ACCC & AER annual report 2016-17

Analysis of performance: Build consumer confidence in retail energy markets

Deliverable 4.2

Build consumer confidence in retail energy markets

This deliverable aligns with one of the AER’s priorities for 2016–17: to build consumer confidence in retail energy markets.

The AER regulates retail energy markets in Queensland, New South Wales, South Australia, Tasmania (electricity) and the ACT. The National Energy Retail Law (Retail Law) and National Energy Retail Rules (Retail Rules) set out consumer protections and obligations on energy retailers, including how offers are marketed and the help provided to customers experiencing financial hardship. We:

  • maintain an energy price comparator website (www.energymadeeasy.gov.au) for residential and small business customers
  • monitor and enforce compliance (by retailers and distributors) with obligations in the Retail Law and Retail Rules
  • oversee retail market entry and exit by assessing applications from businesses looking to become energy retailers, granting exemptions from the requirement to hold a retailer authorisation, and administering the national Retailer of Last Resort scheme to protect consumers and the market if a retailer fails
  • report on the performance of the market and energy businesses (including information on energy affordability)
  • approve customer hardship policies that energy retailers must implement for customers facing financial hardship and looking for help to manage their bills.

We do not set retail energy prices; rather, we guide and inform energy consumers so they can understand the range of energy offers available, make informed choices about those offers and be aware of their rights and responsibilities when dealing with energy providers. Our Energy Made Easy website is a key vehicle for providing this information in jurisdictions where the Retail Law operates.

We also produce publications (including new publications for consumers and consumer advocates) and web information on areas of the Retail Law.

Supporting consumers

Energy Made Easy

Our Energy Made Easy website (www.energymadeeasy.gov.au) includes a price comparator that shows all offers generally available to consumers, an electricity use benchmarking tool that allows households to compare their electricity use with that of similar-sized households in their area, and consumer information.

In 2016–17, Energy Made Easy had more than 600 000 visits. More than 15 000 offers were published over the period, with approximately 3500 electricity and 400 gas offers available at any one time.

Retail pricing information guideline

We publish the Retail pricing information guideline, which mandates how retail energy prices are presented. The guideline aims to help customers compare energy prices and make informed choices. It also gives direction to energy retailers about providing information for our price comparator website, Energy Made Easy. In 2016––17 we conducted regular reviews to monitor retailer compliance with the guideline.

Hardship policies

Energy retailers must have a policy to help residential customers with payment difficulties to manage their bills. We assess retailers’ hardship policies against the requirements in the Retail Law and monitor compliance with the policies. In 2016–17 we approved three new hardship policies.

Minimum disconnection amount

Rule 116(1) of the National Energy Retail Rules (Retail Rules) prohibits retailers from disconnecting a customer’s premises for non-payment of a bill where the amount outstanding is less than an amount approved by the AER and the customer has agreed to repay that amount. This is one of a suite of consumer protections in the Retail Law and Retail Rules that assist customers who are having difficulty paying their energy bills. Other protections include the requirement for retailers to offer payment plans or hardship assistance.

In 2016––17 we conducted a review of the minimum disconnection amount, and in March 2017 we decided to maintain it at $300 (GST inclusive). This will prevent customers incurring significant debt before seeking assistance and will stop more debt accruing before the collection cycle starts, allowing customers to avoid exacerbating payment and financial difficulties.

Engaging with consumers

Customer Consultative Group

Our Customer Consultative Group helps us understand consumer and small business concerns on retail energy issues. It meets at least three times in a calendar year.

In February 2017, following the expiry of the CCG’s membership, the AER reconstituted the group. After calling for expressions of interest and reviewing applications, the AER appointed 12 new members. These applicants were considered to offer a broad range of knowledge and experience and provide good jurisdictional representation.

The AER held two CCG meetings in 2016–17. It will hold two meetings in the second half of 2017, so it will comply with the aim of meeting three times in a calendar year. Topics discussed at the group’s meetings in November 2016 and March 2017 included:

  • the AER’s annual retail performance and compliance reports
  • the AER’s sustainable payment plans frameworks
  • consumer research being undertaken by CCG members and the AER
  • the AER’s work with the Australia and New Zealand Energy and Water Ombudsman Network on expanding dispute resolution services for customers of exempt sellers
  • recent activity in the wholesale electricity and gas markets.

Stakeholder engagement framework

The AER’s stakeholder engagement framework is a public document that sets out the principles that guide our stakeholder engagement. It provides a structure for stakeholders’ needs and interests to be consistently, transparently and meaningfully considered in all our activities.

We published a proposed revised version of the framework for consultation in June 2017. We are proposing to retain our four engagement principles (clear, accurate and timely communication; accessibility and inclusivity; transparency; and measurability) along with a brief explanation of the broad activities we undertake to implement them. We are proposing a shorter and more focused engagement framework document that more clearly outlines our purpose, how engagement helps our stakeholders, and how engagement fits in with our wider regulatory approach.

