Market Monitoring Report. SEQ retail electricity market monitoring: April to June 2018

Transcription

1 Market Monitoring Report SEQ retail electricity market monitoring: April to June 2018 July 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 10 APPENDIX A : MINISTER'S LETTER AND DIRECTION NOTICE 11 APPENDIX B : ASSUMPTIONS AND ADDITIONAL INFORMATION 13 Offers available in the June quarter 13 Other incentives and benefits 13 Calculating bills using our published dataset 13 Highest standing offers 14 GLOSSARY 15 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 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 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 Typical customer The methodology for this report is substantially the same as the one we used when monitoring prices in the SEQ retail electricity market for the financial year. That is, we present prices as a bill (GST incl.) for a median consumption level customer the 'typical SEQ customer' to provide the most meaningful comparison between individual price components. 1 As this report relates only to the 91 days from 1 April to 30 June 2018, the bills are per quarter, not for a year. Standing and market offers We present bills for standing and market offers. Standing offers are basic offers with terms and conditions that are specified by the National Energy Retail Rules (NERR). 2 Market offers contain a minimum set of terms and conditions (specified in the NERR 3 ) and can include other terms and conditions agreed between the retailer and customer. Compared to market offers, standing offers provide preferential terms and conditions to customers. 4 In our view, standing and market offers should therefore not be compared solely in terms of price differences. Energy Made Easy We obtained information on retailers' published standing and market offer prices including supply and usage charges from Energy Made Easy. The median consumption levels we used to calculate typical quarterly bills were 1,012 kilowatt hours (kwh) for residential flat rate customers, and 1,579 kwh for small business flat rate customers. These consumption levels were derived by multiplying daily Energex consumption volumes for by 91 days. Some retailers' higher priced market offers may have been for solar customers only. As retailers do not apply a common approach to identifying solar-only offers on Energy Made Easy, we did not remove any market offers from our analysis. 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 [QCA 2017a]. 2 National Energy Retail Rules, rule 12 and schedule 1. 3 National Energy Retail Rules, rule QCA 2018, Regulated retail electricity prices for , final determination, May, section

5 Introduction Public dataset The tables and graphs in Chapter 2 are supplemented with a dataset, including supply and usage charges for each standing and market offer, for the residential and small business flat rate tariffs for the June quarter. This dataset is available as a separate downloadable spreadsheet (on our website) for stakeholders seeking more detail. Customers could use the dataset to calculate and compare bills based on their actual quarterly consumption. The dataset also allows customers to account for seasonal changes in their demand, such as higher demand in summer months. Consumers with rooftop solar who wish to use the dataset to calculate and compare bills should also take into account solar feed-in tariffs. Instructions on using the dataset to calculate bills are at Appendix B. 2

6 Price monitoring 2 PRICE MONITORING 2.1 Residential customers (tariff 11) In the June quarter, 21 retailers had standing offers for the residential flat rate tariff published on Energy Made Easy. Of these retailers, 16 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, April to June 2018 Retailer Standing offer ($) Average market offer ($) Lowest market offer ($) Highest market offer ($) 1st Energy AGL Alinta Energy Amaysim Energy Click Energy Diamond Energy 377 n/a n/a n/a Dodo Power & Gas EnergyAustralia Energy Locals Lumo Energy 379 n/a n/a n/a Mojo Power Momentum Energy 375 n/a n/a n/a Next Business Energy Origin Energy People Energy 364 n/a n/a n/a Powerdirect Powershop QEnergy Red Energy Sanctuary Energy 401 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 in the June quarter. Sources: Energy Made Easy; QCA analysis. 3

