Queensland has two distinct energy markets – south east Queensland where price deregulation was introduced in 2016; and regional Queensland where regulated prices are subsidised through the state’s Uniform Tariff Policy, effectively removing competition for non-subsidised retailers.
- The median market offer fell by 7% across south east Queensland from March 2018 to March 2019.
- Shopping around is now more important than ever. Customers on the median standing offer could save $487 by switching to the minimum market offer across each network area.
- There are now a number of offers in south east Queensland that are just as competitive as those with discounts, without requirements such as ‘pay-on-time’. There are also competitive deals with fixed prices available, which gives customers more bill certainty.
- Competition has increased for electricity consumers over the past year in south east Queensland. Four new retailers entered the market – ReAmped Energy, DC Power Co, Powerclub and Locality Planning Energy – bringing the total of retail brands to 25. The market share of the Big 3 retailers continues to fall, with Alinta Energy now holding a greater market share than EnergyAustralia.
- South east Queensland has the equal highest rate of switching in the NEM at 29%.
- Although coming off a low base, satisfaction with the level of customer service increased by 9% between April 2018 and 2019, the second highest increase across the national electricity market overall.
- The number of customers on hardship programs fell by 5% during 2017-18 to just over 19,700, but the level of debt they had when they entered the scheme was higher.
Through the Australian Government’s default market offer, electricity price regulation will be reintroduced to south east Queensland on 1 July 2019 (after prices were deregulated 3 years ago). This will reduce the prices paid by the 15% of households in south east Queensland 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 Governments 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.
Full retail contestability was introduced in the state’s two markets in 2007. Price deregulation in gas occurred in both markets in 2007 and in electricity in South East Queensland on 1 July 2016.
Marked differences in these markets’ characteristics have influenced the evolution of competition. South East Queensland covers a much smaller geographical area than regional Queensland (25,000 square kilometres compared to more than one million square kilometres). It also has a much larger customer base, which is approximately twice the size of regional Queensland’s customer base.
Similar to previous years, the Commission has defined the South East Queensland and regional Queensland markets based on their electricity distribution areas (the Energex and Ergon Energy areas, respectively). For gas, while Toowoomba and Oakey fall into the Ergon Energy area, gas customers in these towns are supplied from the same pipeline as those in South East Queensland. Consequently, they have access to the same gas offers and have been included in this market.
Queensland implemented the National Energy Customer Framework (NECF) on 1 July 2015.
In December 2018, retail electricity businesses were supplying approximately 2.2 million small electricity customers in Queensland.
As of December 2018, there were approximately 208,000 small gas customers across Queensland. While most of South East Queensland has access to reticulated gas, only some areas in regional Queensland have such access. These are Gladstone, Rockhampton, the Wide Bay-Burnett region (Bundaberg, Maryborough and Hervey Bay), Toowoomba and Oakey.
South East Queensland
In South East Queensland there were 22 electricity retail businesses (25 electricity retail brands) and three gas retail businesses and brands, as of March 2019. This includes PowerClub, ReAmped Energy, DC Power Co. and Locality Planning Energy which entered the National Electricity Market (NEM) in the past year.
In regional Queensland Ergon Energy Retail supplied almost all of the market’s small electricity customers. There are approximately 614,000 customers in the area as of December 2018. Two other electricity retailers and two gas retailers are present in the region.
Electricity prices are subsidised in regional Queensland through the Uniform Tariff Policy (UTP). The Queensland Competition Authority published the regulated retail prices for 2019-20 for small customers in regional Queensland on 31 May 2019.
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 exist to assess market structure. The key findings of this analysis for Queensland are outlined below.
- Electricity market concentration, as measured by the Herfindahl-Hirschman index (HHI), declined by 692 points to 2,757 from December 2017 to December 2018. South East Queensland is the fourth least concentrated market in the NEM based on the HHI.
- South East Queensland experienced the largest percentage decreases in market concentration in the NEM in 2017 and 2018 since 2009.
- Gas market concentration declined slightly by 1 HHI point to 4,670. South East Queensland is the fourth least 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 South East Queensland has consistently become less concentrated overtime.
South East Queensland also provides an example of the new emerging market structure in the NEM. In South East Queensland, the traditional big 3 no longer hold the three largest market shares. Alinta Energy has captured market share following its joint venture with CS Energy, and has overtaken EnergyAustralia to be the third largest retailer.
Case study of emerging retail structure - South East QueenslandDOWNLOAD CHART DATA [0.57 kB CSV]
Source: AER, AEMC analysis. Description: Ergon retail and retailers who exclusively retail to embedded networks were removed from the AER's Queensland dataset to obtain these results. Includes residential and small business customers.
