TARIFF SWITCHING AMONG OLDER
ENERGY CONSUMERS
June 2014
CUAC gratefully acknowledges Victorian Government Department of State Development,
Business and Innovation support for this work, which originated with a DSDBI-funded
project related to the Department’s Energy Information Fund.
The views and any errors remain our own.
Consumer Utilities Advocacy Centre Ltd (CUAC)
172 Flinders Street
Melbourne VIC 3000
P (03) 9639 7600
F (03) 9639 8966
www.cuac.org.au
ACN 100 188 752
TABLE OF CONTENTS
LIST OF TABLES AND FIGURES ........................................................................................... 1
LIST OF ABBREVIATIONS .................................................................................................. 2
INTRODUCTION ............................................................................................................ 3
Background to the research ........................................................................................ 3
Research approach .................................................................................................. 3
Report ................................................................................................................... 4
OLDER PEOPLE AND ENERGY ........................................................................................... 5
RETAIL MARKET DESIGN................................................................................................... 8
Reasons for not switching ........................................................................................... 8
Reform to support switching ...................................................................................... 10
THE DIGITAL DIVIDE ....................................................................................................... 13
Older people and the internet ................................................................................... 13
Supporting access to price comparators ...................................................................... 16
INFORMATION AND ADVICE ......................................................................................... 19
Physical and cognitive changes associated with ageing ................................................. 19
Providing information and advice .............................................................................. 19
APPENDIX A – BROCHURE & GUIDE ................................................................................. 24
BIBLIOGRAPHY ............................................................................................................. 34
LIST OF TABLES AND FIGURES
Figure 1
Internet use by age, 2007, 2009 and 2011
13
Figure 2
Activities undertaken online by Australians aged 55 years and over (% of users)
14
1
LIST OF ABBREVIATIONS
ABS
Australian Bureau of Statistics
AEMC
Australian Energy Market Commission
AER
Australian Energy Regulator
ACMA
Australian Communications and Media Authority
CUAC
Consumer Utilities Advocacy Centre Ltd
DSDBI
Department of State Development, Business and Innovation
EIF
Energy Information Fund
EWOV
Energy and Water Ombudsman (Victoria)
HILDA
Household Income and Labour Dynamics in Australia
UK
United Kingdom
2
INTRODUCTION
In a deregulated energy retail market, switching is one important way in which consumers can save
money on energy bills. However, research both in Australia and the United Kingdom has shown
that some of the consumer groups for whom these savings would be most consequential are,
unfortunately, less likely to switch.
Based on a review of the literature and stakeholder consultation, this report looks closely at one of
these groups – older people – investigating the causes of lower switching rates and considering the
policy and programs that might support increased switching.
Background to the research
This research grew out of CUAC’s consumer education work. In 2013, we came to an agreement
with the Victorian Government Department of State Development, Business and Innovation (DSDBI)
to work on a project supporting implementation of DSDBI’s Energy Information Fund (EIF). The EIF
provides grants for not-for-profit organisations to develop and deliver energy consumer education,
targeted at disadvantaged, vulnerable or hard-to-reach consumers. As part of our work in
association with the EIF, CUAC agreed to research the development of an energy switching
resource targeted specifically at older people, producing for DSDBI a report and resource
development proposal.
Developing this report and proposal, we realised that the issues covered had implications for policy
as well as communications. We decided to revisit the report, drawing out some of these policy
implications for a wider audience.
Research approach
This report is based on the findings of a desktop review of Australian and UK literature on older
people in relation to:


switching in energy and similar retail markets;
internet access, use and skill levels; and

the provision of information and advice.
The review encompassed academic research and policy and regulatory reports.
Part way through the desktop review we also met with and collected written comments from
Victoria’s major organisations for older people, National Seniors Australia (Victoria) and Council on
the Ageing (Victoria).
3
Report
The remainder of this report is divided into four main sections. In ‘Older people and energy’, we
review the evidence about older people’s energy use, expenditure and switching behaviours,
providing the context for the discussion that follows. The next section, ‘Retail market design’, looks
at how the overall set-up of the retail market can affect switching decisions at the micro level and
proposes some retail market reforms that might support switching, particularly among older people
and other vulnerable consumer groups. In ‘The digital divide,’ we note that internet access has
become a pre-requisite for good consumer decision making on energy, and consider the
implications of this for older people. Finally, the section on ‘Information and advice’ examines how
older consumers can be assisted to switch through the provision of information, advice and support.
4
OLDER PEOPLE AND ENERGY
Older people tend to use less energy; they therefore spend less on it. Nevertheless, rising energy
costs still affect many older people, and a proportion struggle to pay energy bills. Although many
older people could benefit from the savings available through switching, the switching rate among
this group is below average.
Energy use and expenditure
In 2012, Victorian households spent an average of $45 per week on electricity and gas for the
home, of which $27 was for electricity and $18 for gas.1 For a significant minority of consumers,
energy bills comprise a substantial proportion of household expenditure and are difficult to manage.
The Australian Bureau of Statistics (ABS) reports that Australia-wide, households that were mostly
reliant on government income support spent close to 5% of their income on electricity and gas in
2012. Eighteen per cent of low-income Australian households could not pay electricity, gas or
telephone bills on time. For 13% of low income households, failure to pay led to disconnection.2 A
2013 nationally representative survey found that electricity was the most concerning cost of living
pressure for consumers, with 85% of households describing themselves as ‘concerned’, including
44% who were ‘very concerned’, about electricity costs.3
Older energy consumers (65+) tend to use and therefore spend less on energy than average.4 In
the main, this probably reflects smaller average household sizes. However, there is also some
evidence that older people are more likely to adopt energy and water conservation practices in the
home.5 The ABS’ 2011–12 Attitudes to the Environment Survey found that Australians aged 35 and
above were more likely than younger age groups to take steps to limit their personal electricity use
in the home, with this behaviour most common among the 45–54 (92.2%), 55–64 (92.1%) and
65–74 (92.2%) age groups. Interestingly, however, electricity saving behaviour dropped off
among respondents aged 75+, of whom 86.5% took steps to limit use.6
Despite lower average consumption, electricity costs may be of particular concern to older
Victorians because for most people, income declines with age.7 In 2011, the average household
income for Australians 75+ was $36 200, compared to $93 400 for the 50–64 age group.8 In
Australian Bureau of Statistics, 4670.0 - Household Energy Consumption Survey, Australia: Summary of Results, 2012, ABS,
2013.
