Article - 11 recommendations to improve the retail energy market in Victoria
The bi-partisan review of energy markets in Victoria – undertaken by John Thwaites, Terry Mulder and Patricia Faulkner – was handed down to the Victorian Government in August 2017.
You can read my summary of the Victorian Government's response to the Review here.
But first, let's look at what the Review said back in August 2017.
Research conducted using consumer bills has found that Victorian households are paying on average around 21 per cent per year more for their electricity than the cheapest offer available in the market. The Review found three main factors for the market failure in the Victorian retail market:
the cost of competition;
the structure of the market; and
the practices of industry.
The Review made 11 recommendations about protecting consumers, promoting transparency and supporting Victorian families and businesses from increasing energy prices.
“Underpinning our recommendations is the principle that energy is an essential service. As an essential service, consumers must purchase energy and must participate in the retail market even if they are not interested in the product and regardless of continued price rises. Energy must be accessible, affordable, and reliable for all.”
The Review's 11 recommendations
Recommendation 1 – Basic Service Offer
1A - Require all retailers to provide a Basic Service Offer that is not greater than a regulated price, based on annual usage, to be determined by the Essential Services Commission (ESC).
Recommendation 2 – Abolish standing offers
2A - Abolish the requirement for retailers to offer standing offer contracts.
Recommendation 3 – Marketing information on prices to be easily comparable
3A - Require retailers to market their offers in dollar terms, rather than as percentages or unanchored discounts.
3B - Where the retailer knows the actual usage profile for a specific customer, the marketing to that customer is to be based on the estimated annual costs of the offer for that customer, and the costs in dollar terms if conditions attached are not met.
3C - The ESC to develop a small number of typical customer usage profiles (3–4) for use in standardised marketing material.
3D - Marketing of prices to appear in a standardised format and display the actual annual cost for the 3–4 standardised customer usage profiles. Annual energy costs for the standardised customer usage profiles to be the comparison rates in marketing materials.
3E - The ESC to develop a standardised format for retailer information disclosure and marketing material.
3F - Require retailers to notify a customer of the best offer available by that retailer, and reference the Victorian Energy Compare website, in advance of any price or benefits change.
3G - Require retailers to include the following information on customer bills:
how to access the Victorian Energy Compare website;
how to access the Basic Service Offer;
the retailer’s best offer for that customer based on their usage patterns; and
the total annual bill for that customer, based on the customer's current offer and usage patterns.
3H - Require marketing material and bills to provide GST-inclusive pricing.
3I - The Victorian Government’s customer engagement program to continue to focus on improving consumer awareness of the competitive market.
3J - The Victorian Government’s program to continue to enhance and promote the Victorian Energy Compare website and use of smart meter data.
Most consumers could make significant savings from switching.
Recommendation 4 – Contract periods, practices and variations to be clear and fair
4A - Require retailers to commit to fix any prices they are offering for a minimum of 12 months. During this period, the market contract prices cannot change.
4B - Require retailers to clearly disclose to customers the length of time any offered prices will be available without change.
4C - Require retailers to roll customers onto the nearest matching, generally available offer at the end of a contract or benefit period, unless the customer opts for another offer.
4D - Any conditional discount or other benefit offered for paying on-time or on-line billing should be evergreen. Customers should not lose the discount or other benefit when the contract ends.
4E - Costs incurred by customers for failing to meet offer conditions are to be capped and not be higher than the reasonable cost to the retailer.
Recommendation 5 – Promoting access to smart meter data to assist customers to manage bills and increase energy efficiency
5A - The Victorian Government should eliminate barriers to the use of smart meter data to encourage innovation from retailers, and energy efficiency and enable consumers to compare offers.
Recommendation 6 – Protecting low income and vulnerable customers
6A - The Victorian Government to provide assistance to vulnerable and disadvantaged consumers to help raise their awareness and understanding of the energy market and with managing their bills.
6B - The Victorian Government to support programs that help low income and vulnerable households reduce their energy consumption.
6C - The Victorian Government conduct an extensive investigation into the energy support scheme for concession card holders and adjust accordingly so consumers gain the best possible outcome from the competitive market.
6D - The Victorian Government review the administration of the Utility Relief Grants Scheme to ensure it is serving consumers who are most in need.
6E - The ESC to implement the outcomes of its review into improving outcomes for hardship customers.
Recommendation 7 – Brokerage and group purchasing on behalf of low income and vulnerable customers
7A - The Victorian Government support the pilot of a not-for-profit brokerage service for concession card holders.
7B - The Victorian Government should consider ways to negotiate a better deal for concession card holders including a ‘group purchasing’ or single buyer scheme on their behalf.
Recommendation 8 – Monitoring the market
8A - Require the ESC to monitor and report on the competitiveness and efficiency of the Victorian retail energy market. The ESC should have the power to compel the provision of any information required to fulfil its functions.
Recommendation 9 – An energy market code based around the consumer
9A - Require the ESC to review its regulatory codes to ensure they focus on customer outcomes and can account for new business models of service provision.
Recommendation 10 – Full coverage of new energy services
10A - Expand the powers of the Energy Water Ombudsman Victoria to cover emerging energy businesses, products and services.
Recommendation 11 – Energy market structure
11A - Request the COAG Energy Council to review the structure of the energy market, so that it is structured to deliver long-term interests of consumers.
A copy of the Review can be found here.
This article was first published on LinkedIn.