Consumers have been lulled into a false sense of security using price comparison websites for everything including health car, house, life, travel, and pet insurance to phone, internet, energy, home loans and travel bookings.

The problem is that while price comparison websites may save ‘some’ money that does not correlate with the best possible deal.

The Australian Competition and Consumer Commission (ACCC) has had price comparison websites in its sights for some time levying huge fines for misleading conduct.

In essence, many price comparison websites make lofty claims that they compare the market and offer you a better price for the service. What few adequately disclose is that they a) ‘partner’ with a select few suppliers and b) make a hefty commission as you switch (so switch you must).

The ACCC has found, without exception, that price comparison websites do not compare all available suppliers and prices.

In fact, they compare very few suppliers, especially where geographical locations can make a huge difference. They steer you to suppliers they make the most money from. Worse still they base your comparison on a previous ‘bill’ that likely was terrible in the first place, e.g. easy to better.

It found, for example, that iSelect (report here) includes offers from 11 retailers (out of 22) that sell electricity to households in Sydney. The smaller price comparison websites compare offers from far fewer retailers – in some cases, as few as three. Many of the price comparison websites still do not disclose the identity, number or remuneration of their commercial ‘partners’.

GadgetGuy has been reviewing a device from Adelaide company Emberpulse that CEO Dom Gelonese claims can stop the energy rip-off.

We interviewed Dom, and he has a few choice words about energy price comparison websites. Responses are paraphrased.

GG: Why are energy price comparison websites so fraught with danger?

DG: There are five main reasons.

  1. There are over 5,000 retail energy price plans (plans) from retail energy suppliers (retailers) covering the whole of Australia. Regional Australia has far fewer choices compared to its city cousins, and at best a price comparison website gives you options from a handful of ‘select’ plans
  2. Retailers intentionally design plans to be extremely hard for consumers to compare, forcing them to price comparison websites that are their secret business partners
  3. The retail electricity supply industry has poor governance, so it is easy to get away with hidden terms, conditions, penalties for late payment, and commission deals to price comparison websites. Is the ‘Wild West’ too strong a term?
  4. Consumers lack any real understanding of their power usage apart from a previous bill, and it tells them very little. The worst thing price comparison websites do is to compare so-called ‘discounts’ – competing plans seldom use the same base rate per Kilowatt hour (kWh), or time of day charges.
  5. And finally, not one price comparison website is looking at the bigger picture. Things like when saving money may mean going solar for water and energy and when installing a home battery makes sense. This will become even more critical with the increasing use of electric vehicles and recharging costs.

Simply put these so-called objective price comparison websites with their funny or heart-warming television commercials are purely money-making machines.

How do they make the most money? By selling what is best for their partner energy retailers – not you. In every case, we have seen price comparison websites more expensive than the cheapest plans that are readily available.

Essentially, Australians are being taken to the cleaners by these supposed ‘helpful’ websites, particularly if they are oblivious to the way the energy industry works.

Price comparison websites

GG: What is the answer?

DG: As with any industry, consumer education is the answer. Give them the skills and tools to wade through the intentional retail energy market ‘white noise’ and find the ‘white space’.

Government action would be a good first step, but there seems to be too many competing interests at play.

The gutsy answer is to lightly regulate the retail industry to the extent that you can make an ‘apples for apples’ comparison (comparator rate). Define terms such as energy use time bands, what a daily service charge is and let the consumer know what the retail ball-park price is they should pay for power. A little like ‘fuel-watch’ although the wholesale energy industry prices can vary wildly.

Then stop the industry advertising the lowest rates (after a discount applies if you pay on time) to the real rate (a comparative rate as the government has mandated for financial loans.)

The Energy Council of Australia (comprises Federal and the State Energy Ministers) instead is proposing a reference bill to show what others in your area/circumstance are paying. That is fraught with difficulty and really sets a low expectation of beating the reference bill.