2
ABS, Household Energy Consumption.
3
CHOICE, Brotherhood of St Laurence and the Energy Efficiency Council, Survey of Community Views on Energy Affordability –
Australia, 2013, p. 3.
4
P Simshauser and T Nelson, The energy market death spiral: re-thinking customer hardship, AGL Applied Economic and Policy
Research Working Paper No. 31, AGL, Brisbane, 2012, p. 19.
5
Gilg and Barr (2006) cited in B Randolph and P Troy, Energy Consumption and the Built Environment: A Social and Behavioural
Analysis, City Futures Research Centre Research Paper No. 7, City Futures Research Centre, University of NSW, Kensington,
2007, p. 18.
6
Australian Bureau of Statistics, 4626055001DO001_201112 Environmental views and behaviour, 2011-12, 2012, ABS,
Canberra.
7
S Kelly, A squeeze on spending? An update on household living costs for senior Australians, National Seniors Australia
Productive Ageing Centre, Melbourne, 2013, p. 9.
8
Kelly, A squeeze on spending?, p. 9.
1
5
the same year, 8.5 per cent of all senior households had been unable to pay electricity, gas or
telephone bills on time – with this percentage higher for pensioner households (11.9%) and those in
the lowest income quintile (13.7%). Interestingly, despite lower average incomes, inability to pay
was lower among 65–74 and 75+ age groups than the 50–64 age group. One researcher
provides the following hypothesis:
This may be a generational issue (older people are more worried about paying on time), an
organisational issue (Younger people are busier and more likely to miss a payment date), or it
may be that some other factors are contributing to the inability to pay on time.9
It appears that senior households are responding to rising prices for electricity and other essentials
by reducing spending in those and other areas. A 2013 analysis of Household, Income and
Labour Dynamics in Australia (HILDA) data found that with the cost of essentials increasing, low
income senior households were reducing or stopping spending in other categories, including
alcohol and cigarettes, public transport, eating out, petrol, clothing and footwear, medical, home
maintenance and car maintenance.10 Despite energy price rises, HILDA data also show that
between 2006 and 2011, pensioner households cut their spending on utilities by almost a quarter
in real terms, suggesting reduced consumption (either planned or as a result of decreasing
household size) and/or a change to cheaper alternatives.11
Switching
Another way in which many older people could ameliorate rising energy bills is by switching
retailer and/or offer, reducing the price they pay for energy. Research has consistently found that
securing a lower price (including lower tariffs and discounts) is the principal motivation for switching
electricity contract and/or retailer. A 2013 Wallis Strategic Market and Social Research survey
conducted for the ESC found that 56% of switchers reported as the main motivation for switching
‘lower tariffs and rates’, while a further 16% identified ‘discounts’ as the main motivator.12
Switching rates
Although many older households could benefit from switching savings, they appear to be less likely
than younger people to switch in search of a better deal. Recent Victorian data suggests that age is
negatively correlated with propensity to switch away from a standing offer. The 2013 Wallis study
found that the proportion of Victorian electricity consumers on market contracts has been increasing,
estimated at 77% in 2013.13 But while overall switching activity is reasonably high, some groups
are under-represented among switchers. Respondents were more likely to have remained on a
standing offer where they were aged over 40, had an annual household income of less than $50,
000 or lived alone.14 While this data is not particularly fine-grained, it does suggest that older
Victorians and those on low incomes are less likely to switch electricity contract.
9
Kelly, A squeeze on spending?, p. 23.
10
Kelly, A squeeze on spending?, pp. 20–21.
11
Kelly, A squeeze on spending?, pp. 9, 21.
12
Wallis Strategic Market and Social Research, Victoria’s experience of the electricity market 2013 Final Report, Essential
Services Commission, Melbourne, 2013, p. 2.
13
Wallis, Victoria’s experience of the electricity market, p. 1.
14
Wallis, Victoria’s experience of the electricity market, p. 24.
6
Research in the UK has produced similar findings. One 2008 survey found that older people were
the least likely group to switch energy supplier in the coming year.15 Similarly, one 2013 study
investigated the effects of an intervention that sought to tackle fuel poverty by facilitating energy
tariff switching.16 Advice on tariff switching, printed materials and access to websites was given to
151 vulnerable consumers. One week after the intervention, 19 participants had attempted to
switch (13%), with 13 completing a switch successfully.17 Older participants, however, were more
likely to have been with their provider for more than 15 years pre-intervention and the least likely to
have switched after the intervention.
These findings reflect a more general tendency for older people to engage less actively in a range
of markets. A 2013 survey by the Australian Communications Consumer Action Network found that
older people tended to be less active telecommunications consumers, being much less likely than
younger consumers to shop around.18 Similarly, research by Ofcom, the UK’s independent regulator
and competition authority for telecommunications, has found that in the UK, older people are less
likely than younger people to shop around. Assessing willingness to switch and interest in ‘keeping
an eye out’ for better deals, Ofcom’s consumer surveys have consistently found that older consumers
are more likely to be inactive in a range of markets and that they are less likely to switch mobile
phone supplier.19 UK research also suggests that among older people, those of lower socioeconomic status are the least likely to shop around for products and services.20
Extrapolating from this research, it is likely that among older energy consumers in Victoria, those
who are more disadvantaged, are even less likely to switch than others in their age cohort, missing
out on likely savings. It is therefore worth considering what programs and policy changes might
encourage this group to consider switching.
15
Aberdare Online, Reliance on switching leaves pensioners paying a premium for energy, November 7 2008.
16
A Lorenc, L Pedro, B Badesha, C Dize, I Fernow and L Dias, “Tackling fuel poverty through facilitating energy tariff switching: a
participatory action research study in vulnerable groups” Public Health 127 (10), 2013, pp. 894–901.
17
An additional 69 respondents said they intended to switch in the next 12 months.
18
Australian Communications Consumer Action Network, ACCAN survey finds surge in mobile devices, but mind the age gap,
2013, at http://www.accan.org.au/news-items/hot-issues/677-accan-survey-finds-surge-in-mobile-devices-but-mind-the-age-gap.
19
ILC-UK, The Golden Economy: The Consumer Marketplace in an Ageing Society , Age UK, London, 2010, p. 21.
20
ILC-UK, The Golden Economy, p. 21.
