There are many tactics that energy sales people use to try and win you over. One of them is by presenting a large discount. However, a larger discount is DOES NOT mean a better energy deal. This is often an illusion. Below is a summary of what discounts really mean and 3 tips to determine if you have the best energy deal.
off usage, 30% of supply charge & usage, 2% direct debit discount, pay on
time discount, limited discount offer, bundle discounts... The different tactics
surrounding discounts on energy plans can seem as extensive as it is
confusing. However, we must remember that a larger discount does not
necessarily represent a lower price.
To illustrate the point, consider this. One person visits "Shop A" for a pair of jeans. Shop A has the jeans at a 35% discount. They then visit "Shop B" and find that the same pair of jeans are only
20% off. Without knowing the price, you would think that Shop A is cheaper.
Shop A may have higher costs (like rent and wages). To account for this, they price the jeans at $100, while at Shop B price them at $80. Now if we apply the discounts, we determine that the pair of jeans at Shop A is $65, while at Shop B, they are $64. Hence the shop with the higher discount doesn't actually work out to be cheaper.
Similarly, this can happen with energy providers, except the price has a number of components to it (eg supply charge and rates such as peak / off peak).
With this in mind, what
should you do to understand whether you are getting the best energy deal in the market? Below are 3 tips that the team at Energy Pledge have put together to help with this process:
1. Don’t decide
based on the discount alone:
Many sales people you
speak to will sell you a plan based on the discount. Don’t accept that the
larger discount means it is cheaper. As illustrated in the example above, this is often not the case. In fact some of the most expensive plans
on the market include a 30% discount! While some of the cheaper rates are less
than a 5% discount. If you are speaking to an energy salesperson, ask the following questions:
1) What are the rates?
2) What is the supply charge?
3) What part of the bill has discount (usage only, or supply and usage)
4) Are the discounts automatic or based on conditions ?
5) What would be the average daily usage for my size household?
If you collect the information above, you can make a better assessment on the energy deal offered.
2. Keep up to date with changes in prices and discounts
Energy providers update their prices on an annual basis and generally do it all around the same period. New South Wales and South Australia energy prices have recently increased their rates in July 2016. Victoria are expected to increase their rates in January 2017. It's good practice to review your energy usage and supply rates every 3-6 months to ensure you are receiving the best deal. And don't assume you are locked into a contract, there are generally no lock-in contracts. The latest regulation is that an energy retailer can not charge you more than $22 to leave. This cost is often picked up by the new energy retailer you are moving to.
Finally, check to see if your discount still remains. Many energy retailers offer you a great discount to start with. This can disappear over time without you realising it. Meaning you could be paying a lot more for your energy (and hence why we have been able to save people over $1,000 on their bills each year). Check your discounts regularly and compare this to discounts from other providers. However make sure you understand the different discount types.
3. Understand the different types of discounts
It is easy to think that the discount provided, is a discount off the entire bill, but in many cases
it is not.
Here are the types of discounts that commonly exist in Australia:
off usage - this is a
discount only on the energy you use (not the "supply charge").
off supply charge/daily rate AND usage - this is a discount off the total bill.
Debit discount - What you
receive if you pay by direct debit (usually a small discount)
on Time discount - this
discount is dependent on you paying before a certain date.
discount - paying gas and
electricity to the same provider? You’ll get an extra discount, but usually not significant
discount - this means the
discount you’re getting will disappear after a period of time (usually 12
Energy Pledge advisors have found that people who have been on the same energy
plan for a longer period of time, tend to be the ones that could get a better
deal, simply by shopping around. Comparing energy deals can be complicated so it is often best to get a free assessment from independent advisors that understand energy pricing.
If you would like a
free review of your energy bill, and do some good at the same time, visit the EnergyPledge Website, enter your postcode and provider and check your potential to save.