Market Monitoring Report. SEQ retail electricity market monitoring: October to December 2017

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1 Market Monitoring Report SEQ retail electricity market monitoring: October to December 2017 January 2018

2 Contents Contents THE ROLE OF THE QCA II 1 INTRODUCTION Minister's direction notice QCA methodology 1 2 PRICE MONITORING Residential customers (tariff 11) Small business customers (tariff 20) Conclusion 6 APPENDIX A : MINISTER'S LETTER AND DIRECTION NOTICE 7 APPENDIX B : ASSUMPTIONS IN THE PRICE ANALYSIS 9 Offers available in the quarter 9 Sign-up incentives 9 Calculating bills using our published dataset 9 GLOSSARY 10 i

3 The Role of the QCA THE ROLE OF THE QCA The Queensland Competition Authority (QCA) is an independent statutory authority which promotes competition as the basis for enhancing efficiency and growth in the Queensland economy. QCA market monitoring functions The QCA's role with respect to monitoring the south east Queensland (SEQ) retail electricity 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 SEQ retail electricity market for the period 1 October 2017 to 30 June Contacts Enquiries regarding this report should be directed to: Attention: Contact: Mr Shannon Murphy ii

4 Introduction 1 INTRODUCTION 1.1 Minister's direction notice The Minister for Natural Resources, Mines and Energy has directed the Queensland Competition Authority (QCA) to monitor prices for residential and small business electricity customers in south east Queensland (SEQ). The direction notice applies to the period from 1 October 2017 to 30 June 2018, with the QCA required to report on each three-month period. The tariffs that the QCA reports on should be equivalent to the standard tariffs regulated by the QCA in regional Queensland, which are tariff 11 (residential) and tariff 20 (small business). A copy of the notice is at Appendix A. 1.2 QCA methodology The methodology for this report is substantially the same as the one we used to monitor prices in the SEQ retail electricity market for the financial year. That is, we present prices as a bill for a median consumption level customer the 'typical SEQ customer' to provide the most meaningful comparison between individual price components. 1 The way we report bills is, however, different than in the market monitoring report. In the report, we showed bills for a 12-month period, for consistency with the 'annual bill outcome' approach that has been adopted for reporting in other states, and by consumer groups such as the St Vincent de Paul Society. 2 As this report relates only to the 92 days between 1 October and 31 December 2017, the bills are per quarter, not for a year. We obtained information on retailers' published standing and market offer prices including fixed and variable charges from Energy Made Easy. The median consumption levels we used to calculate typical quarterly bills were 1,022 kilowatt hours for residential flat rate customers, and 1,595 kilowatt hours for small business flat rate customers. These consumption levels were derived by multiplying Energex consumption data by 92/ The tables and graphs in Chapter 2 are supplemented with a dataset, including fixed and variable charges for each standing and market offer, for the residential and small business flat rate tariffs for the December quarter. This dataset is available as a separate downloadable spreadsheet (on our website) for stakeholders seeking more detail. Customers may wish to use the dataset to calculate and compare bills based on their actual quarterly consumption, or the consumption levels used in the market monitoring report. The dataset also allows customers to account for seasonal changes in their demand, such as higher demand in summer months. Instructions on using the dataset to calculate bills are at Appendix B. 1 For more information on our methodology, see section 2.3 and Appendix E of QCA 2017, SEQ retail electricity market monitoring: , market monitoring report, November. 2 See QCA 2017, section

5 Price monitoring 2 PRICE MONITORING 2.1 Residential customers (tariff 11) In the December quarter, 19 retailers had standing offers for the residential flat rate tariff published on Energy Made Easy. Fourteen of these retailers also had at least one residential flat rate market offer published on Energy Made Easy. Table 1 Bills for a typical residential flat rate customer, October to December 2017 Retailer Standing offer ($) Average market offer ($) Lowest market offer ($) Highest market offer ($) 1st Energy 429 n/a n/a n/a AGL Alinta Energy Amaysim Energy Click Energy Diamond Energy 423 n/a n/a n/a Dodo Power & Gas EnergyAustralia Energy Locals Lumo Energy 383 n/a n/a n/a Mojo Power Origin Energy People Energy 368 n/a n/a n/a Powerdirect Powershop QEnergy Red Energy Sanctuary Energy 405 n/a n/a n/a Simply Energy Simple average n/a The retailer did not have a residential flat rate market offer published on Energy Made Easy between 1 October and 31 December Sources: Energy Made Easy; QCA analysis. 2