7
RETAIL MARKET DESIGN
A closer examination of consumers’ reasons for not switching highlights several ways in which the
overall set-up and functioning of the retail market can affect consumer decision-making at the micro
level. Because loss aversion and status quo bias figure heavily in vulnerable consumers’ reasons for
not switching, it would seem that vulnerable consumers are likely to be most disadvantaged in retail
markets where consumers cannot be confident that time and effort invested in switching will be
beneficial or, at the very least, not detrimental. Improvements to transfer processes, fixed term
contracts reform and changes that improve trust in the energy industry can be expected to benefit
vulnerable consumers by reducing the risk (and the perceived risk) associated with switching.
Reasons for not switching
Australian and UK research has investigated consumers’ reasons for not switching, and has
produced fairly consistent findings. In the Wallis study, those who had not switched reported feeling
that there was no reason to do so. The top reasons for remaining with the same supplier identified
by non-switchers were loyalty or liking the company (43%) and not worth it/can’t be bothered
(30%). Non-switchers are more likely to be on lower incomes, meaning that electricity costs are
likely to make up a higher proportion of household expenditure (see p. 5). Nevertheless, even nonswitchers who said that electricity is a large proportion of household running costs were likely to
report that switching was ‘not worth the effort’.21
This is consistent with findings from a CUAC survey in 2010, which found that those who said they
had not switched in the past 24 months reported that this was primarily because they were happy
with their current retailer (38%), thought it was not worth the effort or couldn’t be bothered (21%),
found it too hard to choose (18%), or had no specific reason for not changing (13%).
UK research has produced remarkably similar findings. The 2013 tariff intervention study described
on page 7 also found that for those who had not attempted to switch after the intervention, apathy
(can’t be bothered, or not interested) was a key reason, as was lack of time, fear or scepticism
about savings and loyalty to a current provider. The researchers suggested that although the
intervention had encouraged switching, ‘low-income consumers appear to have considerable
apathy to switching energy tariffs... in part due to their complex lives in which switching is not a
priority.’22
Loss aversion
An earlier qualitative study conducted for Ofgem in 2008 investigated vulnerable consumers’
engagement with the energy market, and found that they generally ‘lack the confidence, knowledge
21
Wallis, Victoria’s experience of the electricity market, pp. 2, 21.
22
Lorenc et al, “Tackling fuel poverty”.
8
or initiative to switch proactively.’23 Many participants underestimated the potential savings,24 while
others were change averse because of concerns about potential problems with the switch. Often,
they found, these ‘under-confident and nervous’ consumers were aware of the problems that could
arise from switching, including receiving bills from two companies and being tied to a new supplier
only to see them increase their prices.25
The researchers make the point that for vulnerable consumers, potential switching problems can be
a strong disincentive to switching:
Often on a tight budget and a low income, they believe it will be difficult for them to recover
from a problem, such as facing a much higher than expected bill. Struggling financially and
expecting to do so in the future, they are much more vulnerable than those on higher incomes if
asked to meet unexpectedly high bills.
They also need reassurance that the switch itself will be hassle-free and easy, and that they will
be able to switch away from the new supplier easily if things do not work out. 26
In contrast, consumers who are financially stable and confident dealing with retailers may be more
likely to feel that they have the resources to deal with any problems that might result from switching.
Status quo bias
There appears to be subtle differences in older consumers’ reasons for not switching energy
supplier, namely, a greater tendency towards status quo bias. Status quo bias is, essentially,
‘sticking with what you know.’ In markets, it refers to a situation where a consumer is happier
remaining with a familiar product or service, even where the price is higher. Status quo bias is
related to the endowment effect (valuing something one already has more than things one does not)
and loss aversion (attaching greater weight to potential losses than potential gains).27
In the UK, Ofgem’s study of vulnerable customers found that elderly customers surveyed tended to
be satisfied with their current provider, even if they were unsure about whether they were on the
best deal.28
Elderly customers ... were especially likely to be happy and comfortable doing what they have
done paying their supplier with the means they have used for years. They know they can
manage in this way and prefer to continue rather than seek uncertain savings elsewhere.29
Similarly, the 2008 survey which found that older people were least likely to switch related this to
loss aversion:
23
FDS International Ltd, Research report on vulnerable consumers’ engagement with the energy market, Ofgem, London, 2008,
p. siii.
24
FDS, Vulnerable consumers’ engagement, p. siv.
25
FDS, Vulnerable consumers’ engagement, p. 50.
26
FDS, Vulnerable consumers’ engagement, p. 50.
27
Consumer Utilities Advocacy Centre, Improving energy market competition through consumer participation: A CUAC research
report, CUAC, Melbourne, 2011, pp. 35–6.
28
FDS, Vulnerable consumers’ engagement, p. siv.
29
ILC-UK, The Golden Economy, p. sv.
9
Although the research showed older people are more than twice as likely to switch with
independent advice than on their own‚ the majority are unlikely to switch because they are
unsure whether it would save them any money and worry that it may actually make their
situation worse.30
Finally, the 2013 tariff intervention study found that older people were particularly affected by
apathy and scepticism about the benefits of switching, and that this was related to a general
mistrust of energy companies:
Another significant barrier was the mistrust of energy suppliers... related to poor customer
service and bad experiences of doorstep selling, especially for older people. This lack of trust
may mean consumers doubt energy companies’ impartiality or authority when encouraging
switching.
The researchers concluded that older people experience significant barriers to switching, including
a lack of interest in change, loyalty to existing suppliers, rarely being active consumers, scepticism
(especially those living alone or with cognitive impairment) and difficulties using websites.
Stakeholders that we spoke to also highlighted issues of uncertainty and confusion in a market
where there is a ‘lack of clarity and transparency’ about deals and ‘comparing apples with apples’
is difficult. Consistent findings that older people are more affected by status quo bias accord with
what is known about cognitive changes associated with ageing (discussed in more detail on p.19).
Reform to support switching
Research that has investigated the reasons consumers give for not switching suggests a number of
retail market changes that may lessen barriers to switching, particularly for vulnerable consumers.
Reforms to transfer processes and fixed term contracts would make switching less risky, helping to
tackle the loss aversion that discourages switching. Tackling some of the issues that contribute to the
energy industry’s poor reputation among consumers could also encourage switching by generating
greater trust and confidence in the market.