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 between big 3 to tier 2 retailers increased significantly, mainly resulting from Alinta Energy’s entry and expansion in the market. 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.
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 Queensland a number of retailers noted:
- an uplift in competition in Queensland following the arrangements entered into between Alinta Energy and CS Energy that has facilitated substantial discounting
- the Queensland Government’s removal of the non-reversion policy has removed barriers to exit from the regional Queensland market
- increased political and regulatory intervention across the NEM was increasing risk and administrative burden
- they were critical of the Commonwealth Government’s proposed default offer market (noting that interviews were held before the Commonwealth Competition and Consumer (Industry Code – Electricity Retail) Regulation 2019)
- that 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.
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 South East Queensland customer as follows:
- For residential non-solar offer - annual consumption of 4,600 kWh with an annual controlled load.
- For residential solar offers - annual consumption 4,600 kWh with an annual controlled load kWh 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 7,366MJ.
Standing and market offers
The below table shows the proportion of small customers on standing offers for electricity and gas and shows that in South East Queensland, 85 per cent of customers are on market offers.
Proportion of small customers on standing offers in 2018
|ELECTRICITY STANDING OFFER||CHANGE FROM 2017 TO 2018||GAS STAND- ING OFFER||CHANGE FROM 2017 TO 2018|
|South East Queensland||15%||↓ 5%|
|New South Wales||14%||13%||↓ 2%|
|Australian Capital Territory||51%||↓ 19%||49%||↓ 19%|
|South Australia||9%||↓ 3%||11%||↓ 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 annual bill for the highest priced market offer in South East Queensland fell substantially over the past year.
- The largest decrease in the median residential standing and market electricity offers were seen in South East Queensland, which fell by 4 and 7 per cent respectively. The spread of standing offers also markedly reduced reflecting a withdrawal of high standing offers.
- Standing offers for small business electricity customers decreased in South East Queensland
- There was a small increase in the range of Queensland (AGN Brisbane and Riverview) standing gas offers.
- The median gas market offer bill fell across by around a two per cent reduction in Queensland (AGN Brisbane and Riverview).
Median residential standing and market offer bills
Pricing behaviour of retailers – standing and market offers
As shown in the figure below, South East Queensland has seen an increase in the number of lower priced offers and the removal of the highest standing and market offers. The figure also shows 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 priced offers in the market. The second figure below shows that the lowest offer in the market is from a new or emerging retailer.
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 2017-18DOWNLOAD CHART DATA [1.78 kB CSV]
Source: Retailer data, AEMC analysis.
Rapid changes have been occurring in the South East Queensland market over the past year. These changes have primarily been driven by the expansion of Alinta Energy in the market. Notably, Alinta Energy's primary advertising and market offers have included discounts above 25 per cent and this has resulted in the significant growth in the proportion of tier 2 customers on 26 to 30 per cent discounts. Also of note is the effect that this has had on big 3 discounting levels, with a corresponding increase in the number of customers on 26 to 30 per cent discounts (from one to 14 per cent).
South East Queensland — changes in discounting practices from 2016-17 to 2017-18DOWNLOAD CHART DATA [1.97 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 - South East Queensland
|Network||Customers on standing offers (%)||Annual bill saving (% of bill)|
|Residential Gas||AGN - Brisbane and Riverview||24%||$77(13%)|
|Allgas Energy - Southern Suburbs||$99(15%)|
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.
Source: Energy Made Easy (accessed 1 March 2019) and Victorian Energy Compare (data query for 1 March 2019).
Description: Standing offer proportions are for the whole state (except South East Queensland) while the savings are based on the indicated distribution zone. These percentages are based on residential customers only and differ from the small customer percentages.
In order to determine consumer behaviour the AEMC examines consumer:
- 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.
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 South East Queensland were:
- More customers switched retailers (29 per cent in 2018 compared to 23.5 per cent in 2017).
- Slightly fewer consumers indicated an intention to switch retailers in the next 12 months (13 per cent in April 2019 compared to 17 per cent in April 2018). The main reason stated by consumers for switching was they searched for a better deal on a comparison website (25 per cent) and/or were not satisfied with the value for money from their retailer (34 per cent).
Overall customer electricity switching
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 gas switching
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 increased in 2019. In April 2019 (compared to April 2018), confidence in Queensland that:
- the market is working in consumers’ long-term interests was 36 per cent (up 15 per cent)
- they can make good decisions was 64 per cent (up six per cent)
- they can access easily understood information was 60 per cent (up five per cent).
Residential consumer sentiment survey – conduct results
Key changes in small business consumer behaviour in South East Queensland were:
- Business engagement has somewhat increased in the past year with an increase in businesses’ propensity to switch from 40 per cent in 2018 compared to 52 per cent in 2019.
