The AEMC has released a consultation paper on the ‘Bill contents and billing requirements’ Rule Change Request made by the Federal Energy Minister Angus Taylor earlier this year. In broad terms, the Minister’s proposal is to replace the prescriptive rules-based approach to regulating the content of customer bills with a principles-based approach. The idea is for the general principles proposed by the Minister to be captured by a guideline developed by the Australian Energy Regulator (AER).
Why the change?
The Federal Government is concerned that energy bills have become too complex and information heavy, resulting in poor customer experience. It has been suggested that while most retailers technically comply with the current prescriptive content requirements under Rule 25, their bills are not necessarily presented in a customer friendly way.
New approach
The proposed principles will ensure small customers can:
easily identify key information;
easily verify that the bill conforms to their retail contract;
easily verify how much energy they consume and how their bill is calculated;
confidently query or dispute bills; and
confidently navigate the market and seek the best offer.
The Minister has also requested that the AER consider providing guidance on delivery methods and timeframes when developing the guideline.
Despite the principles-based approach, it is important to note the any non-compliance with the proposed new rule (and by extension the Guideline) is to be a civil penalty provision.
Next steps
The AEMC has asked for feedback on the proposal by 22 October 2020. As the rule change was proposed by the Energy Minister, it is likely to be passed. However, any submissions might also be considered by the AER when developing the relevant guideline. If you would like help drafting a submission, please get in touch.
The New South Wales Minister for Energy and Environment Matthew Kean MP has extended, by way of regulation, the prohibition on remote disconnection and re-energisation until 1 October 2020. The prior prohibition was to expire on 1 September 2020.
the short nature of the extension is notable and is probably a result of the New South Wales government being distracted by the coronavirus and not being in a position to fully consider whether or not remote disconnection and re-energisation should continue to be prohibited.
We will continue to monitor this space and advise our clients accordingly.
The Essential Services Commission (Victoria) has published its final decision on ‘supporting energy customers throughout the coronavirus pandemic.’
The final decision includes an initial temporary package of reforms that will take effect from 1 October 2020 and will last for six months until 31 March 2021. The commission notes that it has the discretion to extend this timeframe if required and if in the long-term interests of Victorian consumers.
The commission has been monitoring the consequences of coronavirus on energy consumers and this has led to the decision that additional reform is required:
Based on the evidence available to us since the start of the pandemic, we consider there is a need for targeted reforms to support residential and small business customers paying their bills through the pandemic.
The package of reforms developed by the commission is in addition to commitments made by the Victorian government including a $3.7 million package of support targeted at Victorians struggling to pay their energy bills as a result of the coronavirus pandemic.
The government package includes the recruitment and training of new financial counsellors, training of over 1100 frontline community workers to give targeted advice on dealing with energy bills, a new energy brokerage program to help 3000 households at risk of payment difficulty to get the best value energy deal, and an education campaign to ensure that Victorians are aware of their rights under the existing Victorian payment difficulty framework.
URGS applications
Retailers will be required to support residential customers in completing URGS applications including by submitting forms online on behalf of customers where possible and with customers’ consent.
Tariff check
Retailers will be required to do a tariff check for all residential customers receiving tailored assistance, not just those who cannot afford the ongoing cost of energy.
Small business
The commission has developed a mandatory guideline that will set out assistance that must be offered by retailers to small businesses experiencing financial stress due to the coronavirus. This assistance will be in addition to the requirements existing in the Energy Retail Code that small businesses adhering to a payment plan must not be disconnected for non-payment.
The proposed guideline is set out in Annexure C to the final decision. For the purposes of the guideline a relevant business customer is a business customer, defined in clause 3 of the Energy Retail Code, who is experiencing financial stress attributable to the coronavirus pandemic.
Pursuant to the guideline, a retailer who is contacted by a business customer regarding, or in connection with, potential or actual difficulty paying for energy costs must provide that business with information about assistance that may be available under the guideline including how it may be accessed.
Retailers must also use best endeavours to contact the business customer who has not paid a bill by its pay by date within a reasonable time prior to any disconnection to provide the customer with information about assistance that may be available under the guideline and how it can be accessed
The assistance that must be provided to relevant business customers is set out in clause 4. This includes, but is not limited to, providing the option of making payments of an equal amount over a specific period, or at different intervals, payment plans that would result in any arrears of the relevant business customer being fully paid within a period determined by the retailer and clearly set out to the relevant business customer, extending the pay by date for a bill for at least one billing cycle in any 12 month period, and practical assistance to help lower energy costs.
