ACCC to investigate energy plans that promise savings but deliver poor value

The Australian Competition and Consumer Commission (ACCC) has announced it will investigate whether energy retailers are misleading consumers by advertising energy plans that promise savings yet actually provide poor value.

This investigation follows a formal complaint filed by Australian Consumers' Association (CHOICE), which raised concerns that many plans marketed as "savings" deals are far from the cheapest options available.

What prompted the ACCC's investigation?

The investigation came after consumer group CHOICE filed its first 'designated complaint' to the ACCC in May.

Under a new framework that came into effect in May the previous year, CHOICE is one of three bodies that can file a 'super complaint' directly with the ACCC about issues affecting consumers.

Each body can file only one complaint per year. Once it is submitted, the ACCC is required to assess and publicly respond within 90 days.

CHOICE decided to use its one complaint to flag concerns that energy retailers use words like 'saver' or 'savings' to promote energy plans that are far from the cheapest available.

"At a time when Australians are increasingly worried about being able to afford to keep the lights on, this has had a big financial impact," Andy Kollmorgen, Investigations Editor at CHOICE, said in a statement.

ACCC to investigate 'savings' promotions

CHOICE's complaint points to a major issue with how energy retailers advertise "savings" plans.

"In some instances, they were even more expensive than the retailer's standing offer," says Rosie Thomas, CHOICE director of campaigns and communications.

"Many consumers rely on these representations as indicators of value to inform their decision-making, but we found that many of these names and descriptions may not reflect genuine value."

According to the latest national CHOICE survey, 84 per cent of households are concerned about rising electricity prices.

But with so many plans marketed with promises of savings, it's hard for consumers to tell if they're actually getting a better deal.

"We are concerned that consumers may be misled or deceived by plan names or descriptions of plans that offer 'savings' that are not genuine, or that consumers may be discouraged from switching to cheaper plans that are available to them," ACCC deputy chair Catriona Lowe said.

"It is essential that energy retailers provide clear and accurate information about their energy plans so that consumers can make informed decisions when choosing an energy provider and plan."

Capitalising on consumer confusion

The confusion doesn't stop at the "savings" labels.

Many energy retailers use identical names for plans that come with different rates, leading to further confusion for consumers.

This issue is especially prevalent with the "better offer" and "best offer" messages on energy bills, which are meant to alert customers to cheaper plans available within the same provider.

Unfortunately, these plans aren't always cheaper.

A recent decision from the Australian Energy Regulator (AER) requires retailers to provide extra information under "better offer" messages when reusing plan names.

"Consumers are often encouraged to shop around in order to save on their energy bills, but that's impossible to do if the information they receive from retailers is inaccurate, incomplete or designed to overwhelm," says Ms Thomas.

The ACCC said that after careful consideration, the issues raised by CHOICE relating to the use of identical plan names in "better offer" and "best offer" messaging, are "most effectively addressed through the review and law reform processes currently underway by the AER and the ESC" and not an ACCC investigation.

What happens if the ACCC identifies misconduct?

If the ACCC finds that energy retailers are breaching Australian Consumer Law following its investigation, it may take enforcement action where appropriate.

It may also "prepare industry guidance or contribute to policy or law reform initiatives".