Putting power back in the hands of consumers: shifting the focus back to the user
Energy affordability and continuity of supply is becoming increasingly important and a costly issue for consumers, the energy industry and governments. Over the last few years, the price of electricity has risen substantially. Electricity bills as a proportion of household expenses has increased, and many customers are struggling to pay their bills.
However, the electricity market is increasingly geared towards providing customers with new energy services, made possible through the adoption of smart meters, solar PV and battery storage. For those customers that cannot afford such technologies and simply want low cost power to light, heat and cool their homes, the market does not seem to be delivering.
Currently, customers that face difficulty in paying their bills can access limited government subsidies to assist in paying their bills. However, these schemes are not well targeted and the level of subsidy (outside of Victoria) has not increased with increases in the cost of electricity. Customers can also access payment plans and hardship schemes from their energy retailer. Whilst these measures provide some support for customers, the issue of affordability is complex and requires the combination of government, industry and the consumer sector to work together to provide a better way forward.
Transparency has always been a key principle for consumer protection in the energy sector. Now more than ever it is critical all consumers have the information they need to make informed decisions about their energy usage. The need for clear and timely information that informs greater consumer choice and control is a key element discussed by Finkel to bridge the gap between consumers who are highly engaged with their energy choices to consumers who are less engaged. This applies equally to vulnerable consumers who need clear and easy to understand information to ensure they are on the best energy plan.
The objective that has guided energy policy to date may not be sufficient to ensure good outcomes for all consumers – customers are viewed as a homogenous group, and competition is typically viewed by policy makers as the best option to promote good outcomes. However, this approach may not be appropriate for all consumers. While a safety net exists, the National Energy Retail Rules do not appear to be sufficient in protecting a large cohort of customers from facing payment difficulties and, at worst, disconnection.
Internationally, energy policy makers have adopted a variety of approaches to help support household customers. Some countries explicitly recognise that electricity is an essential service and, as such, have adopted additional measures to support vulnerable customers in accessing energy. This includes, for example, a requirement for retailers to offer a low fixed charge tariff, social tariffs that provide a discount on energy prices, and greater limitations on when customers can be disconnected.
While some of these options may not be appropriate in the Australian context, it is time for Australian policy makers to rethink how the most vulnerable customers are able to access a service that not only underpins the way in which we live, but increasingly the way in which we stay connected with our communities.
Over the weekend, the Victorian Government released a report commissioned from an independent, bi-partisan panel to examine the Victorian energy retail market. The report makes a series of wide-ranging recommendations aimed at improving market outcomes for Victorian customers. Perhaps the most fundamental recommendation is to introduce a “basic” offer with a regulated cap, which all retailers would be required to provide. This is aimed at customers who simply want affordable energy without the “bells and whistles”.
However as the current debate shifts to Putting power back in the hands of consumers, we cannot lose sight of the fact that the broader question of the government establishing a clear national energy policy that takes pressure off prices in the medium term still needs to be addressed.