The Australian Energy Market Commission (AEMC) is currently considering a rule change request from the Honourable Chris Bowen MP, Minister for Climate Change and Energy. The rule change seeks to amend the National Energy Retail Rules (NERR) to further support people experiencing hardship.
The rule change build on the Australian Energy Regulator’s (AER) Game Changer Report presented to the Energy and Climate Change Ministerial Council in December 2023 and is one of the four put forward. Submissions on the proposed rule change is due by 16 January 2025.
Below, we provide a summary of what is proposed in relation to crediting hardship customer’s accounts so that they pay no more than what they would pay if they were on a retailer’s best offer.
Moving hardship customers to a deemed best offer.
This rule change is proposed in response to barriers faced by hardship customers when engaging in the market with retailers, including a lack of time, literacy, or language barriers. Retailers are not able to move customers on to a deemed best offer without obtaining the relevant customer’s explicit informed consent. The Minister does not propose to amend the explicit informed consent provisions as they are considered to be an important consumer safeguard. Rather, the Minister proposes to require electricity retailers to provide their hardship customers with a credit on their bill if a deemed better offer is available to that relevant customer.
Under the proposed crediting approach, the credit would be equal to the value of the amount that the customer would have saved if they were on the deemed best offer. It would also be pro-rated when a hardship customer moves on or off a hardship program and/or when they change energy plans.
Cost of Implementation
The proposed rule change would not alter energy retailers’ existing obligation to engage with their customers on whether their current plan is right for them. The Minister expects that the proposed crediting approach would help Hardship customers to have more affordable bills while in a Hardship program, reducing the risk of or time they are in debt.
The expected cost of implementation for energy retailers is assessed to be moderate for retailers as the AEMC says that the approach leverages existing retailer obligations. The AEMC notes that for some retailers, there may be additional costs associated with new systems and process builds and ongoing annual costs to subsidise hardship customers’ bills. For example, to calculate and apply credit amounts if the customer prefers their current plan that is not a deemed better offer when this offer is available for the relevant customer.
The AEMC is interested in further understanding the likely short-term and ongoing costs to retailers associated with applying a credit on a hardship customer’s bills that is equal to the value of the amount that the customer would have saved if they were on the deemed better offer.
The AEMC will consider the impact of the rule change on retailers’ incentives and how they package their current and future energy offers: noting that amongst other things, providing a bill credit where there is a deemed better offer may shift how risk and cost of non-payment is allocated between hardship customers and retailers and that retailers may package their existing and future offers to avoid their best offers being defined as generally available under the AER’s Better Bills Guidelines and Retail Pricing Information Guidelines.
The AEMC is interested in what implementation issues may arise, including in consideration of existing requirements under the regulatory framework. It has asked interested parties a number of questions, including: Should there be some other criteria (i.e., level of debt and frequency) for hardship customers to receive a bill credit if there is a deemed better offer? Noting that customers with smart meters often receive more frequent bills compared to those on legacy meters.
Assessment Criteria
The Australian Energy Market Commission proposes to assess the proposed rule change against four criteria:
- Outcomes for consumers
- Principles of market efficiency including risk allocation between retailers and Hardship customers on non-payment of energy bills
- Implementation considerations including cost and complexity
- Principles of good regulatory practice: whether the proposed approach is the best approach.
The AEMC will consider complementary implementation required by the AER (for example updating their existing guidelines) and finally, principles of good regulatory practice. The AEMC will consider whether the proposed approach for applying a bill credit is the best approach.
The AEMC, following consideration of submissions may make the rule as proposed by the proponent, make a rule that is different to the proposed rule, or not make a rule. You can read more and make a submission here.
