Call for power retailers to justify high late payment costs for consumers

Ian Jarratt, Queensland Consumers Association member

Power retailers operating in south east Queensland[1], NSW, Victoria and South Australia need to justify why some customers who do not pay their bills on time can be out of pocket by hundreds of dollars a year.

Queensland Consumers Association research into the market in south east Queensland shows that not paying a power bill on time generally results in the loss of all or most of any discount off the base prices of many market contracts and being slugged with a late payment fee.

The association has also found that these slugs on consumers can amount to several hundred dollars a year, especially for consumers with high levels of power consumption, and that they can slash or wipe out the benefit of being on such contracts.

Therefore, the Association has called publicly on power retailers operating in south east Queensland to justify these late payment costs to consumers, which can apply even if the payment is only a day late.

The Association is concerned that if the costs to consumers of late payment are greater than the cost to retailers this is very unfair and unjustified, particularly when interest rates are low, and many consumers are struggling to make ends meet and pay power bills on time.

The Association also wants power retailers in south east Queensland to compete more on base prices, unconditional discounts, and the likely bills for different types of consumers, rather than on the size of conditional discounts off different and artificially high base prices.

This would benefit all consumers and stop the undesirable and unfair trend towards higher base power prices and higher pay on time discounts following the deregulation of standing offer prices in south east Queensland on 1 July 2016,.

This “smoke and mirrors” pricing and marketing:

Means that the many consumers paying base prices (many of whom are vulnerable and disadvantaged), or who do/can not pay on time, can end up subsidising other consumers.
Makes it much more difficult for consumers to shop around and compare offers.
Reduces consumer confidence, and participation, in the power market.

The Association has also:

Called on the Queensland Competition Authority to include pay on time discounts and late payment fees in the monitoring of the post price deregulation of the SEQ power market it is undertaking for the Queensland government.
Advised consumers likely to be unable to pay power bills on time to be very wary of signing power contacts where late payment will result in much higher costs.
Recommended SEQ consumers wanting free, independent information about the cost of different power contracts to consider using the federal government’s comparison website

The Association’s research has also shown that:

Many consumers in NSW, Victoria (despite its ban on late payment fees) and South Australia can also be out of pocket by hundreds of dollars a year if they consistently pay power bills late.
The cost of paying a telecommunication bill late is likely to be much less that late payment of a power bill and the arrangements are fairer.  Telcos tend to only charge late payment fees if the bill is above a certain amount and their other late payment charges tend to be interest charges on the amount outstanding.
The main advantages of interest charges rather than loss of discount for late payment are that the cost to the consumer is directly related to the time the bill is unpaid and the interest rate can be varied with changes in general interest rates.

The Association is interested in sharing information and ideas about late payment costs with other consumer organizations and in working with them to improve the current arrangements.
[1] In the rest of Queensland there is negligible competition for household customers between power retailers due to the payment by the government of a price equalisation subsidy to the state owned retailer Ergon Enegy

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