What should you consider when choosing a new energy provider for your home?

ASian couple looking through power bill

If you haven’t reviewed your energy plan recently, there’s a good chance you’re paying too much for your electricity. Here’s what you need to know to correct that. 

Unless you enjoy paying more for utilities than you have to, it’s a good idea to reconsider your energy plan once a year. That’s because the value of these plans tends to erode over time, as the benefits and discounts that energy retailers use to lure new customers expire. 

The first thing to do is to contact your current energy retailer and find out if they can do you a better deal, because there might be discounts and concessions, they can offer that you’re not currently receiving. 

But if you really want to make sure you’re getting the best deal on the market for your needs and preferences, you’ll need to play the field and see what’s available elsewhere – and when it comes time to do that, here’s what you should consider. 

Can you change energy providers? 

If you live in South East Queensland, you can choose your own electricity retailer, and there should be no shortage of options for you to choose from. 

If you live in regional Queensland, you still have the right to choose your electricity retailer, but your options will be more limited – depending where you live, you may only have a couple of providers to choose from. You do have the right, however, to be supplied energy at regulated prices which are set annually by the Queensland Competition Authority. 

If you’re buying a new house, you can change energy providers. Your real estate agent might suggest a particular retailer, but you don’t have to agree to use them. The same is true if you’re renting – as long as you’re responsible for your energy bills, then the energy contract is between you and your energy provider, not your landlord and your energy provider, and you can switch or update your plan if you choose to. 

If you live in a multi-unit complex, you can choose an electricity retailer to power your unit, rather than using the site owner, as long as a retailer is willing to make you an offer. 

Are you getting the best price? 

In its 2020 Retail Energy Competition Review, the Australian Energy Market Commission (AEMC) found that dissatisfaction with the value for money offered by their current energy plan was the main motivation for residential consumers who switched providers. 

This seems obvious, and there are important caveats to this that we’ll discuss further below, but you need to make sure your new electricity plan will save you money. When you switch retailers, you’ll still be getting the same energy from the same distributor – your property will still be connected to the same network by the same poles, wires and pipes. Switching retailers, then, is mostly about making sure you’re getting the best value on that energy.  

If you haven’t switched electricity providers in a long time, you might be on the Default Market Offer (DMO), a default price set by the Australian Energy Regulator (AER). The DMO is meant to serve as a price cap on energy retailers to prevent longtime customers from paying too much. It’s also intended to be a clear reference point for energy prices that consumers can understand when comparing offers from a variety of retailers. What it’s not intended to be, however, is a competitive offer in its own right.  

The 2020 Retail Energy Competition Review found that in Queensland, customers on the DMO could save $289 by switching to the minimum market contract available. Market contracts tend to be cheaper than the DMO because energy retailers offer competitive rates as well as a variety of discounts, rebates and sign-up incentives to make their offers more attractive. 

You can easily compare the market contracts available to you with the AER’s energy price comparison website, Energy Made Easy. Unlike other price comparison tools that take a commission from retailers, Energy Made Easy is a free and independent service. 

All available offers are displayed in the same format, so you can easily compare them, and you can upload your most recent bill for most personalised results. If you need help navigating the Energy Made Easy website, contact the AER on 1300 585 165. 

Of course, it’s not as simple as comparing rates and calling it a day – there are some important variables you also need to consider. 

Is it the right offer for your energy usage? 

Smart LED Light

The amount you can save by switching retailers will depend on how much energy you use and when. 

There are two major charges that appear on your electricity bill – the supply charge and the usage charge. The supply charge is the cost of keeping your home or business connected to the network, and it has nothing to do with how much energy you use. Even if you used no electricity at all in a given billing period, you’d have to pay the same supply charge. 

The usage charge, on the other hand, is a variable charge. Sometimes referred to as the consumption charge, it’s the cost of the electricity that you actually use, and it appears on your bill as cents per kilowatt hour (c/kWh). 

Right away, before we even consider the different ways that retailers can charge for usage, we can see how your energy usage might come into play here – if you live by yourself and don’t use a lot of energy, for instance, you might opt for a plan with lower supply charges and higher usage charges, whereas if you’re paying for electricity for a large family, you might opt for the opposite approach. 

Usage can be charged at a flat rate, or on a time-of-use plan. If it’s a flat rate, you’ll pay the same amount of money for your electricity per kilowatt hour, regardless of when you use it, but on a time-of-use plan, you’ll be charged different usage rates at different times of day –  usually divided into ‘peak’ (4 pm to 8 pm on weekdays), ‘offpeak’ (10 pm to 7 am) and ‘shoulder’ (all other times). 