6 Price monitoring Figure 1 Bills for a typical residential flat rate customer, October to December 2017 $500 $475 $450 $425 $400 $375 $350 $325 $300 Low market offer High market offer Average market offer Standing offer Notes: 1st Energy, Diamond Energy, Lumo Energy, People Energy and Sanctuary Energy did not have a residential flat rate market offer published on Energy Made Easy between 1 October and 31 December Sources: Energy Made Easy; QCA analysis QCA assessment Retailers' standing offer bills were generally higher than their market offer bills in the December quarter. The lowest market offer available in the market in the December quarter was Alinta Energy's Home Saver Plus offer ($319). The Alinta Energy offer did not have the lowest fixed daily, or variable usage, charge; the 25 per cent (pay on time and in full) discount on usage charges made it the cheapest offer. The December quarter table and graph show that for a typical residential flat rate tariff customer: The difference between the average standing offer and the average market offer was $46, with the differences across retailers ranging from $10 (Click Energy) to $93 (QEnergy). The difference between the average highest market offer and the average lowest market offer was $35, with the differences across retailers ranging from $0 (Dodo Power & Gas, Energy Locals, Powerdirect and Red Energy) to $98 (Click Energy). Four retailers AGL, EnergyAustralia, Origin Energy and Simply Energy included sign-up incentives on at least one of their market offers in the December quarter. AGL's and Simply Energy's sign-up incentives were $25 (though Simply Energy stated its incentives were applied before GST), and EnergyAustralia's and Origin Energy's incentives were $ See our published dataset for details. 3

7 Price monitoring 2.2 Small business customers (tariff 20) In the December quarter, 16 retailers had small business flat rate offers published on Energy Made Easy. Fifteen of these retailers had small business flat rate standing offers (Simply Energy was the one retailer who was the exception), and 14 had at least one small business flat rate market offer. Table 2 Bills for a typical small business flat rate customer, October to December 2017 Retailer Standing offer ($) Average market offer ($) Lowest market offer ($) Highest market offer ($) 1st Energy 681 n/a n/a n/a AGL Alinta Energy Amaysim Energy Click Energy Diamond Energy 651 n/a n/a n/a EnergyAustralia Energy Locals ERM Power Lumo Energy Origin Energy Powerdirect Powershop QEnergy Red Energy Simply Energy n/a Simple average n/a The retailer did not have a small business flat rate standing or market offer published on Energy Made Easy between 1 October and 31 December Sources: Energy Made Easy; QCA analysis. 4

8 Price monitoring Figure 2 Bills for a typical small business flat rate customer, October to December 2017 $750 $700 $650 $600 $550 $500 $450 $400 Low market offer High market offer Average market offer Standing offer Notes: 1st Energy and Diamond Energy did not have a small business flat rate market offer, and Simply Energy did not have a small business flat rate standing offer, published on Energy Made Easy between 1 October and 31 December Sources: Energy Made Easy; QCA analysis QCA assessment Retailers' standing offer bills were generally higher than their market offer bills in the December quarter. The lowest market offer available in the market in the December quarter was QEnergy's Flexi Biz 17 Single Rate offer ($461). The QEnergy offer did not have the lowest fixed daily charge, but did have lowest variable usage charge. Further, the QEnergy offer did not include any discounts or incentives. The December quarter table and graph show that for a typical small business flat rate tariff customer: The difference between the average standing offer and the average market offer was $77, with the differences across retailers ranging from $21 (Click Energy) to $152 (QEnergy). The difference between the average highest market offer and the average lowest market offer was $29, with the differences across retailers ranging from $0 (Amaysim Energy, Click Energy, Energy Locals, ERM Power, Powerdirect and Red Energy) to $131 (QEnergy). Two retailers Origin Energy and Simply Energy included $50 sign-up incentives on at least one of their market offers in the December quarter. 4 4 See our published dataset for details. 5