7 Price monitoring The equivalent bill for notified prices for the June quarter is $385 (GST incl.). This is calculated by: multiplying the notified supply charge for ( cents per day, including metering charge) by 91 days, and then adding the multiple of the notified usage charge for ( cents per kwh) and 1,012 kwh. 5 Figure 1 Bills for a typical residential flat rate customer, April to June 2018 $525 $500 $475 $450 $425 $400 $375 $350 $325 $300 $275 Notified price Low market offer High market offer Standing offer Notes: Diamond Energy, Lumo Energy, Momentum Energy, People Energy and Sanctuary Energy did not have a residential flat rate market offer published on Energy Made Easy in the June quarter. Sources: Energy Made Easy; QCA analysis QCA assessment SEQ offers Retailers' standing offer bills were generally higher than their market offer bills in the June quarter. For a typical residential customer: standing offer bills ranged from $364 (People Energy) to $507 (QEnergy) market offer bills ranged from $296 (AGL) to $501 (Click Energy). Customers on standing offers could have reduced their bills in the June quarter by switching to a market offer. Customers do need to be aware, when considering switching, that standing offers have set terms and conditions, whereas market offers have flexible terms and conditions. The lowest market offer available in the market in the June quarter was AGL's Set and Forget offer ($296). The AGL offer did not have the lowest supply or usage charges; the 28 per cent (direct debit) discount on usage charges and $50 sign-up incentive made it the cheapest offer. 5 QCA 2017, Regulated retail electricity prices for , final determination, June [QCA 2017b], section 8.1 (Table 16). 4

8 Price monitoring The June quarter table and graph also show that for a typical residential flat rate tariff customer: the difference between the average standing offer and the average market offer was $51, with the differences across retailers ranging from $12 (Click Energy) to $175 (QEnergy) the difference between the average highest market offer and the average lowest market offer was $43, with the differences across retailers ranging from $0 (Dodo Power & Gas, Energy Locals, Next Business Energy and Powerdirect) to $140 (Click Energy). Four retailers included sign-up incentives on at least one of their market offers in the June quarter: AGL included $50 (GST incl.) incentives on its Everyday, Savers, Set and Forget and Solar Savers offers. EnergyAustralia included $50 incentives on one of its Anytime Saver (Home) offers. We treated the incentive as including GST. 6 Origin Energy included $50 (GST incl.) incentives on its Maximiser (Online Only) and Saver (Online Only) offers for customers who switched to Origin Energy. Simply Energy included $25 (applied before GST) incentives on its Plus 15 Online, one of its Save 10 Online offers, one of its AFL Plus 10 Online offers, and one of its Movies Plus 10 Online offers $50 (applied before GST) incentives on one of its Save 10 Online offers, one of its AFL Plus 10 Online offers, one of its Movies Plus 10 Online offers, its Plus 18 Online offer and its RACQ Plus 21 Online offer. SEQ offers and notified prices In the June quarter, for all retailers, except Mojo Power, at least one market offer was available that was lower than the equivalent bill under notified prices in regional Queensland. Also, most retailers' standing offers yielded quarterly bills that were higher than the equivalent bills for notified prices. Another feature of the SEQ market, compared to regional Queensland, is the variety of supply and usage charges offered by retailers. For example: Mojo Power's market offers have relatively high supply charges and relatively low usage charges, a pricing strategy which is more likely to appeal to customers who use large amounts of electricity. Simply Energy's market offers have relatively low supply charges and relatively high usage charges, which may appeal to customers who use lower amounts of electricity. Varying pricing strategies offer residential customers in SEQ the opportunity to select an offer that best suits their consumption level. This is in contrast to notified prices, where all residential customers pay the same charges regardless of their consumption level. 6 See QCA 2018, SEQ retail electricity market monitoring: October to December 2017, market monitoring report, January, Appendix B (sign-up incentives section). 5

9 Price monitoring Quarterly price changes Sixteen retailers had at least one residential market offer available in The table below shows the quarterly changes, in percentage terms, in each of these retailers' lowest market offers in Table 2 Quarterly changes in lowest market offer bill for a typical residential flat rate customer, Retailer December quarter (%) March quarter (%) June quarter (%) 1st Energy 100 (a) 6.5 (b) 0.0 AGL Alinta Energy Amaysim Energy n/a Click Energy Dodo Power & Gas EnergyAustralia Energy Locals Mojo Power Next Business Energy n/a n/a 0.0 Origin Energy Powerdirect Powershop QEnergy Red Energy Simply Energy (a) 1st Energy had two residential flat rate market offers in the September quarter, but none in the December quarter. (b) 1st Energy's bill change in the March quarter refers to its lowest market offer in the September quarter. n/a The retailer did not have a residential flat rate market offer published on Energy Made Easy in the preceding quarter. Note: Quarterly changes are based on retailers' annual bills. Sources: Energy Made Easy; QCA analysis. The table shows that most retailers published new offers during which were cheaper for a typical customer than their previously cheapest offers. Retailers generally increased conditional discounts, and/or used sign-up incentives, to reduce the price of their lowest offer. This aspect of competition will be analysed in detail in our market monitoring report for , which will be published on 30 November

