- The median market offer fell by 0 between 5% across the five network areas from March 2018 to March 2019 in Victoria.
- Shopping around is now more important than ever. Customers on the median standing offer could save between $539 to $649 by switching to the minimum market offer across the network areas.
- There are now a number of offers in Victoria 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.
- Victoria has the lowest level of market concentration in the national electricity market and has the highest (or equal highest) percentage of consumers switching for both electricity (29%) and gas (21%).
- Competition has increased for both the electricity and gas consumers over the past year. Two new retailers entered the Victorian market – DC Power Co and Elysian Energy for Electricity and DC Power Co, Globird Energy and Powershop in Gas. The market share of the Big 3 retailers has fallen from 60% in 2016-17 to 55% in December 2018.
- Satisfaction with the level of customer service fell by 5% in Victoria between April 2018 and 2019, despite increasing across the NEM overall.
- The number of customers on hardship programs increased by 21% during 2017-18 to just over 39,400, and the level of debt they had when they entered the scheme also rose. Disconnection rates increased for both electricity by 18% and gas customers by 5%.
Electricity price regulation will be reintroduced on 1 July 2019 with the new Victorian default offer. This will reduce the prices paid by the 6% of households in Victoria that remain on a standing offer (down by 2% over 12 months).
Similar to the default market offer outside of Victoria, the AEMC will monitor the impact of of the reintroduction of price regulation and advise 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.
For the electricity market in Victoria:
- in March 2019, there were 22 electricity retail businesses (27 retail electricity brands)
- two new retail electricity brands entered the market (DC Power Co. and Elysian Energy)
- these brands are supplying approximately 2.8 million small electricity customers (as of June 2018).
For the gas market in Victoria:
- there were 15 retail gas businesses (17 retail gas brands) in March 2019
- these brands supply approximately 2.09 million small gas customers as of June 2018
- there were three new entrants in the gas market in the past year, Powershop, GloBird Energy and DC Power Co.
Full retail contestability was introduced for both electricity and gas in 2002. In January 2009, retail price regulation was removed for both markets. From 1 July 2019, prices will be re-regulated by the Essential Services Commission under the new Victorian Default Offer (VDO).
Victoria has not adopted the National Energy Customer Framework (NECF). Its retail energy markets are governed by the Victorian Energy Retail Code, which contains some provisions similar to the NECF.
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 Victoria are outlined below.
- Electricity market concentration, as measured by the Herfindahl-Hirschman index (HHI), declined by 95 points to 1294 from December 2017 to December 2018. Victoria is the least concentrated market in the NEM based on the HHI, as it has been since 2009.
- Victoria's electricity market experienced its highest percentage decrease in market concentration in 2018 since 2009.
- Gas market concentration, as measured by HHI, declined by 4.5% (79 points) to 1,693 from June 2017 to June 2018 . Victoria is the least concentrated gas market.
The retail electricity market is becoming less concentrated overtime as shown in the below figure.
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.
The AEMC interviews a range of retailers to seek their insights about what they believe is affecting market structure and retail competition. For Victoria a number of retailers expressed concern about the Victorian Government’s introduction of a regulated standing offer.
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 Victorian customers as follows:
- For residential non-solar offer - annual consumption 4,000 kWh and no controlled load.
- For residential solar offers - annual consumption of 4,000 kWh with no controlled load with a 3kW solar PV system on a flat tariff.
- For small business offers - annual consumption of 20,000kWh.
- For residential gas offers - annual consumption level of 62,528MJ.
Standing and market offers
The below table shows the proportion of small customers on standing offers for electricity and gas and shows that in Victoria, 94 per cent of electricity and 93 per cent of gas 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 | |
Queensland* | 24% | ↓ 4% | ||
South East Queensland | 15% | ↓ 5% | ||
New South Wales | 14% | 13% | ↓ 2% | |
Australian Capital Territory | 51% | ↓ 19% | 49% | ↓ 19% |
South Australia | 9% | ↓ 3% | 11% | ↓ 2% |
Tasmania** | 92% | ↑ 2% | ||
Victoria*** | 6% | ↓ 1% | 7% | ↓ 2% |
The figure below shows:
- The median residential electricity market offer bill was generally closer to the minimum bill across the jurisdictions and particularly in Victoria (CitiPower) with the majority of bills in the lower range of the distribution.
- The minimum residential electricity market offer bill increased marginally in Victoria (CitiPower). The annual bill for the highest priced market offer in Victoria (CitiPower) fell substantially over the past year.
