Victoria sets global benchmark for customer switching


Cameron O’Reilly,
Executive Director,
St Leonards, Australia and Helsinki, Finland — (METERING.COM) — May 18, 2010 – Annualized customer switching in the retail energy market in the Australian state of Victoria in 2009 was the highest ever recorded in a fully contestable market, according to new data from the VaasaETT Global Energy Think-Tank.

In electricity the switching rate in Victoria was 25.3 percent and in gas 27.4 percent, giving an overall switching rate of 26.3 percent.

This can be compared with switching rates in other Australian states. South Australia, which previously had ranked highly in customer switching, is now lagging significantly behind Victoria with a rate of 12.2 percent (12.4 percent in electricity, 11.9 percent in gas).

Queensland, which embraced full retail competition only in 2007, had a switching rate of 11.5 percent (15.4 percent in electricity, 7.6 percent in gas). New South Wales continued to exhibit a moderate switching rate of 9.2 percent (11.8 percent in electricity, 6.5 percent in gas).

Victoria is also notable in being the only market to have maintained a level of annualized switching at or above 20 percent for the last five years.

“Victoria is the most consistent highly active market in the world,” commented Dr Philip Lewis, chief executive of VaasaETT. “With the exception of Great Britain, all other active markets in the world have historically fluctuated substantially in terms of activity. Some have risen promisingly only to die out. Others come and go. Victoria has maintained permanent competitive opportunities and pressures.”

The data, which form part of a broader survey of liberalized electricity and gas markets around the world to be released next month, were collected as part of the SwitchstatsAustralia scheme by VaasaETT in collaboration with the Energy Retailers Association of Australia (ERAA) and the 10 leading Australian energy retailers. Together these companies represent over 80 percent of the electricity customers and 90 percent of the gas customers in the four states.

The level of switching is a tangible barometer of both customers’ willingness to embrace retail choice and the level of competition amongst energy companies in that market.

The high level of switching in Victoria is attributed to the phasing out of retail energy price caps and the establishment of an appropriate price monitoring regime.

“Once you took away the risk of a regulator getting price setting wrong, the extremely competitive market structure kept prices efficient while presaging a greater array of choice in product and provider for Victorian consumers,” explained Cameron O’Reilly, executive director of the ERAA. “What Victoria shows is that if you get the market structures right, you can allow the market to set efficient prices and ensure consumers have both choice and protection.”