with annual consumption of 5936kWh where 1900 kWh is controlled load, as at 5 January, 2017. 2016 data is based on flat tariff offers as at 27 February 2016, without GreenPower, for a representative customer consumption of 5936kWh annually, of which 1900kWh is controlled load. 2015 based on a representative customer consumption of 6500kWh annually. Range of bill outcomes is based on the least to the most expensive (standing or market) offer available by DNSP area.

New South Wales: Gas

CategoryMeasurePeriod2014 review2015 review2016 review2017 review2018 review2019 reviewsource
NSW
Market characteristicsNumber of customersAs at end of previous financial year1.19m1.23m1.26m1.30m1.33m1.39AER retail statistics
Number of retail brands/businessesAs at end of previous calendar year5/46/58/612/9AEMC analysis, AEMO data
Independent rivalryMarket concentration (HHI)5234.004293.003824.003,8203,6003111.00AEMC analysis, AER data
Market share of Big 3As at end of previous financial year1.000.990.9796%93%91.00%
Customer activitySmall customers on market offersAs at end of previous calendar year0.700.750.7982%85%AER retail statistics
Competitive retail pricesRange of bill outcomes- Jemena Costal NetworkQ1 of the year of review$744- $893 ($149 difference)$782- $1,090 ($308 difference)$1,090-$769 ($321 difference)AEMC analysis, Energy Made Easy website
Range of bill outcomes- Jemena Country Network$742-$838 ($96 difference)$789-$976 ($187 difference)$964-769 ($195 difference)

This 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.