- There was a reduction in the range of residential gas standing offers in Victoria due to an increase in the lower end. Overall the range of market offers was largely unchanged except for in Victoria (AGN) where both the lowest and highest priced offers increased (despite a four per cent fall in the median offer).
- Small business electricity standing offers decreased in Victoria (Citipower).
- The range of small business electricity market offers reduced considerably in Victoria with higher priced market offers withdrawn from the market.
Median residential standing and market offer bills
Pricing behaviour of retailers – standing and market offers
The below figures highlight the changes in the distribution of residential standing and market offer annual bills. It shows an increase in lower priced offers and a reduction in the number of higher priced market offers in the CitiPower network region relative to 2018. Similarly, as seen in the other jurisdictions, some of the cheapest offers in the market are market offers without discounts. Some of the lowest offers have appeared to have been withdrawn between 2018 and 2019, however there are more low priced offers in the $1,000-$1,200 range overall. The trends in other network regions can be seen in the figure below.
Due to publication and data access constraints with Victorian Energy Compare the Commission is not able to provide a market wide breakdown of fixed and variable prices in the below figures. We are also not able to provide offers by retailer type (as presented in other jurisdictions). However, based on a sampling of Victorian Energy Compare and information provided by retailers in interviews the Commission considers that, as with other regions, there are:
- an increasing number of low, fixed priced offers in Victoria
- market leading offers from new and emerging retailers in Victoria.
Distribution of representative bills by offer 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 - Victoria
Network | Customers on standing offers (%) | Annual bill saving (% of bill) | |
Residential electricity | AusNet | 6% | $649(36%) |
CitiPower | $539(34%) | ||
Jemena | $569(34%) | ||
Powercor | $581(34%) | ||
United Energy | $578(36%) | ||
Residential Gas | AusNet Services | 7% | $653(36%) |
AGN | $649(34%) | ||
Multinet Gas | $569(32%) | ||
SME Electricity | AusNet | 16% | $3667(46%) |
CitiPower | $2619(43%) | ||
Jemena | $2952(43%) | ||
Powercor | $2877(43%) | ||
United Energy | $2986(45%) |
Source: Victorian Energy Compare (data query for 1 March 2019). Note: Standing offer proportions are for the whole state while the savings are based on the indicated distribution zone.
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 Victoria were:
- More customers switched retailers in the past year than in the previous year (29 per cent compared to 26.7 per cent).
- A similar number of consumers indicated an intention to switch retailers in the next 12 months (22 per cent in April 2018 and April 2019). The main reason stated by consumers for switching was they searched for a better deal on a comparison website (41 per cent) and/or were not satisfied with the value for money from their retailer (33 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 Victoria that:
- the market is working in consumers’ long-term interests was 30 per cent (up four per cent)
- they can make good decisions was 65 per cent (up six per cent)
- they can access easily understood information was 54 per cent (up four per cent).
Residential consumer sentiment survey – conduct results
Small business behaviour
Key changes in small business consumer behaviour in Victoria were:
- engagement has somewhat decreased in the past year with a reduction in businesses’ propensity to switch from 52 per cent in 2019 compared to 58 per cent in 2018.
- the level of confidence among businesses to find the right information to select a retailer or plan increased by five per cent to 58 per cent.
For all the Victorian 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
- 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
Electricity consumer satisfaction has improved since the 2017 price spike induced a fall in consumer satisfaction. In April 2019 (compared to April 2018), satisfaction in Victoria with:
- the level of competition was 52 per cent (up two per cent)
- customer service from electricity retailers was 58 per cent (down five per cent)
- the value for money of electricity retailers was 46 per cent (stable)
- customer service from gas retailers was 64 per cent (down one per cent)
- the value for money of gas was 54 per cent (down three per cent).
Residential consumer sentiment survey – outcomes results
Small business satisfaction
In 2019 (compared to 2018), satisfaction in Victoria with:
- customer service from electricity retailers was 61 per cent (up five per cent)
- the value for money of electricity was 57 per cent (up two per cent)
- choice of energy companies and plans was 33 per cent (up 18 per cent).
For all the Victorian small business sentiment survey results, see the Colmar Brunton report.
Complaints, hardship and disconnections
Key statistics related to complaints, hardship and disconnections for Victoria are:
- Complaints to retailers increased by five 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 five per cent in 2017-18.
- The number of energy customers on hardship programs between June 2017 and June 2018 increased from 32,664 to 39,453.
- The average debt of energy customers on entry into hardship programs increased from $1,241 in 2016-17 to $1,377 in 2017-18.
- Electricity disconnection rates have increased by 18 per cent from 28,589 in 2016-17 to 33,824 in 2017-18.
