Revealed: Over $2k per annum in savings from the best and worst electricity deal

Picture this, you’re out of milk so you quickly shoot up to the local shops to pick up 2 litres to replenish your supplies.  You’re faced with a bunch of options but surprisingly you scratch your head pondering why some brands cost $7 for 2L of standard blue top milk and others $3.  You think to yourself, “it’s exactly the same stuff, nothing different, it’s just standard milk.  Why on earth would someone pay that much for milk if it’s exactly the same?”

Well the short answer most people wouldn’t, and as a matter of fact, this hypothetical situation is just that, hypothetical, and I seriously doubt you will ever come across this situation yourself, as it’s just too ridiculous to believe that anyone would get away with such a price disparity for the same commodity. 

Well welcome to the energy industry, where crazy events like this are common place.  A recent report commissioned by St Vincent de Paul Society has revealed that Victorian households with typical electricity consumption could save up to $2,270 per annum by switching from the worst standing offer to the best market offer*.

How to identify if you’re on a standing offer or market contract

A standing offer is a basic plan.  You’re likely on one of these nasty plans if you haven’t switched retailers in a long time and/or have been in the same location for a long time.  A market contract on the other hand is a plan which usually comes with special benefits such as discounts.  This article explains a bit more about market contracts and how retailers make money from them.

There are 2 typical scenarios where a customer ends up on a standing offer.  The first is when they have never taken up a market contract.  When the industry deregulated in 2002 customers started to transition from the SEC (State Electricity Commission) to private companies and geographic regions were assigned incumbent retailers, which in Victoria were Origin Energy, AGL and Energy Australia.  When customers ended up with these retailers, they were put on standing offers and many have never left.

The other scenario is when benefit periods lapse.  When a customer takes up a market contract, often they have a defined benefit period and when this is over it’s likely they will default to the retailers standing offer and bills all of a sudden skyrocket.

So, using the milk example, it’s a bit like buying your favourite brand which is always priced competitively at $3 for 2L, but then all of a sudden, one day the brand decides to start charging $7 for the same 2L bottle because they’ve decided the benefit period needs to end. 

In the above example, most consumers would simply pick up another bottle of an alternative brand and carry on in their merry way, feeling content that they’ve saved $4 on their purchase. In electricity and gas however it’s not always like this.  Consumer sentiment is significantly different.  They feel like it’s a hassle to switch, or they may not have their numbers right and the alternative plan isn’t any better.  That’s why consumers need to stay on top of their energy plan every time they receive a bill.  Check for better options, it actually only takes around 2 mins to check.  GoSwitch works with a range of energy suppliers and is able to independently advise you on choosing a suitable plan for your situation.  So compare now!

Source: St Vincent De Paul Society report