There’s this joke, told against economists.
Two of them are walking down the street. One points, and says: “Hey look, there’s a $20 note on the footpath.” The other replies: “Impossible. If there was, someone would have picked it up by now.”
Boom tish. My favourite is about a can-opener. And there’s another one about sheep. But we’ll leave them for another day.
What I’m getting at is that the joke against economists is actually a joke against us, about half of us.
Newgate Research has come up with the numbers in a paper prepared for the n Energy Market Commission, quoted by the Prime Minister in his letter to electricity bosses; the one summoning them to a crisis meeting in Canberra on Wednesday.
Roughly half of us haven’t switched electricity suppliers in the past five years, and a good many have never switched.
The letter says they are leaving on the table (or on the ground) savings of up to $830 per year in Victoria and $1400 in NSW.
Why do they do it? Most say (just like the economist) that they “generally don’t trust energy companies that promise a better deal”. Most also say it’s too complicated to compare offers and plans, a conclusion I reluctantly came to myself, and I’m normally good at these things.
Curiously, around half say they would rather cut their bill by cutting electricity use than shopping around, and most strangely of all, 39 per cent say the amount of money they could save isn’t “worth the time and effort involved in switching”.
It’s strange, because without investigating switching they can’t know how much they could save, and also because the savings would be ongoing, whereas the time and effort would be a one-off.
Newgate dug deeper and asked how much of a saving they would need in order to seriously consider switching. The thresholds were astonishingly high. On average the 2000 householders surveyed said they would need to save 23 per cent of their electricity bills to make the effort worthwhile. That’s $82 each quarter in Victoria (more than $300 a year) and $97 each quarter in NSW (almost $400 a year).
If it was petrol, or groceries, we’d drive to the other end of town to save half as much.
And savings available from switching electricity suppliers appear to be bigger. Half of us don’t know it because we don’t think its worth our while finding out.
Many of us wouldn’t know where to start. Asked unprompted to name a government price comparison website, only 2 per cent could. Energymadeeasy.gov.au might as well not exist. Twice as many people used Google to compare suppliers as used a comparison website. Of those that did try to switch, 21 per cent found it difficult, a result much worse than the 15 per cent who found it difficult to switch internet providers, 9 per cent who found it difficult to switch mobile phone companies and 7 per cent who found it difficult to change home insurance. It’s about the same as the 20 per cent who find it difficult to switch banks, the best part of a decade after attempts to make it easy.
Partly, the difficulty is intentional. By expressing electricity charges in formulas that are hard to calculate, the retailers hope we’ll give up. And I reckon it’s also because electricity is dull, and the rewards are delayed. If you get a bargain on an iPad, you feel good straight away. You can take it home and see what you’ve saved.
But if you get a bargain on electricity, nothing changes: the electrons are the same and you won’t see a changed bill for months. It’s the same with mortgages: the dollars are identical and the savings take a while to flow through.
We’re wired for novelty. If the dollars are dull, we won’t pick them up.
Peter Martin is economics editor of The Age.
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