Transfer processes
Potential switching problems can be a strong disincentive to changing retailer. Energy and Water
Ombudsman (Victoria) (EWOV) data show, unfortunately, that such switching problems are
increasingly common in the Victorian retail energy market. As detailed in a recent EWOV report:
In 2012–13, 11,335 energy customers raised the transfer of an electricity and/or gas
account with EWOV as their main issue of complaint – up 52% from 7,445 customers in
2011–12 and up 70% from 6,672 customers in 2008–09.31
Transfer cases fall into three categories – transfer error, transfer objection and transfer delay.
Transfer error occurs where billing rights are mistakenly transferred between retailers. Transfer
objection cases involve a retailer objecting to transfer of a customer’s account.
Of most relevance to our analysis of switching behaviour, transfer delay refers to cases in which
there has been a delay in processing of a transfer. In such cases, customers can receive large back
30
31
Aberdare Online, Reliance on switching.
Energy and Water Ombudsman (Victoria) “Transfer Issue Focus”, Res Online, no. 6, February 2014.
10
bills covering several months’ usage. The financial repercussions of such back bills can be serious,
and as EWOV had noted, this is especially so for consumers in financial hardship.32 The Australian
Energy Market Commission (AEMC) has also acknowledged that transfer problems can have a
‘substantial’ impact on customers.33 Given that vulnerable consumers are less able to recover from
these impacts easily, it makes sense for them to be more loss averse, and therefore more affected
by transfer process issues.
Recognising that efficient transfer processes support customer choice and confidence and are ‘a
critical component of a competitive retail market’,34 the AEMC is reviewing electricity customer
switching. Its aim is to make switching easier and timely for consumers. In turn, this is expected to
increase consumers’ willingness to switch, thereby promoting competition.35 The AEMC’s Review of
electricity customer switching: Options paper sets out areas for potential process improvements.36
While CUAC was unable to participate in the consultation on this review, we are supportive of
reforms that make switching processes more simple and timely for consumers, and believe these
reforms may be of particular benefit to vulnerable consumer groups, including older people.
Fixed term contracts
Where the transfer process itself proceeds smoothly, consumers may still find that switching fails to
produce the expected savings, or, indeed, that it leaves them worse off. In Victoria and across the
National Energy Market (NEM), current retail rules allow retailers to offer contracts in which
customers are committed to fixed term (generally between 12 and 36 months), but the retailer is
able to unilaterally increase prices. Retailers are therefore able to attract customers with discounts or
rates (which may or may not be realised in practice), while discouraging them from leaving with
exit fees.
For consumers, this creates risk. An energy offer that was appropriate at the time of signing can
become inappropriate, even before the first bill has arrived. Again, it is low-income and vulnerable
households who are least equipped to manage unpredictable price rises, typically having less
ability to absorb higher costs or respond by reducing their usage.37 Retail rules that allow price
increases during fixed term contracts undermine willingness to switch, and are likely to be
particularly discouraging for vulnerable consumers, including some older people.
In January 2014, the then Victorian Minister for Energy and Resources announced a package of
energy policy reforms. Among these was a change that would prevent retailers from describing as
‘fixed term’ contracts that have a set length, but which allow retailers to increase prices during the
period. In our response to a DSDBI consultation paper on this and other proposed reforms, CUAC
along with other consumer groups has argued that this change would only partially address the
problem: modifying its terminology but not its nature.
Energy and Water Ombudsman (Victoria) Submission to Australian Energy Market Commission Issues Paper – Review of
Electricity Customer Switching, 23 December 2013, p. 7.
33
AEMC, Review of Electricity Customer Switching, p. 1.
34
Australian Energy Market Commission, Review of Electricity Customer Switching, Options Paper , 23 January 2014, AEMC,
32
Sydney, p. i.
35
AEMC, Review of Electricity Customer Switching, pp. 1–2.
36
AEMC, Review of Electricity Customer Switching, p. 7.
37
Consumer Action Law Centre and CUAC, Unilateral price variation and market retail contracts rule change request for Australian
Energy Market Commission, October 2013, p. 17.
11
Instead, we have urged the Victorian Government to support a CUAC and Consumer Action Law
Centre (CALC) rule change application currently under consideration by the AEMC. The application
requests that the AEMC amend Rule 46 to prevent retailers from unilaterally varying tariffs in fixed
term contracts. We have argued that this change will be competition and efficiency-enhancing. It
will shift the costs of managing price risk from consumers to retailers, who are better placed to
manage these risks. It would also eliminate a barrier to switching – one that is probably particularly
dissuasive for loss-averse vulnerable consumers, including older people.
Trust and reputation
Few consumers have personal experience with more than two or three retailers,38 making the
reputation of individual retailers or trust in the market as a whole an important prerequisite for
consumers to engage in switching. This is especially so as contracts become more complex and
less easy to understand.39
Unfortunately, energy retailers engender low levels of trust. In 2013, only 18% of polled
respondents trusted power companies to act in the public interest – the lowest of all surveyed
industries.40 Complaints about energy retailers to the EWOV have doubled since 2008, with a
steady upward trend about both electricity and gas.41
CUAC supports a range of measures to improve the trust in and reputation of the energy market.
Retailers should engage with consumer advocates to improve financial difficulty policies, and
commit to targets to reduce complaints and disconnections. They should implement a best practice
hardship guideline, improve customer service, and simplify tariffs and bills so that they are more
easily understood.
Wallis, Victorians’ Experience of the Electricity Market, p.16.
See e.g. Essential Services Commission, Victorian Residential Electricity Retail
Market Research: Discussion Paper, October 2013, p. 17, regarding increasing contract complexity.
40
Essential Report, Trust in Industries, at http://essentialvision.com.au/trust-in-industries.
41
Energy and Water Ombudsman (Victoria), 2013 Annual Report, p.14.
38
39
12
THE DIGITAL DIVIDE
The digital divide is another major obstacle to switching for older people and some other
vulnerable consumer groups. Because energy tariffs (particularly flexible electricity tariffs) and their
interaction with household consumption are very complex, the best way for Victorian consumers to
compare offers is through the use of the independent price comparison websites My Power Planner
(electricity) and YourChoice (gas). In the NEM, this function is performed by the Australian Energy
Regulator’s (AER) Energy Made Easy comparator. As these tools are available only online, internet
access, use and skill levels of older people are critical to their ability to make sensible switching
choices.