Other engagement

  • During 2016–17 the AER participated in the following forums and workshops to promote better consumer understanding of the energy framework and their rights and obligations, and to allow stakeholders to raise any issues of concern.
  • We engaged with consumers and stakeholders throughout our network determinations. This included public forums on our issues papers and draft determinations and as part of the process of assessing tariff structure statementss.
  • We participated in a number of events aimed at raising consumer awareness of our Energy Made Easy website, as well as promoting our new consumer resources—such as translated and ‘easy English’ fact sheets and animated videos—to key stakeholder groups. The events included hosting stalls at the SACOSS annual vulnerability and affordability conference (Adelaide, November 2016); Financial Counselling Australia’s annual conference (Gold Coast, May 2017); and the Adelaide Home Show (April 2017).
  • We engaged extensively with consumers, their representatives and other retail energy stakeholders in developing and reviewing AER guidelines and contributing to retail market policy issues. This engagement included:
    • membership of the Queensland Council of Social Service steering committee for its project (funded by the Energy Consumers Association) to research energy issues experienced by Queensland tenants
    • participation in the SACOSS workshop ‘Consumer Protection Framework: Rights and Responsibilities’
    • participation in the Essential Services Commission of South Australia forum on small-scale electricity and water networks
    • participation in Energy Consumers Australia’s 2017 ‘Foresighting’ forum
    • submission on the AEMC’s regulatory arrangements in embedded networks
    • submission on consumer protections for behind-the-meter electricity supply (consultation paper)
    • submission on stand-alone energy systems in the electricity market (consultation paper)
    • drafting a rule change to strengthen protections for customers requiring life-support equipment.

Retail market entry and exit

The Retail Law requires a party selling energy ‘to a person for premises’ to either hold a national retailer authorisation or be exempt from that requirement. We are responsible for granting those authorisations and for the Retail Law’s exempt selling regime. An authorisation allows a party to sell electricity or gas to any consumers in jurisdictions where the Retail Law operates.

Authorisations

A business must apply to the AER for an authorisation to sell energy. It must demonstrate appropriate capacity and suitability to perform as a retailer. We produce guidance for, and work closely with, potential new energy sellers during the application process to make sure they are aware of their obligations.

When we receive an application, we publish it on our website and seek submissions from interested parties before deciding whether to grant an authorisation. We granted electricity retailer authorisations in 2016−17 to:

  • Positive Energy TM Pty Ltd, 9 June 2017
  • Sustainable Savings Pty Ltd, 28 April 2017
  • Online Power and Gas Pty Ltd, 16 December 2016
  • Energy Locals Pty Ltd, 22 July 2016.

We granted gas retailer authorisations to:

  • Weston Energy Pty Ltd, 9 September 2016
  • WINconnect Pty Ltd, 29 July 2016
  • Savant Energy Power Networks Pty Ltd, 15 July 2016.

We refused an authorisation application from Ultium Energy Pty Ltd (24 January 2017) on the grounds that it did not satisfy the entry criteria and did not provide all of the information required to make an application assessment.

Exemptions

Some energy sellers may be exempt from the requirement to obtain authorisation to sell electricity and gas. There are three types of exemptions.

  • Deemed exemptions—for small-scale selling arrangements where the costs of registration would outweigh the benefits of increased regulation. A person covered by a deemed exemption need not apply to or register with the AER. Conditions generally apply.
  • Registrable exemptions—for defined classes of energy-selling activities that need regulatory oversight, usually because of scale and market impact. These exemptions apply to a particular person or company for a particular site. They must be registered with the AER. As at 30 June 2017 there were approximately 3000 published registrable class exemptions.
  • Individual exemptions—for specific situations where the activity is not covered by a deemed or registrable exemption. In 2016–17 we granted eight individual exemptions. Six of these were from businesses retrofitting existing sites to create embedded networks. All but one of these were for residential sites. We refused a retrofit application for a shopping centre, as the applicant did not provide all the information required for this type of application, including evidence of mitigation of customer detriment.

Our Exempt selling guideline outlines the classes of deemed and registrable exemptions that apply, as well as the process for obtaining an individual exemption.

Retailer of Last Resort

The AER manages the Retailer of Last Resort (RoLR) scheme. If an energy retailer fails, its customers are transferred to another retailer so that they continue to receive electricity and/or gas supply. In 2016–17 we:

  • oversaw an electricity RoLR event for Urth Energy Pty Ltd. Customers of the failed retailer in Queensland, New South Wales and South Australia were transferred to default RoLRs
  • appointed ActewAGL Retail as the default RoLR for gas customers connected to the Shoalhaven gas network in New South Wales.

The AER maintains a RoLR plan and conducts RoLR exercises with plan participants. Because of the Go Energy RoLR events in 2015–16 and the Urth Energy RoLR event in 2017, no exercise was required in 2016–17.

Compliance and enforcement

We employ various tools to monitor and enforce compliance with the Retail Law and Retail Rules. They include:

  • a self-reporting framework under which businesses must notify us within a given timeframe if they breach provisions
  • a proactive monitoring program
  • intelligence from our regular liaison with energy ombudsman schemes and consumer representatives
  • complaints we receive directly.

Our Compliance and enforcement statement of approach sets out how we go about these functions.

