Jul 5, 2012

Electricity retailers: do we really need them?

Electricity retailers are not really retailers at all -- they don’t deliver any product, apart from a bill. Now they're accused of standing in the way of the energy revolution. Why do we need them?

People understand what a retailer is: it’s where you go to buy and collect stuff — shoes, clothes, groceries, petrol and other items. They are the points of sale between the manufacturers and wholesalers, and the consumers.

But what about electricity retailers? Is that where you go to buy and collect electricity? Well, actually, no. Electricity retailers don’t actually deliver you any electricity at all. As the diagram below — taken from a presentation by UNSW electricity expert Hugh Outhred — will tell you, that comes straight from the generators via the transmission network and the distributors. And now, some of you will get electricity from solar PV modules on your roof.

Free Trial

Proudly annoying those in power since 2000.

Sign up for a FREE 21-day trial to keep reading and get the best of Crikey straight to your inbox

By starting a free trial, you agree to accept Crikey’s terms and conditions


Leave a comment

32 thoughts on “Electricity retailers: do we really need them?

  1. Frank Campbell

    For once, Parkinson is right

  2. Bryannai Baillieu

    Retailers are important so that the public maintains the delusion that there is competition in what is really a privatised monopoly. Silly!

  3. Hamis Hill

    Remote Mine Site electicity supply company PowerCorp has a device called PowerStore which aids in the mangement of supply and demand. They have a web site and have recently merged with another power company.
    The concept of storage is the key to solving some of the problems in the article, especially for the
    energy service groups now getting together.
    PowerCorp is/was an energy service company of the sort postulated in the article.
    Do not see why their operations cannot be applied to slices of the grid of similar size to their remote mine site operations. And almost immediately, considering their long history of operation.
    Something similar to this established energy service business could knock the retailers off their pedestal.
    But don’t monopolies protect themselves by denying the very existence of competition.
    Remote area mine site energy provision? Suely nothing at all happens outside the Grid?
    All those mining ans electrical engineers? What would they know about energy? Ridiculous!

  4. Hamis Hill

    But don’t monopolies protect themselves by deying the very existence of competition?
    What happens at remote area mine sites beyond the Grid.
    Is someone already servicing their energy needs?
    Are mining and electrical engineers involved? What would they know about energy and how to use it?
    Better not ask Eh?

  5. Scott

    “Last year, the major electricity retailers reported that the “churn” rate for 2010-11 was nearly 25%”

    Rather than a bad sign, that’s good as it’s usually a sign that the level of competition is high.

    Competition is the key to lower prices. You remove the retailers, you get less competition as the cost barriers of becoming a (serious) supplier of energy are too high (the solar distributed model is not quite there yet). Becoming a retailer, on the other hand, isn’t as difficult and they can concentrate on contract management efficiencies, leaving power generation and distribution to the big boys.

  6. Merve

    The power system in Australia is a scam from top to bottom. We have retailers who just print bills. We have distributers who scam the system by bumping up costs. Read “The Age” today, “Why your electricty bill is growing”. Tony Abbott and friends are hyper ventilating over the Carbon Price, when the majority of the rise in our bills is due to other reasons, many of which are to do with the failed privatisations, with overseas companies robbing us.

  7. Jonathan Prendergast

    Retails do more than print bills.
    Contracting the right amount of electricity at peak, shoulder and off-peak times is crucial, and enables the wholesale market. Some retailers have gone under when they haven’t contracted enough energy on the hottest sunny day, or haven’t allowed for a generator maintenance.
    They also have huge regulatory compliance they have to keep up.
    Concession prices for low income and the elderly.
    Not only do they pay the generators, but they calculate and pay the distributors and transmission companies also.
    They also have to buy Renewable Energy Certificates, and implement other policies like CFL and LED lightglobes.
    The main role of the retailers is the customer service. Which some do very poorly. But remember, they are the only point of customer service, so are doing it on behalf of the generators, distributors and themselves.
    We expect a lot from our retailers, and they are in a very competitive market. It’s unrewarding work, then the above article says their useless. Thankless task. I’d never wanna do it.
    And then when people discuss the retail part of the cost of electricity, they call it ‘retail margin’. Yeah, the generators and distributors are doing it for free, and the retailers are just sitting there taking profits? Of course not.

  8. Owen Gary

    Electricity utility split into four= 4x more cost to consumers. Standard Corporate operating practice, it’s called the “Free Market” which means it’s free for them to make a profit at our expense.

  9. David Hand

    Every trader you engage with who you pay for a good and service that you beneficially use for yourself is making a profit at your expense. In fact, when you trade your hours to your employer in exchange for your salary, you are making a profit at their expense.

    It’s called the “Free Market”.

Leave a comment

Share this article with a friend

Just fill out the fields below and we'll send your friend a link to this article along with a message from you.

Your details

Your friend's details