We found that electricity prices for residential customers increased by an average of 14% in July this year, which was driven by rapidly increasing wholesale costs.
However, these rising costs have been largely offset by decreases in network charges over the previous two years. The net result is that on average, residential customers are paying 2% more for electricity since 2013-14 when prices were deregulated. This is a real decrease in prices of 5% (once CPI is accounted for).
This period of relative price stability contrasts with the large price increases in the 5 years leading up to 2013-14, which were driven by increases in network charges.
Since 2013-14, competition in the retail market has continued to develop. The number of brands competing in the market has risen from 15 to 26; the market share of smaller retailers has increased from 7% to 13% and the number of small customers on market offers has risen from 63% to 77%. More than 30% of customers switched either retailer or offer in the last year.
However, further improvements could be made so it is easier for the 23% of customers who are still on standing offers to shop around. As the spread of offers in the market has widened, customers on standing offers are paying around 25% more than customers who have switched to a better deal, and they are paying about 10% more than what they were paying five years ago.
Retailers, governments and third parties should focus on facilitating increased customer engagement in the retail market to further enhance competition, and in particular ensuring that vulnerable and hardship customers are not paying more than they need to.