Older people and the internet
Older people are less likely to use the internet and, when they do use it, focus on different tasks to
younger users. Older people also rate their internet and computer skills as lower.
Internet use
Although use is growing rapidly, older people are less likely to use the internet and to have
computer and internet access in the home. The most recent high-quality data on internet use in
Australia comes from the World Internet Project.42 This survey found that in 2011, most Australians
were internet users, but that internet use was lower amongst older people.
Figure 1. Internet use by age, 2007, 2009 and 2011
Source: Ewing and Thomas (2012) p. 2.
While only 57% of 65+ Australians were internet users in 2011, use among this age group had
increased dramatically over 2009 and 2007 figures. This indicates that although web–based
S Ewing and J Thomas, CCI Digital Futures 2012 – The internet in Australia, ARC Centre of Excellence for Creative Industries
and Innovation, n.p., 2012, p. 2.
42
13
information as a means of reaching older audiences should not be disregarded, alone it is
insufficient.
Internet use is also lower among other vulnerable consumer groups. In 2011, 67% of low-income
households (earning less than $30,000 per year) used the internet, compared to 98% of
households earning $100,000 or more.43 Australians with lower levels of educational attainment
were less likely to be internet users (73% of those with basic education, versus 95% of those who
had attended university), as were those living outside of capital cities (82% versus 90% in capital
cities).44
Online activities
Older and younger people also tend to use the internet in different ways. Stakeholders that we
spoke to noted that even among older internet users, many (particularly the very oldest age groups)
use the internet for a limited range of activities (e.g. email and visiting bookmarked websites) and
may not know how to search and navigate more widely.
Research also shows that on average, older internet users are most likely to regularly use the internet
to ‘check email, search or browse the web, send attachments with an email, use a bank’s online
services, and check weather forecasts’.45 Compared to younger users, they are less likely to use the
internet for social networking, video–sharing, downloading or watching music and video and
online shopping. Figure 2 below, shows the online activities of older Australians according to
Australian Communications and Media Authority (ACMA) research in 2010.
Figure 2. Activities undertaken online by Australians aged 55 years and over (% of users)
Source: ACMA cited in Haukka (2011), p. 13.
Among the activities of older internet users shown in Figure 2, ‘research and information’, ‘banking
and finance’ and ‘buying/selling/shopping’ are most similar and relevant to use of a price
comparison website. While a majority of 55+ internet users undertake the first two activities, only a
S Ewing and J Thomas, CCI Digital Futures 2012 – The internet in Australia, ARC Centre of Excellence for Creative Industries
and Innovation, n.p., 2012, p. 3.
44
S Ewing and J Thomas, CCI Digital Futures 2012 – The internet in Australia, ARC Centre of Excellence for Creative Industries
and Innovation, n.p., 2012, p. 3.
45
S Haukka, Older Australians and the Internet, CCI, n.p., 2011, p. 13.
43
14
minority use the internet for buying, selling or shopping. Similarly, a recent UK survey found that the
probability of making online purchases declines ‘markedly’ with age. People in the 65–69 age
group were only half as likely as 45–49 year olds to have made an online purchase in the past 12
months, while only 2% of people aged 80+ had done so.46 This is likely to be related, at least in
part, to the internet security concerns that are more marked among older people.
Internet skills
One of the barriers to internet use for older people is lack of skills and confusion about the
technology.47 A 2008 Australian Communications and Media Authority (ACMA) survey found that
among internet users, self-assessed internet competency declined with age, with 34% of 70+ users
and 35% of 65–69 users describing their skills as ‘very much below average’.48 Older internet
users were also more likely to report that they couldn’t assess their competency level,49 presumably
because of lower awareness of the range of activities enabled by the internet. Similarly, a 2011
qualitative study of senior women found that lack of knowledge was a major barrier to internet
access for this group, and that this lack of knowledge underpinned fears about using the internet.50
While less experience of using the internet is probably the primary reason for poorer internet skills
amongst older people, the physiological effects of ageing can also affect internet use. Older
people are likely to be slower and make more errors, with ‘the reaction to colour, size of images,
menu systems and animation’ all affected by ageing.51
Lower internet and computer skills are likely to mean that using price comparison websites will tend
to be more challenging for older consumers. UK research supports this conclusion. While not
addressing price comparison websites specifically, Ofcom’s consumer surveys have shown that
older consumers are more likely than other age groups to believe that making cost comparisons is
difficult.52 Similarly, the switching intervention study found that participants – particularly older
participants – found energy comparison websites very confusing and difficult to use. They therefore
argued that the one-on-one, personalised nature of the study’s switching intervention was crucial to
its success.53
With regard to internet use more generally, research has identified a range of supports and services
that may be useful for older users, including one-on-one help, classes and training geared
specifically towards older people, a help line, and clear instructions.54 User-friendly manuals and
instructions should be printed, using plain language, detail and lots of diagrams.55
ILC-UK,The Golden Economy, pp. 18–9.
Haukka,Older Australians and the Internet, p. 21.
48
Australian Communications and Media Authority, Use of digital media and communications by senior Australians, ACMA,
Melbourne, 2014, p. 10.
49
ACMA, Use of digital media, p. 10.
50
Council on the Ageing WA,Where do I start? Female seniors and the internet 2011, Council on the Ageing and the Australian
Communications Consumer Action Network, Perth, 2011, p. 20.
51
ILC-UK, The Golden Economy, p. 49.
52
ILC-UK, The Golden Economy, p. 21.
53
Lorenc et al “Tackling fuel poverty”, p. 899.
54
Haukka, Older Australians and the Internet, p. 9; ACMA, Use of digital media, p. 5.
55
ACMA, Use of digital media, p. 5.
46
47
15
Supporting access to price comparators
The findings of research into older people’s internet use, online activities and skill levels have
important implications for government and regulator price comparator websites.
Ease of use
Firstly, the generally lower internet skills of older people highlights the importance of ensuring that
government or regulator price comparators are intuitive and as simple as possible to use. Ideally,
these websites will be subject to user testing, including a substantial group of older consumers.
My Power Planner
There are obstacles to simplifying comparator websites – the complexity of energy tariffs themselves,
and the legal need for detailed terms and conditions being two of these. Nevertheless, we see
room for some simplification to the Victorian government’s electricity price comparator My Power
Planner. Firstly, the number of click-throughs required to reach the offer comparison results page
should be reduced. Currently, offer comparison results are displayed only after an ‘Explore your
Power Profile’ page, which contains complex information (presented in an interactive graph) about
the consumer’s energy use over time. While this information will be of interest and use to some
consumers (particularly very engaged consumers), it is less salient to most than the offer comparison
results. Its complexity may also be off-putting to some consumers, causing them to click away before
reaching the comparison.