If you have a particular appliance that uses a lot of energy, like a hot water system or a pool pump, you could also link a ‘controlled load’ rate to this appliance that only works at off-peak times.  

Different retailers will have different tariffs, but it’s important to be aware of your usage pattern so you’ll know which offer is right for you. If you tend to use electricity out of peak times, or you’re willing and able to change your energy consumption patterns to do so, then a time-of-use plan could be ideal for you. But if you tend to use a lot of electricity during peak times, and this isn’t likely to change, then signing up for a time-of-use plan could prove to be a very costly mistake. 

Have your last few energy bills handy when you’re comparing offers so you can see which deal best matches your needs. If you’re using the AER’s Energy Made Easy site to compare offers, you can also upload your most recent bill for more personalised results. 

Be aware of discounts, fees and conditions 

Market contracts come with discounts that you won’t get with the DMO, but they can also come with fees – and in both cases, you need to make sure you understand them. 

Providers will often offer conditional discounts for things like paying your bill on time, or for paying by a certain method, such as direct debit. In these instances, ask about the discount benefit period – in most cases, the discounts won’t be permanent, but will instead be for a set period of time (hence the value of reconsidering your deal every year or so). 

It’s also important to check whether these discounts apply to the whole bill, or only to usage charges. And don’t assume that a discount automatically means you’ll get a better deal – a discount on a high underlying rate could still work out to be more expensive than another offer, and if you aren’t able to meet the conditions, you could end up paying a lot more. 

Some retailers will offer you a discount for combining your electricity plan with your gas plan. Again, you need to make sure the underlying rates are actually competitive instead of assuming a discount is the way to go. 

Market contracts will often lock you in with an energy provider for a certain period of time (usually one, two or three years). If you’re likely to move and might need to switch providers, make sure you check your contract for an exit fee. You should also watch for fees for receiving paper bills, and be aware of late fees and fees for using different ways to pay.

Energy retailers are required to publish fact sheets for every plan they offer, outlining the rates, conditions and fees. You can find these at Energy Made Easy.  

How much does customer service matter to you? 

Money is important, but it’s not the only consideration. Depending how important great customer service is to you, you may decide it’s worth paying a little extra for a provider that goes above and beyond. 

That could mean choosing a provider with an Australian-based call centre, or an active social media team that quickly responds to your enquiries. You could try sending a provider an email to see how long it takes them to reply, or look at reviews from customers online to see what sorts of experiences they’ve had. 

The cost of providing customer service accounts for about six per cent of the total electricity price paid by Queensland residential consumers, so if a provider is offering a deal that seems too good to be true, it could be because they’re cutting costs in that department. 

Is the energy greener on the other side? 

Wind energy generation

Consumers are increasingly taking the environmental impact of their purchasing decisions into account, and energy is no exception

Greenpeace once maintained an independent list of Australia’s greenest energy providers, but that research hasn’t been updated since 2018 and nothing has come along to take its place. 

However, you can consider signing on to a GreenPower plan. GreenPower is a government program that enables energy retailers to buy renewable energy from government-accredited companies across Australia. When you go with GreenPower, you can choose what percentage of your power you want to come from a renewable energy source, all the way up to 100 per cent – but be aware that the more GreenPower you choose, the more you’ll need to pay. These costs can be found in the fact sheets published by each retailer on Energy Made Easy

You can also look for retailers that offset their energy use, or encourage renewable energy uptake by offering good solar feed-in tariffs. You could also research which renewable energy assets are owned by the retailer (or their parent company), and read their public positions on renewable energy and their plans for the future. 

Ready to make the switch? 

If your only issue with your current provider is the price you’re paying, you can contact them once you’ve found a better deal to see if they can match it or do better. If not, check if there are any fees that you’ll need to pay if you leave. 

Once you’ve decided you definitely want to make the switch, contact your new retailer directly to sign up to your new plan and they’ll take care of the rest, including letting your current retailer know about your decision. 

Your new retailer will send you all the information on your new offer. From the time you receive this information, you’ll have a 10 day cooling off period – you can change your mind and cancel the contract within those 10 days.  

Depending on your retailer, distributor and where you are in your billing cycle, the switching process can take anywhere from one to three months, but your energy supply won’t be interrupted in the meantime. 

When your first bill arrives, make sure it matches what you and your retailer have agreed on. Mark the date, and set yourself a reminder – because in a year’s time, it could be worth reconsidering your plan and seeing what the market has to offer.