How does switching energy suppliers encourage competition?

Looking online for the best deal may be one way to reduce your electricity prices and boost competition in the market 171 64440 0 14098752 300

You may realise that doing a gas or electricity comparison can have an impact on your energy prices, as you have the power to choose the cheapest supplier, but this simple switch could also lower overall energy prices for everyone.

Once consumers are easily able to switch suppliers, those companies will need to compete in a more active sense to keep their customers on board.

If consumers are making active choices in regards to their electricity and gas prices, the price for customers across the board might drop. This is because suppliers may lower their prices to prevent them losing customers and to encourage new clientele to use their services over another provider.

One issue faced by many consumers - both residential and corporate - is a lack of understanding where the different offers are concerned.

This could make it challenging to choose the right supplier and correct deal.

Around 42 per cent of customers in Victoria said they found it difficult to understand offers, while 32 per cent said it was comparatively easy, according to research conducted by the Consumer Utilities Advocacy Centre (CUAC).

This indicates that there are a large number of consumers who could be making poorly informed decisions and not participating in the market as well as they could. 

One factor that could be negatively impacting consumers' participation levels and preventing them from making active choices based on all the options available in the market is the heavy reliance on door-to-door salespeople as a way to switch customers.

This form of sales may not provide customers with all the relevant information they require and in some cases can be misleading. Around 87 per cent of those who participated in the CUAC study said they had been approached by a door-to-door salesperson. Of this number, 31 per cent said the seller told them the entire neighbourhood were switching electricity supplier and 11 per cent said the salesperson reported being a representative of a government agency.

The CUAC expressed concern in its report whether consumers are able to make effective choices as a result.

Independent switching websites are a better way to receive information as they can offer a broad range of options, without trying to sway you towards a particular retailer.

This means you can do an electricity comparison and easily spot the best deal for your needs, based on the size of your household or business and your average use.

Posted by Tim Wolfenden.