Why you should discount discounts on electricity plans

Discount Shop Window

Many of us are guilty of judging a bargain by how big a discount is available. We make what seems to be a fair assumption that a discount is based on a price reduction from the so-called regular price. But when it comes to electricity there isn’t a regular price

in NSW, VIC, SA and SE QLD.

Welcome to the discount game

Electricity retailers are free to set whatever price they want, just like other retailers. They can then discount at whatever rate they want. The longer a market has had price competition, the larger the discounts many retailers offer. In Victoria, which has had retail competition the longest, discounts are as high 30-40%, in NSW it’s 20-25% and in Queensland 10-15%. Are retailers making a lower profit in Victoria because they are foregoing more margin with these higher discounts? I doubt it. Are consumers paying less than those in other states? No. The increasing competition on discounts isn’t really competition when the retailers arbitrarily decide on the base rates. In fact, in a state such as Victoria where the discounts are higher, the potential for profit is greater as households who don’t pay on time end up paying 50-60% more eg. rather than paying $600 after a 40% discount, the household pays $1000 – that’s 66% more!

Big discounts get our attention and are a proven tactic to get buyers to act. But when there is no set price and anyone can charge what they like, a big discount doesn’t provide any guide to whether a plan is well priced in the market.

“Look past the discount. The only thing that matters for households is the cost after discounts (that you can meet the conditions for) plus GST.”

Other comparison sites make a song and dance with big distracting discounts and prices in fine print. It’s not a fair comparison. At WATTever we show the price because it’s what you end up paying. The cheapest deals are ranked first. I seriously question the integrity of other comparisons that rank by discount level, because it doesn’t put the customers’ interests first.

Check the conditions

It’s important to recognise if you might not be able to meet the conditions for a particular discount, such as Pay On time. In this case, a quarter of your annual discounts will disappear if miss a quarterly bill by a day. So if this has happened in the past (and you think it could happen again), simply untick that discount option and we update the cost estimate. You can then find a plan with conditions you’ll know you can meet.

For those who want to see the individual plan discount you can still see that on our Plan Details page but unless you’re comparing plans from the same retailer, that discount is meaningless. And in some cases, even within the same retailer you can’t compare discounts as each plan has different base rates. That’s why we recommend you ignore discount rates and focus on what matters, the total cost. We break that down into usage charges, supply charges, solar feed-in tariff and GreenPower based on your electricity profile and preferences.

discount sign for 4 cents off petrolBut why discount at all? Electricity is a commodity, like petrol. When you purchase petrol the price is listed on a big sign at the front of the store. It is the current price including GST. You don’t get charged more because you are a regular customer of the service station or a cheaper price if you are a new customer. Yes, there are some small discounts for loyalty schemes (usually <5%) but the pricing is simple. This makes it easy for consumers to shop around and for cheap service stations to get more customers.

Unfortunately, in the electricity market, you don’t (unless you have an electric vehicle) purchase your power from a service station with a prominent pricing sign each week/fortnight/month. And you can’t practically buy electricity from a different supplier each week, at least not yet. What you can do is the equivalent of driving past your local service stations to check the prices and see new service stations. There are 15-25 retailers in NSW, QLD, SA and VIC including a range of offers. And there are a couple who have simple, no discount pricing which makes it easy to understand how much you’ll pay now and in the future.

Ready to step off the discount merry-go-round?

While some people like driving around to save a couple of cents on petrol, finding a good retailer with no discounts or at least a discounted rate that doesn’t disappear after 12 or 24 months, means you won’t see your bill jump 50% if you miss a bill payment.

So if you’re tired of the discount merry-go-round, select Ongoing Discounts in our electricity plan comparison and take a closer look at plans that will go the distance.

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