10 Price monitoring 2.2 Small business customers (tariff 20) In the June quarter, 18 retailers had small business flat rate offers published on Energy Made Easy. Of these retailers, 16 also had at least one small business flat rate market offer published on Energy Made Easy. Table 3 Bills for a typical small business flat rate customer, April to June 2018 Retailer Standing offer ($) Average market offer ($) Lowest market offer ($) Highest market offer ($) 1st Energy AGL Alinta Energy Amaysim Energy Click Energy Diamond Energy 580 n/a n/a n/a EnergyAustralia Energy Locals ERM Power Lumo Energy Momentum Energy 602 n/a n/a n/a Next Business Energy Origin Energy Powerdirect Powershop QEnergy Red Energy Simply Energy Simple average n/a The retailer did not have a small business flat rate market offer published on Energy Made Easy in the June quarter. Sources: Energy Made Easy; QCA analysis. The equivalent bill for notified prices for the June quarter is $611 (GST incl.). This is calculated by: multiplying the notified supply charge for ( cents per day, including metering charge) by 91 days, and then adding the multiple of the notified usage charge for ( cents per kwh) and 1,579 kwh. 7 7 QCA 2017b, section 8.1 (Table 17). 7

11 Price monitoring Figure 2 Bills for a typical small business flat rate customer, April to June 2018 $800 $750 $700 $650 $600 $550 $500 $450 $400 Notified price Low market offer High market offer Standing offer Notes: Diamond Energy and Momentum Energy did not have a small business flat rate market offer published on Energy Made Easy in the June quarter. Sources: Energy Made Easy; QCA analysis QCA assessment SEQ offers Retailers' standing offer bills were generally higher than their market offer bills in the June quarter. For a typical small business customer: standing offer bills ranged from $580 (Diamond Energy) to $769 (QEnergy) market offer bills ranged from $450 (QEnergy) to $657 (Powershop). Customers on standing offers could have reduced their bills in the June quarter by switching to a market offer. Customers do need to be aware, when considering switching, that standing offers have set terms and conditions, whereas market offers have flexible terms and conditions. The lowest market offer available in the market in the June quarter was QEnergy's Flexi Saver Biz 17 Single Rate offer ($450). The QEnergy offer did not have the lowest supply charge, but did have lowest usage charge. Further, the QEnergy offer did not include any discounts or incentives. The June 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 $83, with the differences across retailers ranging from $32 (Amaysim Energy and Click Energy) to $299 (QEnergy) the difference between the average highest market offer and the average lowest market offer was $36, with the differences across retailers ranging from $0 (1st Energy, Amaysim Energy, Click Energy, Energy Locals, Lumo Energy, Powerdirect and Red Energy) to $118 (Powershop). Two retailers included incentives on at least one of their market offers in the June quarter: 8

12 Price monitoring Origin Energy included $50 (GST incl.) incentives on its Business esaver offer for customers who switched to Origin Energy. Simply Energy included $50 (applied before GST) incentives on its Save 10 Online offer. SEQ offers and notified prices In the June quarter, all retailers had at least one market offer available that was equal to or lower than the equivalent bill for notified prices. Also, most retailers' standing offers yielded quarterly bills that were higher than the equivalent bills for notified prices. Quarterly price changes Sixteen retailers had at least one small business market offer available in The table below shows the quarterly changes, in percentage terms, in each of these retailers' lowest market offers in Table 4 Quarterly changes in lowest market offer bill for a typical small business flat rate customer, Retailer December quarter (%) March quarter (%) June quarter (%) 1st Energy n/a n/a 0.0 AGL Alinta Energy Amaysim Energy n/a Click Energy EnergyAustralia Energy Locals ERM Power n/a Lumo Energy Next Business Energy n/a n/a 12.8 Origin Energy Powerdirect Powershop QEnergy Red Energy Simply Energy n/a The retailer did not have a small business flat rate market offer published on Energy Made Easy in the preceding quarter. Note: Quarterly changes are based on retailers' annual bills. Sources: Energy Made Easy; QCA analysis. The table shows that a number of retailers published new offers during that were cheaper for a typical customer than their previously cheapest offers. Retailers generally increased conditional discounts, and/or used sign-up incentives, to reduce the price of their lowest offer. This aspect of competition will be analysed in detail in our market monitoring report for , which will be published on 30 November

