SEQ Retail Electricity Market Monitoring: 2017–18
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Updated Market Monitoring Report SEQ retail electricity market monitoring: 2017–18 March 2019 We wish to acknowledge the contribution of the following staff to this report: Jennie Cooper, Karan Bhogale, Shannon Murphy, Thomas Gardiner & Thomas Höppli © Queensland Competition Authority 2019 The Queensland Competition Authority supports and encourages the dissemination and exchange of information. However, copyright protects this document. The Queensland Competition Authority has no objection to this material being reproduced, made available online or electronically but only if it is recognised as the owner of the copyright2 and this material remains unaltered. Queensland Competition Authority Contents Contents EXECUTIVE SUMMARY III THE ROLE OF THE QCA – TASK AND CONTACTS V 1 INTRODUCTION 1 1.1 Retail electricity market monitoring in south east Queensland 1 1.2 This report 1 1.3 Retailers operating in SEQ 1 2 PRICE MONITORING 3 2.1 Background 3 2.2 Minister's Direction 4 2.3 QCA methodology 4 2.4 QCA monitoring 6 2.5 Distribution non-network charges 45 2.6 Conclusion 47 3 DISCOUNTS, SAVINGS AND BENEFITS 48 3.1 Background 48 3.2 Minister's Direction 48 3.3 QCA methodology 48 3.4 QCA monitoring 49 3.5 Conclusion 96 4 RETAIL FEES 98 4.1 Background 98 4.2 Minister's Direction 98 4.3 QCA methodology 98 4.4 QCA monitoring 98 4.5 GST on fees 104 4.6 Fees that 'may' have applied 105 4.7 Additional fee information on Energy Made Easy 105 4.8 Conclusion 105 5 PRICE TRENDS 107 5.1 Minister's Direction 107 5.2 Data availability 107 5.3 QCA methodology 107 5.4 QCA monitoring 108 5.5 Conclusion 118 6 SWITCHING TO MARKET OFFERS 119 6.1 Background 119 6.2 Minister's Direction 120 i Queensland Competition Authority Contents 6.3 QCA methodology 121 6.4 QCA monitoring 122 6.5 Conclusion 129 7 HARDSHIP, REBATE AND HEEAS CUSTOMERS 130 7.1 Background 130 7.2 Minister's Direction 131 7.3 QCA methodology 131 7.4 QCA monitoring 132 7.5 Conclusion 155 8 NEW RETAIL TARIFFS AND PLANS 156 8.1 Background 156 8.2 Minister's Direction 156 8.3 QCA methodology 157 8.4 QCA monitoring 157 8.5 Conclusion 158 9 MARKET COMPETITIVENESS 159 9.1 Minister's Direction 159 9.2 QCA methodology 159 9.3 QCA commentary 160 9.4 Conclusion 167 10 SIGNIFICANT ISSUES 169 10.1 Minister's Direction 169 10.2 Background 169 10.3 QCA methodology 169 10.4 QCA monitoring 169 10.5 Conclusion 170 GLOSSARY 171 APPENDIX A : MINISTER'S LETTER AND DIRECTION NOTICE 173 APPENDIX B : KEY ASSUMPTIONS IN PRICE MONITORING 176 Offers included in analysis 176 Number of days in a year 176 Annual bills—standing offers 176 Annual bills—market offers 176 GST 177 Residential offers available to small business customers 177 Calculating annual bills using our published dataset 177 APPENDIX C : SWITCHING CUSTOMERS (LOCATION) FULL POSTCODE DATA 178 REFERENCES 190 ii Queensland Competition Authority Executive Summary EXECUTIVE SUMMARY Introduction The Queensland Government deregulated retail electricity prices for residential and small business customers in south east Queensland (SEQ), effective from 1 July 2016. The government also introduced a 'market monitoring' function in the Electricity Act 1994 (Qld) to ensure customers have the opportunity to benefit from price deregulation in SEQ. We expect that this market monitoring report, covering the period 1 July 2017 to 30 June 2018, will promote customers' awareness of prices in the SEQ retail electricity market and inform their engagement with the SEQ retail electricity market. Price monitoring A customer's electricity bill depends on the customer's choice of retailer offer. Our analysis is based on annual bills for a 'typical SEQ customer' with a median consumption level, and covers the most common tariffs and tariff combinations for small customers for 2017–18. Standing offer bills were generally more expensive than market offer bills in each quarter of 2017–18. From the September quarter to the March/June quarter, the number of retailers with offers in the market increased for each tariff and tariff combination, and so did the number of market offers. Most retailers also published new market offers during 2017–18 that were cheaper—for a typical SEQ customer—than their cheapest market offers in the June quarter of 2017. Discounting Many retailers attached discounts of some form to their market offers in 2017–18. In many cases discounts related to customers' payment and billing arrangements, and they usually applied only to the usage charge, not also supply charges. Retailers also offered customers a greater variety of incentives and benefits in 2017–18, compared to 2016–17, when incentives related mostly to signing up online. However, discounting on market offers was again very complex in 