Avoiding a new era of retail electricity rip-offs

By Tristan Edis

The report Smart Moves for a Smart Market acts as a bit of warning against the possibility that electricity becomes too complex a product, where consumers’ constrained brain power and emotions can be exploited to their disadvantage. 1) Information must be clear and relevant: Contract terms and conditions, technology costs in bundled contracts and product information sheets must be simple, accurate and engaging.

Also, if we were to force retailers to charge for electricity based on, say, just two components – units of energy consumed and peak network capacity demand – we’ll also constrain potential for valuable innovation.   As an example, a retailer might offer you a fixed monthly plan just like what most people do with their mobile.

Disclosure of information about product attributes and use will also be essential. 2) Flexibility will be essential: Long lock-in contracts and undue exit fees will not allow consumers to realise benefits as their situations or understanding change. 3) Increased standardisation of products and services will be necessary: This should not be so onerous as to limit innovation but undertaken to ensure maximum comparability of products and services for consumers.

Judging by the level of complaints the Australian Competition and Consumer Commission has received in recent times about power company sales tactics (they’ve sanctioned just about every major power retailer), people already encounter trouble understanding what’s on offer when prices are relatively simple and based on just two components: a fixed charge per day and a charge per kilowatt-hour of electricity consumed.

Read more here: Business Spectator


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