Clause 5 prohibits retailers from commencing or continuing with proceedings for the recovery of arrears from relevant business customers. It’s interesting to consider whether this is consistent with the Corporations Act and the rights of recovery for retailers therein.
Clause 5 also prohibits a retailer selling or otherwise disposing of the debt of a relevant business customer who is in arrears at any time other business customers receiving assistance under the guideline or within 10 business days after the business customer has been disconnected.
We have been operating Compliance Quarter for over three years now and one of the key components of our service offering is the outsourced Compliance Manager role that we provide to several businesses operating in highly regulated industries.
Providing the outsourced Compliance Manager role gives us the ability to benchmark businesses when it comes to compliance. The outsourced Compliance Manager role also helps us understand when a business is likely to face compliance issues into the future.
When it comes to determining whether a business will or will not be compliant, there are some very basic metrics that determine success.
What is a compliance culture?
The most critical aspect of compliance is a compliant culture. What this means is that an organisation’s staff must value compliant and ethical conduct.
Compliance and ethics must be baked into decision-making. Compliance must be rewarded, and non-compliance addressed. When designing processes and reward structures, compliance must be paramount. A common example of where this is not the case is where a sales representative is rewarded purely based on sales completed rather than compliant sales.
To embed compliance in decision making, the Organisation should firstly have a complete understanding of their regulatory obligations and secondly should consider the impact of their decision-making when it comes to compliance with regulatory obligations.
Compliance, like many other areas of business, risks being tied up with buzzwords and some of the most spectacular examples of non-compliance have been by businesses that have been given a false sense of security either by internal or external advisors.
When it comes to compliance culture, the easy way to measure success is to review the decisions that have been made by senior management over time and to consider whether those decisions included compliance as a key feature or as an afterthought.
Businesses which rely heavily on external advice for approval, particularly after the fact, rather than for guidance before making decisions are typically those at most risk.
Training, documentation, and systems and processes
All businesses must ensure that they have a compliance management process in place that is robust, documented, regularly updated, and, most importantly, implemented. What this means in practice is that businesses should document their compliance policies and procedures and ensure that all staff have been trained on compliance.
Training is not a one-off exercise, this is been clearly demonstrated when it comes to various organisations response to the coronavirus. Staff must be given the tools and resources they require to implement an effective compliance program. In areas of key risk, this means investment by an organisation and this means continual training.
If you are considering whether or not your compliance management program was effective, ask yourself when your staff most recently completed training on compliance and whether you can say, hand on heart, that all of your staff have completed appropriate training for their roles.
Some of the warning signs that you need to do more work on this area include policies and procedures that have not been updated in more than six months and staff that have not completed training.
Compliance example by senior management
It is critical that your business conduct monthly compliance committee meetings where you consider the effectiveness of your compliance program and consider any improvements can be made.
Within your compliance committee meetings, you should be looking at any new or proposed regulatory obligations, looking at the measures of compliance, and developing a work programme for the month ahead. Compliance committee meetings should be documented and records of agendas and minutes kept.
What is a outsourced Compliance Manager role?
An outsourced compliance manager takes control of your compliance program and ensures that you have a robust compliance management system in place.
Depending upon the terms of the engagement, this individual may be responsible for regulatory updates, for reviewing the adequacy of the controls you have in place, and for training staff.
The benefits of an outsourced compliance manager include: a) their independence from the business, b) their industry expertise and ability to benchmark your business against others, and c) the value that they can provide at a lower cost to your business.
When an energy retailer offers a fixed-term benefit it must follow a prescribed process prior to the expiry of that period to ensure that its customers are not taken by surprise by the end of the benefit period.
What is a fixed benefit?
A fixed benefit is a benefit or advantageous picture of a product that expires after a specific period of time. Examples given by the AER include the following:
15% guaranteed discount off usage charges for 12 months. At the end of 12 months, the customer’s discount will change to a 10% guaranteed discount.
15% off usage charges for 12 months, if a customer pays on time. At the end of 12 months, the customer will no longer receive a pay on time discount.
15% guaranteed discount off usage charges for six months. At the end of six months, the customer’s discount will change to a 20% guaranteed discount.
A customer receives two movie tickets every month for six months. At the end of six months, the customer will no longer receive any movie tickets.