Secondly, there is an urgent need for improvements to the ease and simplicity of consumer access
to a smart meter data file (through retailers or distributors) which is compatible with My Power
Planner. At present, the process of obtaining this file may take up to ten days, while EWOV has
received cases in which consumers have been unable to access it altogether. Such data access
problems delay and complicate the comparison and switching process and therefore present a
major barrier to switching, particularly for consumers who are already somewhat sceptical about
the likely benefits.
Unlike commercial switching and comparison sites, My Power Planner is contained within a
broader and information-dense website, Switch On. While we believe that this additional
information is important and should be available to consumers, the location of My Power Planner
within Switch On may mean that some consumers do not find the price comparison tool, or
understand its primacy. DSDBI might consider taking steps to foreground My Power Planner or
present it as a stand-alone website.
Finally, it may also be possible to remove some of My Power Planner’s detailed text and imagery,
which makes the tool appear somewhat cluttered, and which may be overwhelming and off-putting
for some users.
Energy Made Easy
The Energy Made Easy price comparator website, run by the Australian Energy Regulator, is in the
process of improving its usability based on feedback from consumer testing, including testing with
older consumers. Changes to be implemented in the second half of 2014 will include:
16

A simpler results page, with less detail, allowing consumers to more easily compare plans
at a high level. More detailed information about individual offers will be available, but not
displayed by default.

Better filtering options (e.g. with/without exit fees, pay-on-time discounts, or direct debit
discounts). This will allow consumers to more tightly target their searches and reduce the
number of offers they need to compare.

A “How to Use” video guide.

Greater prominence of the helpline number for consumers who wish to speak to a person,
and a clearer display of the icons to print or save pages as a PDF.56
Improvements to enable ease of use of price comparison sites are also likely to benefit other
vulnerable consumers, including consumers with lower literacy and numeracy skills and those for
whom English is not a first language.
Appropriate messaging
Appropriate messaging that takes account of how older internet users use the internet may also
encourage use of government and regulator price comparators. For example, most older internet
users use the internet to research and find information, while use of the internet for shopping is much
less common, probably related to concerns about security. It may therefore be useful to explicitly
position use of sites My Power Planner and YourChoice as simple research and information
activities. Messages could highlight the fact that these websites only compare offers and do not
carry out a switch, involve making a purchase or require financial information to be inputted.
Related to this, given that fears about viruses and online security are one barrier to internet use for
older people, it may be useful to emphasise that government and regulator price comparison
websites are safe and secure to use.
As well as making changes to improve the ease of use of price comparators, government and
regulators should also emphasise this in their framing. Many older people (like consumers more
generally) feel that energy offers are overly complicated – perhaps deliberately so – and that
making a comparison is difficult and not worth the effort. Price comparison tools should be framed
as something that takes care of this complexity and allows an ‘apples with apples’ comparison,
taking the hard work out of switching.
Alternative channels
No matter how simple to use and well-promoted, a website will not be useful to those consumers
who do not have access to the internet. As we have seen, this group of non-internet users is
predominantly made up of older people, low-income households and people in rural areas. An
energy retail market that requires internet access for price comparison effectively excludes this group
of vulnerable consumers – many of whom struggle to meet energy costs – from making effective
decisions.
56
Australian Energy Regulator, personal communication, 20/05/2014.
17
One possible solution is to provide a telephone service as a complement to government and
regulatory price comparator websites. Call centre operators could perform the comparison based
on information provided by the consumer over the phone, and then post a print-out of results to
consumers. Another approach is for community organisations that work with these consumer groups
to help them to use the websites to compare offers. This is considered in more detail in the next
section of the report.
18
INFORMATION AND ADVICE
While older people are less likely, on their own, to switch energy retailer or offer, there is some
evidence to show that interventions to facilitate switching can be effective. Any such interventions
should take into account the physical and cognitive changes associated with ageing, including
learning and decision-making styles, and preferences with regard to information, advice and
support provision.
Physical and cognitive changes associated with ageing
Changes to physical and mental health that can be associated with ageing impact on consumers’
participation in markets, affecting both the goods and services that they seek and their capacity to
engage.57 Disability and frailty are not inevitable parts of ageing, and there is much variation
among older people. Nevertheless, ageing is associated with reduced mobility and disability, and
these impact on the experiences of older people as consumers. For example, eyesight declines
sharply over 65,58 with implications for the design of printed materials and websites. Similarly,
features of physical retail environments (such as a lack of seating and high or low shelves) can
create barriers to access for those older people who are frail or have a physical disability.59
Ageing is also associated with changes in cognitive capacity. The rate of change varies among
individuals and changes are not consequential for many adults until very late in life. Nevertheless,
ageing is associated with decreases in processing speed, cognitive flexibility (ability to change
judgements with new information) and available working memory. Compensating for these
changes, older people retain knowledge and skills from across the life span (known as ‘crystallised
intelligence’) and so have an extensive knowledge base to draw on when solving problems.60
The cognitive weaknesses and assets of older people affect how they make decisions, including
consumer decisions, with older people tending to review less information, eliminate choices more
quickly, and rely more on rules/principles and prior life experience.61 This can be an effective and
efficient way of making decisions,62 but probably decreases the likelihood of change in response to
new information. Stakeholders we spoke to also told us that older people tend to be more
conservative when making decisions. This has implications for the content, length and messaging in
any resources intended to encourage older consumers to consider switching.
Providing information and advice
While older people are less likely to switch, it does appear that independent advice and assistance
can encourage switching. The 2013 tariff intervention study (see p. 7) found that after being
57
58
59
60
61
62
ILC-UK, The Golden Economy, p. 25.
ILC-UK, The Golden Economy, p. 25.
ILC-UK, The Golden Economy, p. 39.
Centre for Medicare Education, How Seniors Learn, Issue Brief Vol. 4, No. 9, 2003, p. 2.
Centre for Medicare Education, How Seniors Learn, pp. 3–4.
Centre for Medicare Education, How Seniors Learn, p. 4.
