Estimated reading time: 6 minutes
Powerclub Review – A new electricity proposition
We review Powerclub which was launched in 2019 with a novel approach to selling electricity. It has only one direct competitor, Amber Electric, which we also reviewed recently. We show that there are cheaper options than Powerclub, without the risks entailed in being exposed to the highly volatile wholesale market.
Electricity providers have traditionally had 2 main jobs:
- To bill customers, and
- To manage the risks of the volatile spot market so that customers pay a fixed price.
Powerclub only performs the first job. Exposure to the spot market means you can get highly variable bills as we explain below.
They claim to sell all the services they acquire on the customer’s behalf at cost, and just charge a monthly fee to cover their costs.
Powerclub claims – Review
Powerclub claims “Same energy – better price” which they say they can deliver by being “Customer Owned”. While Powerclub have some extravagant claims, at least their claims don’t have over the top nature of the claims made by Amber Electric. They do claim to be member owned, and ‘not for profit’.
It sounds good and very different from the others, but let’s dig deeper
Powerclub claim to be ‘not for profit’ and member owned but they admit that a licence fee is paid to Power Club Investments Pty Ltd which essentially shifts profits to that company.
Are Powerclub Rates Cheaper?
The claim to be cheaper relies on
- being able to access wholesale prices directly and using power at times when the spot market is cheaper and less when it’s more expensive. This part is a stretch for most customers who don’t have much discretion in their use of power.
- removing or reducing the retail margin, and
- removing the cost of hedging prices.
What does exposure to the spot market mean for customers?
- Powerclub do not offer a fixed rate plan, unlike all the others in the market (except Amber Electric, which is similar).
- With Powerclub you are fully exposed to the highly volatile wholesale spot market, whereby prices vary every 5 minutes and at times of scarcity can rise to 100 times the typical fixed price offer i.e. $15,100/MWh or $15/kWh. Since 2016 annual spot prices in SA and Vic have varied by a factor of 3-4 times. In NSW and QLD annual spot prices have varied by 40-80%.
- Their app provides alerts when spot prices are high, but would you turn off your air conditioner on the hottest day?
- Powerclub (unlike Amber) do not have any price protection in their plans.
Is the delivered price Cheaper?
The cheapest Energy Companies essentially pass through the wholesale contract price to customers at any point in time (as distinct from the spot) with a minimal premium. The cost premium for avoiding the spot risk is minimal (estimated at 0.4c/kWh).
The other component of prices are the retailer charges. As shown in the home customer example drawn for the Powerclub website, the Powerclub charges amount to $228 p.a. well in excess of the 5% retail margin ($73) that they cite on their website. Best practice costs of conventional electricity retailing are $70 p.a. However, Powerclub only bill customers and don’t have the costs of managing energy price risks in the wholesale market as other suppliers do. Their best practice costs would therefore be lower, say $50-60 p.a. Their remaining margin is around $166 p.a. It’s not consistent with being low cost!
In addition the average home customer will need to lodge $400 with Powerclub as discussed below.
As a result, customers are generally better off getting the cheapest fixed price and moving suppliers when there is a cheaper price. Find out how do that here.
We therefore reject the claim that Powerclub are cheaper.
Review of Powerclub rates compared with Amber Electric
|Retail service fee
|Carbon neutral charges
Review Green Credentials of Powerclub
The claim to be greener relies on
- They claim that using energy when it’s cheaper is also greener. There may be some merit in this, but it relies on customers being able to manage their usage, and particularly reducing their usage on extreme weather days. For most customers this will have a minimal effect as they can’t manage their usage in this way. In effect Powerclub are saying you can be greener by using green energy paid for by others – it’s a form of double counting.
- Powerclub is not often a good choice if you have solar panels because you get the lower spot price for your exports and/or using less when solar panels are operating.
- Both Powerclub and Amber Electric provide carbon offsets, but Powerclub don’t provide any explanation of the type of carbon credit. However it is clear from the low cost of their credits that they are international credits of low quality rather than the much more expensive Australian Carbon Credits.
Their claim to be ‘greener’ is dubious at best. The best and really the only way to be greener is to subscribe for GreenPower, which adds only a small cost, and supports the adding of new renewable energy to the grid. Powerclub do not offer GreenPower.
We therefore reject the claim that Powerclub are greener.
Price protection with Powerclub
Powerclub do not offer any price insurance. The customer instead pays into a Powerbank. The initial Powerbank is set at $40 per 1000 kWh of usage. For our example customer this amounts to $218 charged upfront. Over time this doubles to $436. Customers are charged an apparently ‘fixed’ price which is then adjusted to either top up or draw down their Powerbank.
- How do you feel about outlaying around $400 to the Powerbank?
- What if there is a bad month or two, say 10 times the normal price? Sound ridiculous? It’s not. You would just have to pay up for that month, and the next if it repeated. There is no practical limit on what you might pay in a month.
Our review of Powerclub showed there are very limited situations where it could be a good option.
- When the customer has a high degree of discretion about when power is used, and can automatically use minimal electricity when the spot price is high, and use more when the spot price is low.
- This could apply in the future when customers have their own battery or electric vehicle, if it can automatically reduce the draw from the grid at times of high prices and increase usage at times of low prices.
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