The rules
The National Energy Retail Rules (Retail Rules) require a retailer to notify small electricity and gas customers when a benefit provided to the customer for a minimum or fixed period in their market retail contract is ending or changing.
The notification that must be sent must be sent no earlier than 40 business days and no later than 20 business days before the benefit change date.
The notice
Requirements for the contents of the notification referred to above are specified in rule 48A of the Retail Rules and in the AER Benefit Change Notice Guidelines (AER Guidelines). The notice must be sent in writing- using clear, simple and widely understood language consistent with the AER Guidelines- and include the following information:
the small customer’s metering identifier;
that a benefit change will occur and the benefit change date;
that the small customer may use the price comparator to compare offers that are generally available to classes of small customers in their area;
the name and web address of the price comparator;
that the customer can request historical billing data and, if they are being sold electricity, energy consumption data, from the retailer that will assist it to use the price comparator to compare offers that are generally available to classes of small customers in their area; and
any early termination charges payable under the contract.
The notice must contain any additional information specified in the AER Guidelines. Not all of the requirements within the AER Guidelines are set out below and retailers should ensure that they read the guideline in full. An example of a complaint benefit change notices is provided in Appendix A of the AER Guidelines.
The AER Guidelines state that a retailer cannot direct its customers to its website for the information required, i.e. it must all be contained within the notice itself.
The AER Guidelines specify that the notice must be sent to the customer in accordance with the customers preferred method of receiving written communication from the retailer. For example, if a customer has opted to receive communications from the retailer by email, the notice must be sent to the customer by email.
The headline
Retailers must include a prominent headline statement on the benefit change notice in a manner that ensures that it is clearly identifiable as a headline.
If the benefit change will result in a decrease in the value of the benefit, the headline statement must inform the customer that the benefit change will result in a loss of a benefit and must refer the customer to Energy Made Easy. If the benefit change will not result in a decrease in the value of the benefit, a retailer has discretion over the content of the headline statement, subject to the requirement in clause 56 of the AER Guidelines.
If a retailer refers to the benefit in the headline statement, a retailer must describe the benefit in the same way as it is described in the retailer’s marketing material.
A retailer must ensure the headline statement is prominent and clear and use either colour, font size or other visual tools to ensure this information is easily distinguishable from other information in the benefit change notice
The ‘do nothing amount’
A retailer must include the amount is estimated to be payable by the customer over the next 12 months under the MRC as a result of the benefit change. This is referred to as the ‘do nothing amount’ in the AER Guidelines The ‘do nothing amount’ must be expressed as a figure in dollar terms inclusive of GST and calculated in accordance with section 5.3.1 of the AER Guidelines.
The ‘do nothing’ amount must be positioned before the information in Zone A of the benefit change notice.
Instructions to customer
A retailer must include the steps that a customer can take to compare plans on Energy Made Easy. The steps must be positioned before the information in Zone A of the benefit change notice.
Pursuant to s 74: Retailers must ensure that the steps include: (a) a reference to Energy Made Easy (b) a statement that the customer can use Energy Made Easy to compare plans (c) a statement that directs the customer to refer to the information in Zone A.
Zone A
Zone A refers to a specific area within the benefit change status as set out in appendix A to the AER Guidelines. The contents of zone A i.e. information that must be required is set out in section 4.1 of the AER Guidelines in the form of the table.
Retailers are only required to provide information relevant to the characteristics of the customer’s existing market retail contract a fuel type and tariff type. There are no fixed dimensions for the zone A information. Reference to EME
The AER Guidelines also state that the benefit notice must include the Energy Made Easy URL in the following format http://www.energymadeeasy.gov.au/offer-search. Further, if the notice is sent electronically, any references to the Energy Made Easy must hyperlink to the above URL.
The Australian Energy Market Commission (‘AEMC’) has just finalised a rule that will allow the majority of market energy retailers in Australia to defer network bills for 6 months. Here we explain this decision and what it means for retailers.
The Problem for Retailers
COVID-19, and the regulatory responses to it, has had a significant impact on energy retailers. The usual collections processes used by electricity retailers have changed as those retailers have sought to act in a manner that is consistent with the AER’s 10 Principles. One consequence of this, is that customer debt to retailers is increasing significantly. This has, in turn put cashflow pressure on retailers.
AEMC’s Solution : Deferral of Network Bills
Network charges are the amounts that retailers need to pay to their local distributors (‘Distribution Network Service Providers’, or ‘DNSPs’ for the use of their electricity infrastructure: The ‘poles and wires’ and associated equipment.
