In this article, we look at two regulatory announcements for the Victorian Retail Energy Market over the last ten days or so. The first is the Essential Services Commission’s (ESC) Victorian Retail Energy Market Update January to March 2018 (the first quarter update). The second is an update on embedded network regulation in Victoria.[1]

Baseball game, Victorian Retail Energy Market

Photo by Joshua Peacock on Unsplash

By Dr Drew Donnelly, Regulatory Specialist, Compliance Quarter

Below are the key headlines from the 2018 first quarter update:

A decrease in standard retail contracts in the Victorian Retail Energy Market

Standard contract/standing offer contracts are a type of retail contract that provides customers with certain guaranteed consumer protections. Under the Energy Retail Code, retailers in Victoria are only permitted to publish new standard contract (or standing offer) prices twice a year. The ESC notes that only one retailer has chosen to publish new prices, with other standard contract prices remaining the same. [2]

Relatedly, the ESC notes a continued reduction in the number of customers on standard retail contracts with 5.8 per cent in March 2018, compared to 6.6 per cent of customers in July 2017. This suggests that more and more Victorian customers are choosing competitive market offers.

Increasing discounts without a corresponding reduction in energy bills

In July 2016 the average discount offered by retailers was 29 per cent off usage. Now, the average discounts on usage have increased to 33 per cent. The ESC expressed concern at the lack of transparency involved in heavy discounting, as well as the potential for early payment discounts to impact on those with payment difficulties.[3] We have noted regulator concern with excessive discounting before, see https://www.compliancequarter.com.au/when-is-an-electricity-discount-not-a-discount/.

Increase in disconnections and customers on payment plans

The ESC observed that between January and March 2018, disconnection for non-payment of bills increased by 11 per cent on the previous quarter. The ESC also observed that more and more customers with payment difficulties have been using payment plans. Compared to this time last year, an extra four thousand hardship customers have taken up payment plans with their retailer each month this year. [4]

It seems fair to say that the rise in disconnections and customers on payment plans is an indicator of the continuing struggle for Victorian residential customers with high bills. On the other hand, increased participation in hardship programs should lead to a reduction in disconnections in the long run.

ESC Audits

We recently discussed the audits being carried out in other National Electricity Market states by the Australian Energy Regulator (see https://www.compliancequarter.com.au/are-you-compliant-with-the-disconnection-rules/).  The ESC indicates that a range of audits are in place for 2018 including:

  • reviewing the way in which retailers estimate energy bills;
  • looking at how newly licenced companies are dealing with life support obligations, customers in payment difficult and billing and marketing;
  • tailored audits on specific energy companies to check resolution of specific issues identified in 2017 audits;[5]

New Protections in Embedded Networks

Work is ongoing for customer protections in embedded networks. The ESC has set up a register for exempt persons (including embedded networks) which makes it easy for customers to find out who their provider is. Currently, more than 850 embedded network operators have registered since the register went live in May. The ESC is also processing hundreds more applications so numbers will likely grow rapidly.

Furthermore, from 1 July 2018, embedded network customers in Victoria will also have access to the Ombudsman for dispute resolution.[6]

Future regulatory work from ESC to be aware of includes:

  • new standards for billing and marketing materials;
  • a framework for assessing retail market competitiveness and efficiency;
  • a review of the energy rules to better focus on customer outcomes.[7]

If you have any questions about how the new developments in the Victorian retail market might affect your business, please click here to get in touch with the team at Compliance Quarter.

[1] See https://www.esc.vic.gov.au/media-centre/latest-report-shows-energy-discounts-still-dont-guarantee-lower-bills and https://www.esc.vic.gov.au/media-centre/new-rules-private-electricity-networks-give-customers-more-protection.

[2] First quarter update, p4.

[3] First quarter update, p6.

[4] First quarter update, p9-11.

[5] First quarter update, p12.

[6] See https://www.esc.vic.gov.au/media-centre/new-rules-private-electricity-networks-give-customers-more-protection.

[7] First quarter update, p16.

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