News Release Details

MELBOURNE, 16 January 2002 – Charles River Associates (Asia Pacific) Pty Ltd today announced the results of a survey conducted to determine residential consumers' likelihood of changing electricity retailer as a result of Full Retail Contestability. Implementation of this final stage of deregulation of the electricity industry in New South Wales and Victoria now allows users of less than 40 megawatt-hours of electricity per year to choose their electricity retailer. This includes almost all residential customers, and small business customers up to the size of a typical milk bar.

The survey of 400 households in New South Wales and Victoria indicated that – at the beginning of full retail contestability – less than 10 percent of those surveyed are likely to change their electricity retailer. The main reason for not switching – given by almost half of the customers unlikely to switch – was that they were satisfied with their current retailer and/or saw no reason to change. As might be expected, monetary savings were cited as the main factor that would get a customer to consider switching. While about one-third of the customers could not specify a level of savings that would make switching attractive to them, about 20% said it would take savings of at least $100, an amount Lance Hoch, Vice President of CRA, characterised as being “unlikely to be obtainable, given the relatively thin margins of most electricity retailers and the fact that the average annual bill for a residential customer in Victoria is between $750 and $800”.

In addition, the results show that while four out of five Victorian consumers were aware of the changes that came into effect there on 13 January, less than 50 percent of the New South Wales respondents realised they have been able to choose their electricity retailer since 1 January. Furthermore, only five percent of the households surveyed recalled having been contacted by a power retailer seeking to gain their business. Hoch hastened to add that it was possible that more customers had actually received offers from competing retailers, “but just didn't remember them”.

What does this mean for the future of competition in electricity at the residential end of the market? According to Hoch, the jury is still out. “Clearly, the level of awareness in New South Wales will need to be improved. But even in Victoria, where awareness levels are high, it is still very early days. After consumer awareness builds regarding retail choice for electricity, it remains to be seen whether competition develops around price only, or whether the retailers decide to and succeed in developing more sophisticated products and services as means for differentiating themselves and winning customers.” CRA plans to continue monitoring results of competition in the residential sector on a subscription basis for electricity industry and government clients.

Charles River Associates (Asia Pacific) Pty Ltd is a wholly owned subsidiary of Charles River Associates Incorporated, a specialist consultancy founded in Boston, Massachusetts, in 1965. CRA provides expert economic and business consulting services on many key aspects of the electricity industry to a wide range of clients, from industry organisations, generators, and transmission companies to regulators and governments. CRA staff have extensive experience in competitive electricity market analytics, design and regulation in Australia, New Zealand, Malaysia, Singapore, South Korea, the UK, Canada and the United States.

Contact:
Lance Hoch
Charles River Associates (Asia Pacific) Pty Ltd
Tel: 03-9606-2811
Mob: 0411-721-386