Given that these charges typically make up around 40 percent of retail bills, a relaxation on the payment requirements would be of significant help to retailers in trying to pay their own bills. Key details of the proposal include:
Payment deferral for network charges will only be permitted with respect to residential and small business customers on a payment plans, hardship arrangements or deferred debt arrangements, at the time the retailer is issued with the bill. This means that the retailer cannot simply defer payment of all network bills;
It does not apply to government-owned retailers or retailers of last resort. This is because there is already a solvency framework in place for these retailers to support them;
Interest is charged on deferred payments. This is intended to have the effect of discouraging retailers from using deferral unless they have to.
Our take
It was inevitable, of course, that relaxed payment mechanisms for customers would have an impact on retailer cashflow and potential solvency. This mechanism should give some degree of breathing space to market retailers who are feeling the pressure. Note, this deferral will not apply to ‘on-selling’ retailers (such as those who sell energy entirely in embedded networks) as they are not liable to pay network charges to DNSPs.
Note that these changes are in addition to general protections which were introduced in response to COVID-19 to support any company in Australia (including energy retailers). These changes include:
An increase in the minimum required amount for a statutory demand for payment of debt ($2,000 to $20,000) as well as the time required to pay (from 21 days to six months). This was the standard mechanism by which liquidation proceedings would be commenced;
A new temporary ‘safe harbour’ for company directors who may otherwise be facilitating insolvent trading;
Various cash grants to support businesses in difficulty.
The Australian Competition and Consumer Commission (ACCC) has commenced proceedings in the Federal Court of Australia alleging that Sumo Power Pty Ltd (Sumo) made false or misleading representations to Victorian consumers in relation to its electricity plans.
The ACCC alleges that between June and November 2018, Sumo promoted 12-months electricity plans with large discounts including pay on time discounts of up to 43% while planning to substantially increase the charges applied to those customers within a few months, or knowing it was likely to do so.
The ACCC claims that sumo caps that represented to consumers that it would maintain, or not materially increase those low rates and consumers would get the benefit of the pay on time discounts for a 12-month period. In November 2018, Sumo substantially increased the underlying rates it charged for certain consumers by approximately 30% to 46%. The ACCC alleges that there was a predetermined strategy which Sumo had not disclosed to consumers.
You can read more about the law of misleading and deceptive conduct here and more on the application of that law to electricity retailers here.
The ACCC further alleged that Sumo substantially misled consumers when advising them that the price increases were due to wholesale energy cost factors including generation costs rises and climate change and ageing assets forcing the closure of cheap coal-fired power stations.
The ACCC is seeking penalties, declarations, publication orders, complaints program orders, consumer redress, and legal costs.
The Australian Competition and Consumer Commission (ACCC) has announced that electricity provider Locality Planning Energy Pty Ltd (LPE) has paid a penalty of $10,500 after it was issued with an infringement notice for an alleged contravention of the Electricity Retail Code.
This represents the first enforcement action taken by the ACCC for an alleged breach of the Electricity Retail Code.
The Competition and Consumer (Industry Code—Electricity Retail) Regulations 2019 (the Code) applies to all electricity retailers that supply to small customers in the applicable distribution regions of New South Wales, South Australia and south-east Queensland. You can read more about the Code on Law Quarter’s website here.
The Code sets a cap on standing offer prices and specifies how prices and discounts must be advertised, published or offered. The Code was introduced in July 2019 with the objective of reducing confusion and making it easier for consumers to compare retail electricity offers.
It was alleged that LPE failed to:
compare its offered price to the reference price, which is the benchmark price set by the government;
display the total amount a customer consuming an average amount of electricity would need to pay in a year based on the offered price; and
display the distribution region and type of small customer to witch that offer applied.
An example of the advertising in question was published by the ACCC in its notice and is below:
The Essential Services Commission of Victoria (ESC) has released its Compliance and Enforcement Objectives for 2020 to 2021. We examine those objectives below.
All Eastern States, other than Victoria, have adopted the National Energy Customer Framework and are regulated by the Australian Energy Regulator. You can view our article on the AER’s compliance and enforcement objectives here.