19
informed about potential savings, just over half of all participants (52%) said they were more likely
to consider switching.63 The researchers argue that for older people, tariff switching interventions
need to be targeted, taking into account their ‘status quo bias, energy use habits and scepticism.’64
Similarly, the 2008 survey found that older people are more than twice as likely to switch with
independent advice than on their own.65 In CUAC’s experience delivering consumer education
seminars to older audiences (including Culturally and Linguistically Diverse (CALD) seniors’ groups),
we have also found that with sufficient explanation and appropriate messaging, many older people
do show an interest in switching and in using an independent online price comparator to compare
offers.
Types of information and advice
In our consultation with consumers and community workers, we have heard that ‘information’ alone
– that is, knowledge, facts and ideas66 – is often insufficient for vulnerable consumers, including
some older people.67 Instead, advice (a recommendation or opinion about a course of action68) as
well as support to fully understand and act on information may also be needed.
Several studies have investigated the preferences of older people for different types of advice and
support, tending to find that face-to-face contact is a particularly highly valued manner of sharing
information and advice.69 A 2009 study by Age Concern and Help the Aged in the UK found that
local, face-to-face contact was most popular, being the first choice of just over half (54%) of the
older people surveyed, followed by booklets or leaflets (23%).70 Face-to-face and booklets or
leaflets were strongly preferred by the oldest respondents, aged 75+.71 Similarly, a recent report by
the charity Age UK reviewed the evidence about information and advice for older people.72 The
review considered the different channels for information and support, finding that while written
information is often sufficient, ‘those with the greatest needs may require information and advice
delivered personally (face-to-face or by telephone), often with practical support to resolve their
problems.’73
On the other hand, reviews of the literature and evidence from practice have also ‘highlighted the
problems and pitfalls of over-reliance on a single format or type of information giving and
advice,’74 suggesting that information and advice should be made accessible at a range of ‘access
points’ and in different ways.75 Hence, while face-to-face support is popular, this ‘personal’ form of
63
Lorenc et al, “Tackling fuel poverty”, p. 898.
64
Lorenc et al, “Tackling fuel poverty”, p. 900.
65
Aberdare Online, Reliance on switching.
Dunning, Andrew, Information, advice and advocacy for older people: Developing and delivering services, Joseph Rowntree
Foundation, Place, 2005, p. 7.
67
See: CUAC,Consumers and Smart Meters: Delivering information to non-government organisations, CUAC, Melbourne, 2010.
68
Dunning, Information, advice and advocacy, p. 7.
69
Dunning, Information, advice and advocacy, p. 24.
70
Age Concern Research Services and Help the Aged, Take my advice: A survey on the information and advice needs among the
45+ age group, Age Concern Research Services and Help the Aged, n.p., 2009, p. 24.
71
ACRS & Help the Aged, Take my advice, p. 25.
72
Age UK, Information and Advice for Older People Evidence Review, London: Age UK, 2013.
73
Age UK, Information for Older People, p. 3.
74
Dunning, Information, advice and advocacy, p. 22.
75
Age UK, Information for Older People, p. 3.
66
20
information and advice is often best complemented with ‘impersonal’ forms, such as printed
materials, websites, TV and radio.
All of this research supports CUAC’s findings in our 2010 study of consumer information needs in
relation to smart meters. This research found that face-to-face advice from trusted sources, used in
combination with printed collateral and other tools, was a preferred and effective mode of
information provision for vulnerable consumers.76
Characteristics of good information and advice
Research has also investigated some of the other characteristics of good information and advice
(written or otherwise). Effective information and advice for older people is appropriate to their
abilities, experience, knowledge, language and culture, reflecting the diversity of the audience’s
experiences and offering representations that older people can relate to.77 One of the stakeholders
that we spoke to recommended linking energy messages to older consumers’ understanding from
other sectors, such as insurance and telecommunications.
Related to this, it is important to take into account cultural and linguistic diversity and the needs of
people with limited mobility, limited literacy and sensory impairment.78 For example, printed
information should be designed to accommodate visual impairment through larger print, careful use
of colour, and so on. Written information and advice should be of immediate relevance, clear,
attractive and brief,79 limited to key messages and information so as to avoid overwhelming
working memory.80
Finally, independence in the provision of information and particularly advice is highly valued by
older people, and seen as an indicator of ‘good service’.81 Stakeholders that we consulted also
emphasised older consumers’ wariness about facing a ‘sales pitch’ and the need for information to
be provided via trusted sources such as community houses and neighbourhood learning centres.
This highlights the critical importance of government and regulator involvement in providing energy
information and price comparison services for consumers. These information sources are (and are
perceived as being) independent from any particular business, and therefore able to provide
impartial, trustworthy advice that can be a basis for decision-making. Government can also improve
consumers’ access to independent advice through support for community organisations’ work with
energy consumers through programs like the Victorian Government’s Energy Information Fund.
76
77
78
79
80
81
CUAC,Consumers and Smart Meters, p. 32.
Dunning, Information, advice and advocacy, pp. 23–4.
Ibid.
Ibid.
Centre for Medicare Education (2003) How Seniors Learn.
Dunning (2005) Information, advice and advocacy, p. 30.
21
Messaging
The content of information and advice to older people is as important as the manner of delivery.
The evidence reviewed in this report suggests a number of important messages about switching (in
addition to those specifically relating to internet use discussed on page 17).
Case for benefit
To overcome substantial status quo bias, a convincing case must be made for the benefits of
switching. This should include realistic dollar amount estimates of potential savings, based on the
likely circumstances of senior households. At the same time, it is important not to oversell or
exaggerate the potential benefits.
Loss aversion is one aspect of status quo bias and again, a convincing case needs to be made that
losses are unlikely (or, at least, that they can be addressed.) Switching messaging should therefore
emphasise that Ombudsman services are available should problems arise.
Independence and impartiality
The poor reputation of energy retailers82 has created consumer trust problems which reinforce the
loss aversion that discourages switching. With regard to price comparators, one way of tackling
this may be to emphasise strongly the impartiality and trustworthiness of government and regulator
price comparison websites. One of the stakeholders that CUAC consulted, suggested that powerful
endorsements from high-profile, well-regarded individuals can be influential. With regard to My
Power Planner, that the website has been supported by CHOICE and the Consumers Federation of
Australia may be a useful message.
Where governments or community organisations produce written resources promoting switching,
these should be clearly identified as being from an independent and trustworthy source.