13 Price monitoring 2.3 Conclusion The key points of our comparison and assessment of standing and market offer prices for the period 1 April to 30 June 2018 are below. Summary (1) Standing offer bills were generally higher than market offer bills in the June quarter. (2) The cheapest residential flat rate market offer available in the June quarter, calculated for the typical customer, was AGL's Set and Forget offer. (3) The cheapest small business flat rate market offer available in the June quarter, calculated for the typical customer, was QEnergy's Flexi Saver Biz 17 Single Rate offer. (4) In the June quarter, almost all most retailers had at least one market offer available that was lower than the equivalent bill for notified prices, and most retailers' standing offers were higher than the equivalent bill for notified prices. 10

14 Appendix A: Minister's letter and direction notice APPENDIX A: MINISTER'S LETTER AND DIRECTION NOTICE 11

15 Appendix A: Minister's letter and direction notice 12

16 Appendix B: Assumptions and additional information APPENDIX B: ASSUMPTIONS AND ADDITIONAL INFORMATION Offers available in the June 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 April and 30 June This includes offers which were available on 1 April, but expired before 30 June Other incentives and benefits We attributed 91 days of value to the annual value of sign-up incentives 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 $50 sign-up incentive that customers were "eligible for only one upfront credit on an account in any 12-month period". We excluded the value of the Amazon Echo device which was included as a sign-up incentive on AGL's Savers Home Connect offer as it did not provide a direct reduction in electricity bills. AGL stated on the offer that the recommended retail price of the device was $149. We also excluded the 1 per cent bonus discount off electricity and natural gas usage charges where customers signed up their residential natural gas to Origin Smart Saver (Market Offer). The reason we excluded this discount is that gas offers are outside the scope of our monitoring. Other benefits which we note were included on offers in the June quarter, but which did not provide direct reductions to electricity bills and are therefore not included in our bill calculations, were the: Qantas Points benefit on Red Energy's Red Saver and Red Plus offers. This benefit provided 10,000 bonus Qantas Points once Red Energy becomes responsible for the supply of the customer's electricity and two Qantas Points per $1 on the bill, when the customer pays on time Gold Class Tickets benefit on Simply Energy's Movies Plus 10 Online and Movies Plus 10 FIT offers. This benefit provided one Gold Class movie ticket or two Event Cinema movies tickets evert three months. We did include the AFL Free Kick monthly credit of $10 per month on Simply Energy's AFL Plus 10 FIT and AFL Plus 10 Online offers in bill calculations. Calculating bills using our published dataset The table below shows how stakeholders can calculate bills for the June quarter using the dataset published on the QCA website. Calculating a June quarter bill Supply costs (retailer daily supply charges x 91) + Cost of electricity imported (retailer usage charge x customer consumption level) + Membership fees 8 One-off sign-up bonuses, guaranteed and conditional discounts + GST 8 Mojo Power is the only retailer who charged membership fees in the June quarter. For more information on Mojo Power's membership fees, see the public dataset and QCA 2017a, section

17 Appendix B: Assumptions and additional information Highest standing offers While all retailers are required to publish a standing offer, we understand that some retailers do not actively compete for standing offer customers. These retailers may have high standing offers with few customers. We invited retailers whose standing offer was more than 10 per cent higher than the average standing offer to inform the QCA how many customers were contracted to their standing offers. ERM Power advised us that it had one customer on its small business standing offer during the June quarter, and that the customer would be on the standing offer for an interim period until they signed an offer with ERM Power or another retailer. 9 9 ERM Power 2018, unpublished advice to the QCA, July. 14

18 Glossary GLOSSARY 1st Energy AGL Alinta Energy Amaysim Energy Click Energy Diamond Energy Dodo Power & Gas Electricity Act EnergyAustralia Energy Locals ERM Power excl. GST incl. kwh Lumo Energy Mojo Power Momentum Energy n/a NERR No. Origin Energy People Energy Powerdirect Powershop QCA QEnergy Qld Red Energy Sanctuary Energy Simply Energy 1st Energy Pty Ltd AGL Sales Pty Ltd Alinta Energy Retail Sales Pty Ltd amaysim Energy Pty Ltd Click Energy Pty Ltd Diamond Energy 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 Momentum Energy Pty Ltd not applicable National Energy Retail Rules 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 15