The 2020-2021 Priorities
The ESC notes that the objectives represent priorities for compliance but do not reduce the need for retailers to ensure compliance with all regulatory obligations. The 2020 to 2021 objectives are to ensure:
customers experiencing vulnerability are protected from disconnection and accumulating debt;
customers affected by family violence are treated with respect and not subject to actions within the control of energy businesses that may endanger them;
energy businesses are deterred from disconnecting customers when they were not entitled to, or if they have not followed the relevant rules;
when businesses break the rules that regulate the market, they are held to account; and
The ESC are informed of the current state of the market.
The Essential Services Commission has stated that they will focus on:
payment difficulty framework;
family violence protections;
wrongful disconnections of customers;
planned interruptions, especially affecting customers with life support equipment;
the transfer of customers without explicit informed consent;
overcharging of vulnerable customers, especially affecting those on concession entitlements or in payment difficulty; and
embedded networks.
Both leading and lagging
In our view, Victoria is leading the way when it comes to the protections in place in relation to family violence and it is likely that the AER will adopt similar measures. Family violence is clearly an area that needs focus. Energy retailers have the potential to add to harm to family violence survivors and, in our view, the ESC have done an excellent job when it comes to explaining energy retailer’s responsibilities in this area.
Victoria (specifically the Victorian government) is lagging when it comes to the regulation of embedded networks given substantial time and effort invested in this area by the Australian Energy Market Commission. Rather than build on the work completed by the AEMC, a framework that was in many ways consistent with the framework that will be replaced in NECF was recently implemented. Victoria has taken much longer to come to the realisation that embedded networks are becoming a substantial component of the Australian Electricity Market.
Overcharging of vulnerable customers is, in our experience having worked for some of the country’s largest energy retailers, rare. The rules are clear about what a retailer must do when they have overcharged a customer. This being so, retailers, continue to have issues when it comes to their billing systems and those issues often translate into unacceptable consumer outcomes.
The ESC’s approach
The ESC notes that it takes a multifaceted approach when promoting customer protections under the energy rules. The ESC seeks to help customers and energy businesses understand their rights and obligations through education including via advertising, social and traditional media, its website and engagement with consumer advocacy groups.
The ESC monitors the energy industry to detect breaches of the rules and to identify any gaps in the rules. The ESC operates an annual audit program to check whether energy businesses have appropriate processes and policies in place to comply with the energy rules. When the ESC becomes aware of a potential breach, they may investigate and take enforcement action.
Key priorities for the Australian Energy Regulator
On 6 August 2020 the Australian Energy Regulator (AER) released its compliance and enforcement priorities for 2020 to 2021. The AER notes that its priority statement should be read alongside the current Statement of Expectations of energy businesses which set out the 10 principles the AER expects energy retailers to adhere to during the COVID crisis.
Generally, the AER has noted that it will maintain the 2019 to 2020 priorities with changes in recognition of the current COVID crises.
The first priority for the AER is customers in financial difficulty and ensuring that those customers are offered sustainable and affordable payment plans and timely access to retailer hardship programs. We have written extensively about the identification of customers who are potentially experiencing financial difficulties in previous posts. The general economic conditions that exist today and that are likely to develop over the next 6 to 12 months clearly mean that sustainable and affordable payment plans and hardship will be a priority. Additionally, the AER is focused on ensuring that customers are not wrongfully disconnected.
The second priority for the AER is on ensuring that customers using life support equipment are protected. During the previous 12 months, various improvements were made in the regulatory regime applicable to life-support including to standardise processes that retailers must follow when registering and deregistration customers who require life-support equipment. Energy retailers will need to ensure that they follow the current regulatory regime including by following the registration and deregistration processes and by keeping up-to-date records.
The third priority of the AER is to ensure that both AEMO and the AER are provided with accurate and timely information. The AER notes that AEMO requires accurate and timely information to ensure power system security and efficient outcomes in the operation of the energy market. There have been numerous examples of retailers failing to implement systems and processes to adequately report on their performance and compliance. Reporting is fundamental to the AER’s capacity to adequately monitor the market.
The fourth priority of the AER is to support the transition to metering contestability to ensure consumer and market benefits are delivered. We previously written about the various obligations that apply when it comes to metering installation timeframes. All energy retailers must ensure that metering coordinators are appointed for each connection point and that the obligations relating to the installation and rectification of metering are complied with.
The final priority for the AER is to increase market transparency through strengthening the gas market reporting requirements and ensuring access to pipeline capacity under the east coast gas reforms.
All energy retailers should carefully review the AER’s compliance and enforcement policy and ensure that they have adequate controls in place for each of the priorities outlined above.
Free Compliance Assessment
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