9 Price monitoring 2.3 Conclusion The box below summarises the key points of our comparison and assessment of standing and market offer prices for the period 1 October to 31 December Comparison and assessment (1) Standing offer bills were generally higher than market offer bills in the December quarter. (2) The cheapest residential flat rate market offer available in the December quarter for the typical customer was Alinta Energy's Home Saver Plus offer. (3) The cheapest small business flat rate market offer available in the December quarter for the typical customer was QEnergy's Flexi Biz 17 Single Rate offer. 6

10 Appendix A: Minister's letter and direction notice APPENDIX A: MINISTER'S LETTER AND DIRECTION NOTICE 7

11 Appendix A: Minister's letter and direction notice 8

12 Appendix B: Assumptions in the price analysis APPENDIX B: ASSUMPTIONS IN THE PRICE ANALYSIS Offers available in the quarter Section 2 of the terms of reference in the direction notice requires the QCA to report on prices which were available in each three-month period (from 1 October 2017 to 30 June 2018). We therefore include all retailers' offers which were generally available between 1 October and 31 December This includes offers which were available on 1 October, but expired before, 31 December In our market monitoring report, we used a point-in-time approach to report on prices on a quarterly basis. 5 This approach is consistent with other regulators' annual price/market monitoring reports and we consider it met the requirements of the direction notice for our annual market monitoring report. Sign-up incentives We multiplied the value of sign-up incentives by 92/ to calculate bills. We consider that this more accurately reflects the benefit to a customer over a 12-month period. For instance, AGL stated in its offers that included the $25 sign-up incentive that customers were "eligible for only one upfront credit on an account in any 12-month period". EnergyAustralia did not state on Energy Made Easy whether or not the $50 sign-up incentives on its Flexi Saver (Home) offers included GST. We treated the incentives as including GST on the basis that the $50 and $100 sign-up incentives which were included on some of EnergyAustralia's small business offers in were GST inclusive. 6 Calculating bills using our published dataset The table below shows how stakeholders can calculate bills for the December quarter using the dataset published on the QCA website. Calculating a December quarter bill Fixed costs (retailer daily fixed charges x 92) + Cost of electricity imported (retailer usage charge x customer consumption level) + Membership fees 7 One-off sign-up bonuses, guaranteed and conditional discounts + GST 5 See QCA 2017, Appendix E. 6 See QCA 2017, section (QCA assessment), section (QCA assessment) and section (Other incentives and benefits). 7 Mojo Power is the only retailer who charged membership fees in the December quarter. For more information on Mojo Power's membership fees, see the public dataset and QCA 2017, section

13 Glossary GLOSSARY 1st Energy AGL Amaysim Energy Click Energy Diamond Power Dodo Power & Gas Electricity Act EnergyAustralia Energy Locals ERM Power excl. GST incl. kwh Lumo Energy Mojo Power n/a No. Origin Energy People Energy Powerdirect Powershop QCA QEnergy Qld Red Energy Sanctuary Energy Simply Energy 1st Energy Pty Ltd AGL Sales Pty Ltd amaysim Energy Pty Ltd Click Energy Pty Ltd Diamond Power Pty Ltd Dodo Power & Gas (M2 Energy Pty Ltd) Electricity Act 1994 (Qld) EnergyAustralia Pty Ltd Energy Locals Pty Ltd ERM Power Limited exclusive Goods and Services Tax inclusive kilowatt hours Lumo Energy (Qld) Pty Ltd Mojo Power Pty Ltd not applicable Number Origin Energy Retail Pty Ltd People Energy Pty Ltd Powerdirect Pty Ltd Powershop Pty Ltd Queensland Competition Authority QEnergy Limited Queensland Red Energy Pty Ltd Sanctuary Energy Pty Ltd Simply Energy Pty Ltd 10

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