The Energy Management Institute (EMI) has published an analysis of existing tools in Europe for comparing electricity prices.
With the amendments to the Energy Act the next stage of the liberalization of the electricity retail market in Bulgaria has started. All low-voltage non-residential customers will have to look for a new electricity supplier on the liberalized market rather than the regulated one.
In addition to an active information campaign the law stipulates from January 1, 2021 all end customers with expected annual consumption below 100,000 kWh to have free access to a platform for comparing electricity price offers, including offers for contracts with a dynamic electricity price. The price comparison platform will be a single, central, public web-based information system that provides access to up-to-date information on electricity supply offers. Its operator will be the Energy and Water Regulatory Commission (EWRC).
What are Price comparison tools?
Price comparison tools (PCT) are a key element in providing clear and transparent information to users. Based on the information content included in them, energy consumers can better understand the market environment and choose new electricity supplier. PCT enables consumers to compare the prices of different offers, increasing the opportunities for customers to take advantage of the competition in the retail market.
According to the latest changes in European legislation (Directive 944/2019), Member States should ensure that household customers and micro-enterprises with an expected annual consumption of less than 100,000 kWh have free access to at least one tool for comparing electricity prices, including contract offers with a dynamic price of electricity. Customers shall be notified of the availability of these instruments in their bills or as an annex to their bills.
The same Directive introduces PCT standards for efficient operation for the benefit of energy consumers. In particular, each Member State must have at least one comparison tool that meets the following requirements:
- independent from market participants;
- equal treatment of energy companies in the search results;
- disclosure of ownership;
- disclosure of funding sources;
- objective criteria for comparison and their disclosure;
- understandable language;
- accurate and up-to-date information;
- information about the time of the last update;
- accessibility for people with disabilities;
- procedures for submitting false information;
- require as little personal information as possible for comparison
- complete market coverage
The listed criteria promise consumers better access to neutral and objective information, which will enable them to take an active role in the liberalized of the energy market.
European examples
Consumers in the Netherlands have 32 PCTs and Germany with 30 PCTs can benefit from an extremely high number of PCTs compared to other EU countries. However, according to the ACER report, these figures may look different when we include the requirement for complete market coverage. In France and Spain, the 15 PCTs cover the entire market, and in Norway -7.
The PCT reliability assessment has been carried out by the national regulatory authorities on the basis of a set of criteria defined for the first time in the good practice guidelines published by CEER in 2017. Standards similar to those defined relate to independence, transparency, comprehensiveness, clarity and comprehensibility, fairness and accuracy, user-friendliness, accessibility and consumer empowerment.
According to the results, PCT is reliable in 18 Member States. There are Member States with many reliable PCTs such as the United Kingdom (11), Austria and the Czech Republic (3), Portugal (2) and Ireland (2). In most Member States with one, two or three PCTs, national regulators or other authorities responsible for consumer protection manage and maintain those platforms. In 18 countries this important tool for electricity consumers has been managed by a public institution.
In Bulgaria, Cyprus, Hungary and Malta, there isn’t a single developed and functioning PCT.
How do they work and what information do the standard price comparison tools provide?
Although the available online price comparison tools vary from one Member State to another in terms of the range of services offered, the scope of the information required by consumers and provided by traders, and its visualization, follow a common model. PCT can only provide a comparison between the offers available on the market and/or further facilitate the process of switching providers. To be as useful as possible, PCTs require users to enter specific information related to the user`s demand profile and their current provider. This usually includes:
Customer type: domestic or commercial.
Postal code: This information is needed as some fixed (regulated) components of electricity tariffs (eg network prices) may vary from region to region, and some suppliers operate only in a limited geographical area.
Current supplier and details of the current contract: The current supplier and the energy “tariff” used by the consumer should be clearly indicated in the invoice. This is the starting point for comparison between different providers. Ideally, the PCT database should include (such as a drop-down menu, for example) all tariffs applicable to the relevant type of user, offered by all suppliers in its territory. There are also PCTs that follow a different approach and do not take into account the current provider. In such cases, the starting point for comparing and calculating the potential savings in the customer`s electricity bill is the information about his usual average electricity consumption. The consumer is required to identify his current consumption either by the amount paid or by kWh of electricity consumed for a certain period of time (e.g. monthly, quarterly, annually).
It may be required to provide specific information on various characteristics of the tariffs used – day / night; special / seasonal tariffs; social tariffs, etc., as well as any other specific feature of the contract that could affect the final price, such as the method of payment of the bill (some providers offer discounts in case a direct debit is chosen), payment of equal monthly installments, reporting once or twice within the period, combined utility services – electricity plus water, mobile services, gas, heating, etc.
Usually all this information is present in the invoice from the current supplier and the PCT provides a sample from which it is clear where it can be found.
Depending on the level of complexity of the tool, the user can further set additional preferences and requirements for the offers. In modern urban agglomerations, for example, the main argument for choosing a supplier is often not the prices, but specific non-price characteristics, such as:
- method of payment of the bill / special payment schemes
- a fixed tariff at which the price of energy will not increase or decrease for a certain period of time
- ability to manage the account online
- no fees for early termination – indefinite contract
- no requirement to prepay a deposit
- providing free services to customers, e.g. energy audit, property insurance, combined services
- green energy requirement
- support for “smart” home and appliances (smart metering, demand-response premiums)
- other promotional offers, e.g. discounts, provided that the customer purchases or accepts an additional service.
The PCT collects all the listed information and returns the results of the available alternative solutions for that particular user.
As expected, offers are ranked on the basis of the final price that can be provided to the individual consumer, or very often on the basis of the expected annual savings that he would realize in comparison to his current tariff.
Most of the PCT operators in the countries with developed retail market additionally provide the service of changing the supplier – on behalf of the client by concluding a contract with the selected supplier at the selected tariff against a certain fee.
Source: Energy management Institute