Enforcement action

The AER can respond to breaches by:

  • accepting an administrative resolution
  • seeking a court enforceable undertaking
  • issuing an infringement notice of up to $4000 for an individual or $20 000 for a body corporate. We can issue an infringement notice if we have reason to believe that a business has contravened a civil penalty provision. Payment of an infringement notice penalty is not an admission of guilt, but finalises the matter
  • starting court action with a civil penalty of up to $20 000 for an individual or $100 000 for a body corporate for each breach.
Infringement notices

In 2016–17, 21 infringement notices were paid by retailers and distributors for allegedly failing to meet obligations under the Retail Law and Rules.

Twelve of these related to a failure by distributors to provide customers registered as using life-support equipment with the required four days’ notice of planned interruptions to energy supply. For these:

  • Ausgrid paid penalties of $160 000
  • Endeavour paid penalties of $20 000
  • Ergon paid penalties of $20 000
  • Energex paid penalties $40 000.

Origin Energy LPG Limited paid a penalty of $20 000 for allegedly submitting inaccurate information and data to the AER relating to the total number of residential customers on standard retail contracts for the supply of gas.

IPower Pty Limited and IPower 2 Pty Limited, trading as Simply Energy, paid a penalty totalling $60 000 for allegedly failing to obtain explicit informed consent from customers before entering them into (or extending) gas and electricity contracts.

Property company Stockland Corporation Ltd paid penalties totalling $100 000 for allegedly selling electricity at a shopping centre in New South Wales and at four sites in Queensland, including two retirement villages, without holding a retail authorisation or exemption. Stockland also provided an administrative undertaking as part of the resolution of the matter.

Undertakings

In 2016–17 the AER accepted two court enforceable undertakings for alleged breaches of the Retail Law and Rules.

  • Energy Intelligence, the company that provided energy management for one of the Stockland properties for which infringement notices were issued (see above), gave an undertaking to improve its internal processes and to appoint a compliance officer with specific responsibilities in relation to energy.
  • Ausgrid gave an undertaking to ensure compliance with its life-support obligations under the Retail Rules.

Compliance checks

The AER periodically releases compliance checks for industry to highlight obligations and to emphasise the importance of effective compliance processes and systems. We may become aware of issues that require guidance through retailers’ reports on their compliance with the Retail Law and Rules, or through discussions with ombudsman schemes.

In 2016–17, we issued three compliance checks relating to the obligations on retailers when billing customers. The compliance checks provide information on the required content on an energy bill; resolving customer complaints and processes for dealing with incorrect charges.

Stakeholder forums

We held retailer forums in November 2016 and April 2017. The April 2017 forum provided retailers with an update on the performance of the retail energy market and highlighted some of our key work on improving consumer engagement. Retailers gave presentations about innovative approaches they are implementing to improve customer payment strategies.

Retail compliance report

In November 2016 we published our annual retail compliance report. The report covered compliance monitoring and enforcement activity in 2015–16 and priority areas for the coming year.

The report noted that, while the number of reported breaches from businesses was lower, the compliance issues were similar to those of previous years. Major issues included:

  • life-support customers not receiving the required notice before their energy supply was interrupted
  • customers being placed on contracts without providing explicit informed consent.

Amendments to compliance procedures and guidelines

We are responsible for energy market regulation, including ensuring compliance with the Retail Law, the Retail Rules and the applicable national regulations. Our Compliance procedures and guidelines support this function. We updated these in June 2017 (with a commencement date of 1 July 2017) to incorporate new rules introduced by the AEMC and refine the reporting framework. We also released a Practice guide for compliance audits to further supplement the information on compliance audits in the guidelines.

In jurisdictions that have adopted the Retail Law, the Compliance procedures and guidelines establish a self-reporting framework that requires businesses to report any potential non-compliance with certain obligations under the Retail Law and Retail Rules, and a process for the management of compliance audits under the Retail Law.

In effect, the Compliance procedures and guidelines enable us to:

  • monitor the extent to which retailers and distributors have complied with key obligations under the Retail Law and Retail Rules
  • identify emerging or systemic compliance issues that may warrant further action
  • set out our approach to using the compliance audit powers.

Life-support rule change

On 28 February 2017 the AER submitted a rule change request to the AEMC, proposing changes to Part 7 of the Retail Rules relating to the protection of customers whose premises require energy for the purposes of life-support equipment. The changes aim to:

  • simplify the registration of premises where life support equipment is required
  • clarify retailer and distributor obligations by introducing processes to confirm the need for life-support equipment and timeframes to provide information to customers to facilitate confirmation.

Performance monitoring and reporting

We released our fourth annual retail market performance report (for 2015–16) on 22 November 2016. The report covers states and territories where the Retail Law applies. It consolidated quarterly data on customer service and complaints, energy bill debt, payment plans, hardship programs, energy concessions and disconnections. It also reported on energy affordability.

In addition to a performance report, each quarter we publish key market and retail performance data on a range of indicators, including data on customer switching levels, customers experiencing payment difficulties, customer hardship, disconnections and reconnections, and complaints.