Electricity retailers and distributors will come under renewed regulatory scrutiny over how they engage with electricity customers and meet their needs, under national rule changes being proposed by federal energy minister Chris Bowen.
In a rule change request submitted to the Australian Energy Market Commission (AEMC) last week, and shared publicly this week, Bowen has proposed the new “principles-based rule,” or set of rules, “to uplift the general standard for retailer engagement with customers.”
“This is to ensure that retailers not only comply with minimum engagement standards, but also make best efforts to tailor, where practicable, their engagement and communication practices to the individual needs and circumstances of customers.”
Bowen says the rule change request, backed by the Energy and Climate Change Ministerial Council in May, originates from the Australian Energy Regulator’s review of payment difficulty protections, but is intended to apply to all customers, and not only those identified as experiencing hardship.
“The growing complexity of the energy market, alongside a diverse range of customer needs and circumstances, means retailer communication to, and engagement with, customers’ needs to be tailored, contextualised and responsive,” the rule change request says.
“Without this, many will struggle to understand their options, entitlements and protections at critical moments, limiting their ability to engage confidently in the energy market.
“Additionally, existing communication gaps may continue to widen, leaving vulnerable, disengaged, and customers in hardship further behind.”
The rule change request appears on the radar in a big week for electricity market reform, with the AEMC’s final report on its review of Electricity Pricing for a Consumer-Driven Future due for publication on Thursday.
The AEMC review is expected to make a series of recommendations – including some hotly contested proposed changes to the network pricing component of electricity bills – to make the electricity market simpler to navigate for consumers, including by removing unnecessary billing complexity.
The draft report put forward six recommendations in December last year, including to axe the “loyalty tax” – where consumers are unknowingly transferred to a higher-cost version of their retail electricity plan – and to make retailers compete for customers on standing offers.
But the most contentious proposed reform is to how the cost of network access is passed through to consumers, with the AEMC contending that a higher fixed-price tariff would spread the cost of the grid more fairly among a broader variety of consumers.
Critics of the proposal say higher fixed network charges will create a new set of winners and losers, the winners including high-income, high energy-usage households and network companies, with consumers locked in to cover sunk asset costs.
And the losers of the proposed reform, say critics – including IEEFA and the Smart Energy Council – would be households who have invested in energy efficiency upgrades, solar panels or batteries, as well as medium and low-consuming and potentially low-income households.
Perhaps getting ahead of some of the less contentious recommendations of the AEMC’s review – and building on the findings of the AER review – the rule change request from Bowen and the energy ministers is more focused on plugging “observable gaps in support” in the current retail market.
“Currently, the National Energy Customer Framework (NECF) is largely focussed on prescriptive engagement obligations and activity-based compliance activities for the supply and sale of traditional energy from the grid,” the request says.
“This rule change request proposes the introduction of a principles-based rule ‘requiring retailers and distributors to take reasonable steps to engage with a customer in a way that meets their needs.’
“The intention of this rule change is to require retailers and distributors covered by the NECF to respond effectively to the diversity of customer needs and make use of a more sophisticated evidence base of consumer behaviour to support more tailored, accessible and effective engagement approaches.”
Bowen says the potential for different interpretations of the proposed principles-based rule could be countered by a non-binding standalone AER guidance note, that would clearly articulate the regulatory intent, provide practical examples of appropriate engagement, and promote transparency and consistency in its application.
“By introducing a principles-based obligation, the rule would shift the focus from complying with the minimum ‘red-letter law’ to focusing on the needs of the individual customer and tailoring their practices to maximise opportunities to improve customer understanding and good outcomes,” Bowen says.
“This approach is intended to ensure information is effectively delivered to the customer and likely to be understood, enabling all customers, but particularly those who may experience vulnerability, to have the confidence to make informed decisions and seek assistance when needed.”
The AEMC has not yet initiated the rule change request, but when it does it will publish a Consultation Paper to guide stakeholder consultation on any proposed new rules.
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