Stop power companies slugging low-income customers for marketing costs

MEDIA RELEASE

Victoria should stop allowing energy retailers to pass on marketing costs to people using Victoria’s no-frills default power offer.

That’s a key recommendation from a new policy submission co-authored by the Victorian Council of Social Service.

The Victorian Default Offer is a government-mandated baseline electricity deal used by many low-income earners. The price is set by the Essential Services Commission following representations from the power companies.

Last year, the ESC increased the baseline power cost by 25%.

• The Victorian Default Offer (VDO) is Victoria’s government-mandated baseline electricity deal.
• About 400,000 Victorians, or 15% of homes, use the VDO.
• The way the VDO is currently calculated, electricity companies can pass on the costs of telemarketers and other marketing activities (so-called “customer acquisition and retention costs”)
• This is unfair and should stop.

As part of the current process, power companies are allowed to include the cost of telemarketers, in-house marketing teams and participation in third-party comparison websites in their price proposals, and the ESC is obligated to include these in their final calculations.

VCOSS CEO Juanita Pope says that’s ludicrous.

“Low-income Victorians using the VDO aren’t benefiting at all from the power companies’ marketing spend.”

“They’re on the VDO because they don’t have a lot of money or because the power companies have already failed them.”

“If the power companies want to splurge on marketing they should find better and fairer ways to pay for it.”

The submission — prepared in partnership with the Brotherhood of St. Laurence, Consumer Action Law Centre, Council of the Ageing Victoria, Energy Consumers Australia, Financial Counselling Victoria and Good Shepherd — also calls for the ESC to:

• Give less weight to the power companies’ desired profit margins,
• Ensure the retailers are fulfilling their obligation to offer customers the best deal, and
• Make sure retailers are offering adequate customer supports to people in hardship.

The VDO is a valuable safeguard for Victorian power users doing it tough,” Ms Pope said.

“Changes are needed to ensure the VDO remains fair and genuinely affordable.”

“Everybody should be able to afford enough energy to live a comfortable and healthy life

Submission co-authors include VCOSS, the Brotherhood of St. Laurence, Consumer Action Law Centre, Council of the Ageing Victoria, Energy Consumers Australia, Financial Counselling Victoria and Good Shepherd.