Many retailers offer one-time incentives in addition to discounts to market their energy plans. Incentives can take many forms, including:
fixed cash rebates or cash-back on the first bill,
variable cash-equivalent incentives such as ‘first month free’ offers,
non-cash incentives such as movie tickets, sports jerseys and frequent flyer points, or
conditional incentives, such as a sign-up bonus that applies only if you buy electricity and gas simultaneously.
One-time sign-up incentives are becoming more common. Here's why:
Many retailers have adopted incentives as their preferred way to attract new customers, rather than simply reducing their rates or including a discount.
This is because a retailer can selectively apply an incentive to any plan, and limit the incentive to new customers only.
If they were to offer the equivalent dollar value of the incentive as a price reduction or discount, they would be required to disclose the existence of that better-priced plan to all their existing customers through the 'Deemed Best Offer' requirements imposed by the regulator.
The 'Deemed Best Offer' rules require retailers to display in their bills a notification if this is the best-priced plan they currently offer, or if they have a better-priced plan available. They must include this notice in their bills at least every three months.
By presenting a price reduction as an incentive, retailers can make a plan more attractive to new customers, without 'cannibalising' (their term, not ours) their existing customer base.
Additionally, retailers can deploy incentives without re-engineering their plan pricing, making this a much simpler way for them to achieve a tactical market advantage.
It’s tricky to include incentives in a pricing analysis, because they will often only impact the first bill, sometimes reducing that first bill by a significant amount, but once the incentive has been applied, the underlying rates may not be very attractive.
What kinds of incentives does Bill Hero recognise?
Bill Hero includes only cash or cash-equivalent incentives in our pricing calculations.
Non-cash incentives like movie tickets, sports memorabilia or frequent flyer points are always excluded.
How does Bill Hero calculate plans with incentives?
To avoid the potential for an otherwise poorly priced plan landing at the top of your results solely because of a one-time incentive, we calculate the price impact of cash and cash-equivalent incentives, prorated over 1 year.
For example, a $100 incentive on an Electricity plan will manifest as a $25 reduction to a quarterly estimated bill price for that plan.
Lower rates vs Incentives?
Incentives represent genuine cash value to energy consumers, so we think it makes sense to include incentives by default in the comparison calculations.
The cash value of an incentive is usually paid up-front, so you get the benefit right away, instead of having to wait for the benefit to accrue over time if the same value was instead delivered as a reduction to consumption rates.
Tip
You can remove incentives from the calculations by switching the Incentives toggle to 'No'.
Incentives as a sign-up bonus
Many retailers use sign-up bonus incentives as a tactical mechanism to ramp up customer acquisition — the incentive is generally available only to new customers, not existing ones.
Bill Hero accommodates this by defaulting to calculating available incentives into all plans except for those plans offered by your current retailer.
So, if your current retailer happens to offer a sign-up incentive to attract new customers, you won't be eligible for it, because you're an existing customer. Bill Hero will recognise that you're a current customer of that retailer, and will not include the incentive in that retailer's plans when it generates your results.