The below table provides a summary of the key market statistics for Victoria.
Victoria: Electricity
Category | Measure | Period | 2014 review | 2015 review | 2016 review | 2017 review | 2018 review | 2019 review | source | |
VIC | Market characteristics | Number of small customers | As at end of previous financial year | 2.63m | 2.64m | 2.69m | 2.74m | 2.8m | AEMC analysis, ESC data | |
Number of retail brands/ businesses | As at end of previous calendar year | 18 / 16 | 21 / 17 | 25 / 22 | 25 / 21 | 27/22 | AEMC analysis, AEMO data | |||
Independent rivalry | Market concentration (HHI) | 1,818 | 1,765 | 1,679 | 1,596 | 1,551 | 1,293 | |||
Market share of Big 3 | As at end of previous calendar year* | 70% | 65% | 63% | 61% | 59% | 55% | |||
Customer activity | Small customers on market offers | As at end of previous financial year | 76% | 82% | 90% | 92% (Residential: 93% Small business: 83%) | Residential: 94% Small Business: 84% | ESC Comparative Performance Report, Customer Service; Victorian Energy Market Report | ||
Competitive retail prices** | Range of bill outcomes - Jemena | Between October and February | $1,234-$1,800 ($566 difference) | $1,023-$1,525 ($502 difference) | $939-$1,737 ($798 difference) | $975-$$2,739 ($1,764 difference) | $1,084-$2,550 ($1,466 difference) | AEMC analysis, Victoria Energy Compare website | ||
Range of bill outcomes - United Energy | $1,193-$1,683 ($490 difference) | $974-$1,443 ($469 difference) | $824-$1,638 ($814 difference) | $935-$$2,555 ($1,620 difference) | $1,035-$2,378 ($1,343 difference) | |||||
Range of bill outcomes - CitiPower | $1,038-$1,571 ($533 difference) | $857-$1,336 ($479 difference) | $833-$1,556 ($723 difference) | $898-$$2,472 ($1,573 difference) | $1,038-$2,300 ($1,262 difference) | |||||
Range of bill outcomes - Powercor | $1,306-$1,826 ($520 difference) | $1,048-$1,545 ($497 difference) | $975-$1,752 ($777 difference) | $1,004-$$2,722 ($1,717 difference) | $1,115-$2,528 ($1,413 difference) | |||||
Range of bill outcomes - AusNet Services | $1,380-$1,943 ($563 difference) | $1,131-$1,787 ($658 difference) | $1,107-$2,022 ($915 difference) | $1,087-$$3,108 ($2,022 difference) | $1,172-$2,891 ($1,719 difference) |
** Estimated bills are based on the consumption level of the "representative consumer". Range of bill outcomes is based on the least to the most expensive (standing or market) offer available by DNSP area.
Victoria: Gas
Category | Measure | Period | 2014 review | 2015 review | 2016 review | 2017 review | 2018 review | 2019 review | source | |
VIC | Market characteristics | Number of customers | As at end of previous financial year | 1.9m (AEMO data) | 1.9m | 1.95m | 1.98m | 2.02m | AEMC analysis, Essential Services Commission data | |
Number of retail brands / businesses | As at end of previous calendar year | 8/8 | 10/9 | 12/11 | 14/12 | 17/15 | AEMC analysis, AEMO data | |||
Independent rivalry | Market concentration (HHI) | As at end of previous financial year | 2390.00 | 2212.00 | 2053.00 | 1,953 | 1,873 | 1564.00 | AEMC analysis, AER data | |
Market share of Big 3 | As at end of previous financial year* | N/A | 0.82 | 0.72 | 70% | 68% | 62.00% | AEMC analysis, AER data; Victorian Energy Market Report | ||
Customer activity | Small customers on market offers | As at end of previous financial year | 0.72 | 0.75 | Residential: 91% Small business: 82% | ESC Comparative Performance Report, Customer Service; Victorian Energy Market Report | ||||
Competitive retail prices | Range of bill outcomes- AusNet Services | February and March of the review year | $559-$1,015 ($456 difference) | $962-$2,371 ($1,409 difference) | $1,148-$2,370($1,222 difference) | AEMC analysis, Victoria Energy Compare website | ||||
Range of bill outcomes- Australian Gas Networks area | $600-$1,041 ($441 difference) | $1,069-$2,606 ($1,537 difference) | $1,235-$2,606 ($1,370 difference) | |||||||
Range of bill outcomes- Multinet gas | $606-$962 ($356 difference) | $957-$2,236 ($1,279 difference) | $1,223-$2,235 ($1,012 difference) |
About 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.
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.