2017–18, as in 2016–17. Retail fees Most retailers who published residential and/or small business market offers attached retail fees to at least some of their offers in the June quarter of 2018. The types of retail fees attached to market offers were credit and debit card payment fees, payment processing fees on payments made by direct debit or over the counter at Australia Post, paper bill fees, dishonoured cheque and direct debit payment fees, late payment fees and early termination fees. For most fee types, the range of the charges was narrow and charges were similar as in 2016–17. As in 2016–17, retailers did not consistently identify on Energy Made Easy which payment methods were accepted on their offers. This made it difficult to compare payment processing fees across offers and retailers. Price trends For each of the most common tariffs and tariff combinations for small customers, standing offer bills have increased more than market offer bills from 2015–16 to 2017–18. The difference between the average lowest and the average highest market offer bills has also increased, in particular since 2016–17. The largest bill increases usually took place in the September quarter. In the last three quarters of 2017–18, the average lowest offer bills decreased for each of the three residential customer tariffs and tariff combinations. iii Queensland Competition Authority Executive Summary Switching to market offers The number of customers moving from standing offers to market offers with their retailer in 2017–18 increased significantly compared to 2016–17, with the largest proportion of switching customers in the west of the SEQ region. Residential and small business customers with lower levels of consumption switched in higher proportions compared to 2016–17. Nearly half of the number of residential customers who switched participated in a hardship program, received the Queensland Government electricity rebate, or received Home Energy Emergency Assistance Scheme (HEEAS) support (or a combination of all three). Hardship, rebate and HEEAS customers Seventy-five per cent of hardship, rebate and HEEAS customers were on market contracts in 2017–18. These customers generally paid bills based on prices that were similar to the average of those prices available on Energy Made Easy. The high proportion of customers on hardship programs on market contracts may reflect the additional efforts made by retailers to assist hardship customers, such as helping them identify the best prices for their circumstances. In April 2018, the Australian Energy Regulator (AER) issued new reporting procedures for retailers. In addition to (continuing to) report on the number of customers in their hardship programs, retailers are now required to report on the type of contract (standing or market) each hardship customer is on. The AER expects that this will show whether retailers are working with customers to find more attractive prices and terms and conditions that suit their circumstances (particularly in relation to affordability concerns). New retail tariffs and plans A small number of new retail tariff plans emerged in 2017–18. Some retailers attached new incentives and benefits to their offers in 2017–18; we consider these to also be new types of retail plans. Market competitiveness Increased rivalry between retailers to offer better deals to customers in 2017–18 followed Alinta Energy's entry in to the SEQ market in August 2017. Competition is still mostly based on discounts, while retailers did not generally offer products tailored to customers' needs. Competition may be hindered though if price- sensitive customers are not on the best possible plan because they find it difficult to navigate the market and compare offers. Significant issues The implementation of Power of Choice reforms to metering arrangements was a significant issue that emerged in the SEQ market in 2017–18. We anticipate that retailers' reporting to the Australian Energy Regulator on new measures regarding smart metering will provide useful information for stakeholders to analyse the implementation of Power of Choice. iv Queensland Competition Authority The Role of the QCA – Task and Contacts THE ROLE OF THE QCA – TASK AND CONTACTS The Queensland Competition Authority (QCA) is an independent statutory body which promotes competition as the basis for enhancing efficiency and growth in the Queensland economy. The QCA's role with respect to monitoring the south east Queensland retail electricity market (the market) is set out in part 2, chapter 4 of the Electricity Act 1994 (Qld) (the Electricity Act). In accordance with section 89B of the Electricity Act, the QCA has been directed by the Minister for Natural Resources, Mines and Energy to report on the operation of the market for the period 1 July 2017 to 30 June 2018. Contacts