- The level of confidence among businesses to find the right information to select a retailer or plan decreased 17 per cent to 50 per cent in 2019.
For all both the South East Queensland and regional Queensland small business sentiment survey results, see the Colmar Brunton report.
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
- 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 Queensland with:
- the level of competition was 50 per cent (up nine per cent)
- customer service from electricity retailers was 71 per cent (up 12 per cent)
- the value for money of electricity retailers was 55 per cent (up 10 per cent).
- customer service from gas retailers was 73 per cent (up five per cent)
- the value for money of gas was 61 per cent (level with 2018).
Residential consumer sentiment survey – outcomes results
For Queensland small business customers in 2019 (compared to 2018) satisfaction with:
- customer service from electricity retailers was 47 per cent (down 22 per cent)
- the value for money of electricity was 37 per cent (down 19 per cent)
- choice of energy companies and plans was 17 per cent (down one per cent).
For both the south east Queensland and regional Queensland small business sentiment survey results, see the Colmar Brunton report.
Key statistics related to complaints, hardship and disconnections for Queensland include:
- Complaints to retailers decreased by 66 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 increased by 37 per cent in 2017-18.
- The number of customers on hardship programs between June 2017 and June 2018:
- for electricity, decreased from 19,700 to 18,648
- for gas, increased from 1,066 to 1,123.
- The average debt of customers on entry into hardship programs:
- for electricity, increased from $776 in 2016-17 to $890 in 2017-18
- for gas, increased from $424 in 2016-17 to $528 in 2017-18.
- Electricity disconnection rates have:
- increased by 11 per cent from 25,201 in 2016-17 to 27,910 in 2017-18 for residential customers
- decreased by 16 per cent decrease for small business customers from 1641 in 2016-17 to 1,379 in 2017-18. Queensland had the smallest decrease in business consumer disconnection rates in the past year.
- Gas disconnection rates have increased in 2017-18:
- for residential customers by 70 per cent to 1,749 disconnections
- for business customers by 50 per cent to 128 disconnections.
The below table provides a summary of the key market statistics for Queensland.
South East Queensland: Electricity
|Category||Measure||Period||2014 review||2015 review||2016 review||2017 review||2018 review||2019 review||source|
|Market characteristics||Number of small customers*||As at end of previous calendar year||2.09m||2.12m (June 2017)||2.15m||2.17m||AER retail statistics|
|Number of retail brands/ businesses||11/10||13/11||16/14||21/18||25/22||AEMC analysis, AEMO data|
|Independent rivalry||Market concentration (HHI)||4,079||3,895||3,807||3,697||3,246||2,756|
|Market share of Big 3||93%||92%||89%||82%||76%|
|Customer activity||Small customers on market offers*||48%||51%||54%||58%||AER retail statistics|
|Competitive retail prices**||Range of bill outcomes - Energex||Between January and March||$1,429-$1,681 ($252 difference)||$1,294-$1,709 ($415 difference)||$1,313-$1,905 ($592 difference)||$1,165-$2,228 ($1,063 difference)||$1,438-$2,167 ($729 difference)||AEMC analysis, Energy Made Easy website|
* Data for whole of QLD. ** 2018 data is based on a representative customer in Queensland. Range of bill outcomes is based on the least to the most expensive (standing or market) offer available by DNSP area. Bills are based on data extracted from Government comparison website Energy Made Easy on 5 January 2017 and 21 March 2018.
South East Queensland: Gas
|Category||Measure||Period||2014 review||2015 review||2016 review||2017 review||2018 review||2019 review||source|
|Market characteristics||Number of small customers ('000)*||As at end of previous calendar year||179.00||183.00||188.00||191.00||203.00||205.00||AER retail statistics|
|Number of retail brands / businesses||2/2||3/3||AEMC analysis, AEMO data|
|Independent rivalry||Market concentration (HHI)*||As at end of previous financial year||5162.00||5085.00||5118.00||5,149||5,152||4598.00||AEMC analysis, AER data|
|Market share of Big 3||As at end of previous calendar year||1.00||0.98||97%||96%||95.00%|
|Customer activity||Small customers on market offers*||0.65||70%||71%||AER retail statistics|
|Competitive retail prices||Range of bill outcomes- Brisbane and Riverview (AGN)||Q1 of the year of review||$997-$1,153 ($156 difference)||$562-$602 ($40 difference)||$524-$624 ($100 difference)||AEMC analysis, Energy Made Easy website|
|Range of bill outcomes- Brisbane, Gold Coast, Toowoomba||$1,032-$1,159 ($127 difference)||$608-$685 ($77 difference)|
* Data for whole of QLD. Note: range of bill outcomes is based on the least to the most expensive offer available (market and standing offer) by gas distribution area.
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.