Time to decide
Stakeholders that we spoke to noted that some older people want time to review information in
hard copy before making decisions. It may be worth emphasising that consumers who use an
independent price comparison website can print, read and consider the information (in contrast,
say, to a door-to-door sales situation).
Acknowledge experiences
Switching messages targeting older Victorians should reflect their experiences, knowledge and life
circumstances. For example, descriptions of the potential savings to result from switching should
acknowledge that many older Victorians will be on standing offers, but live in smaller households
and have experience and skill in budgeting, economising and saving energy.
see, for example CHOICE (2013) Energy retailers’ marketing tactics, at http://www.choice.com.au/reviews-andtests/household/energy-and-water/saving-energy/energy-retailer-marketing.aspx
82
22
Staying with existing retailers
While some older consumers may be encouraged to switch retailer to make savings, loyalty to a
current provider will see many nevertheless preferring to remain with their current retailer. The
resource should give advice to this group about how they can seek a better deal from their existing
retailer.
Salient terms and conditions
Payment mechanisms are changing as technologies evolve, with particular implications for older
people. Research in the UK has found that while a significant proportion of older people do use
direct debit to pay utility bills (42% in the 90+ age group in 2007) the use of direct debit to pay
utility bills declines with age, especially among those over 70.83 This may be related, in part, to
fears about control and security.84
Similarly, Ofgem research on vulnerable customer engagement in the energy market in 2008 found
that ‘most vulnerable customers had stuck with the same payment method for many years, and were
often nervous at the prospect of making a change.’85 They also found that vulnerable consumers
were less likely to be attracted to online billing. This was particularly the case if they did not have
internet access, but even those who did tended to prefer the security of a paper bill.86
While all of this research is from the UK, our consultation with stakeholders suggests that billing and
payment mechanisms are of particular importance to some older Victorians. Given that market offers
often limit customers’ billing and payment options it may be particularly important to alert older
consumers to these terms and conditions when promoting switching to this target audience.
83
84
85
86
ILC-UK,The Golden Economy, p. 42.
ILC-UK, The Golden Economy, p. 47.
FDS, Vulnerable consumers’ engagement, p. siii.
FDS, Vulnerable consumers’ engagement, p. siii.
23
APPENDIX A – BROCHURE & GUIDE
Three ways to save on energy bills brochure
24
25
26
27
Assisting older people with energy costs: A guide for community organisations
28
29
30
31
32
33
BIBLIOGRAPHY
Aberdare Online (2008) Reliance on switching leaves pensioners paying a premium for energy ,
November 7 2008.
Age Concern Research Services and Help the Aged (2009) Take my advice: A survey on the
information and advice needs among the 45+ age group, Age Concern Research Services and
Help the Aged, p. 24.
Age UK (2013) Information and Advice for Older People Evidence Review, London: Age UK.
——, 4626055001DO001_201112 Environmental views and behaviour, 2011-12, 2012,
ABS, Canberra.
—— (2013) 4670.0 - Household Energy Consumption Survey, Australia: Summary of Results,
2012.
Australian Communications and Media Authority (2014) Use of digital media and communications
by senior Australians, Melbourne: ACMA.
Australian Communications Consumer Action Network (2013) ACCAN survey finds surge in mobile
devices, but mind the age gap http://www.accan.org.au/news-items/hot-issues/677-accansurvey-finds-surge-in-mobile-devices-but-mind-the-age-gap.
Australian Energy Market Commission, Review of Electricity Customer Switching, Options Paper,
23 January 2014, AEMC, Sydney.
Centre for Medicare Education (2003) How Seniors Learn, Issue Brief Vol. 4, No. 9.
CHOICE, Brotherhood of St Laurence and the Energy Efficiency Council (2013) Survey of
Community Views on Energy Affordability – Australia.
Consumer Utilities Advocacy Centre (2010) Consumers and Smart Meters: Delivering information to
non-government organisations, CUAC: Melbourne.
——(2011) Improving energy market competition through consumer participation: A CUAC
research report, Melbourne: CUAC.
Council on the Ageing WA (2011) Where do I start? Female seniors and the internet 2011,
Council on the Ageing and the Australian Communications Consumer Action Network.
Dunning, Andrew (2005) Information, advice and advocacy for older people: Developing and
delivering services, Joseph Rowntree Foundation.
Energy and Water Ombudsman (Victoria), 2013 Annual Report, 2013.
34
Energy and Water Ombudsman (Victoria) Submission to Australian Energy Market Commission
Issues Paper – Review of Electricity Customer Switching, 23 December 2013.
Energy and Water Ombudsman (Victoria) “Transfer Issue Focus”, Res Online, no. 6, February
2014, at http://www.ewov.com.au/publications-and-media/res-online-no.6-february2014/transfer-issue-focus.
Essential Report, Trust in Industries, at http://essentialvision.com.au/trust-in-industries.
Ewing, Scott and Julian Thomas (2012) CCI Digital Futures 2012 – The internet in Australia, n.p.:
ARC Centre of Excellence for Creative Industries and Innovation.
FDS International Ltd (2008) Research report on vulnerable consumers’ engagement with the energy
market, London: Ofgem, p. siii.
Haukka, Sandra (2011) Older Australians and the Internet, n.p.: ARC Centre of Excellence for
Creative Industries and Innovation.
ILC-UK (2010) The Golden Economy: The Consumer Marketplace in an Ageing Society, Age UK,
p. 21.
Kelly (2013) A squeeze on spending? An update on household living costs for senior Australians,
National Seniors Australia Productive Ageing Centre, p. 9.
Lorenc A, Pedro L, Badesha B, Dize C, Fernow I and Dias, L (2013) “Tackling fuel poverty through
facilitating energy tariff switching: a participatory action research study in vulnerable groups” Public
Health 127 (10), pp. 894-901.
Randolph, B and Troy, P, Energy Consumption and the Built Environment: A Social and Behavioural
Analysis, City Futures Research Centre Research Paper No. 7, City Futures Research Centre,
University of NSW, Kensington, 2007, p. 18.
Simshauser, Paul and Tim Nelson (2012) The energy market death spiral: re-thinking customer
hardship, AGL Applied Economic and Policy Research Working Paper No. 31, p. 19.
Wallis Strategic Market and Social Research (2013) Victoria’s experience of the electricity market
2013 Final Report.
35
1