Observations from the Vinnies’ Tariff-Tracking Project€¦ · Gavin Dufty, St Vincent de Paul Society May Mauseth Johnston, Alviss Consulting September 2014 The NEM Observations

Gavin Dufty, St Vincent de Paul Society

May Mauseth Johnston, Alviss Consulting

September 2014

The NEM

Observations from the Vinnies’

Tariff-Tracking Project

September 2014

The$National$Energy$Market$–$Wrong$way,$Go$back?$

! 1!

Disclaimer$The$energy$offers,$tariffs$and$bill$calculations$presented$in$this$paper$and$associated$workbooks$ should$be$used$as$a$general$guide$only$and$should$not$be$ relied$upon.$The$ workbooks$ are$ not$ an$ appropriate$ substitute$ for$ obtaining$ an$ offer$ from$ an$energy$retailer.$ $The$ information$presented$ in$this$paper$and$the$workbooks$ is$not$provided$as$financial$advice.$While$we$have$taken$great$care$to$ensure$accuracy$of$the$information$provided$in$this$paper$and$the$workbooks,$they$are$suitable$for$use$only$as$a$research$and$advocacy$tool.$We$do$not$accept$any$legal$responsibility$for$errors$or$inaccuracies.$The$St$Vincent$de$Paul$Society$and$Alviss$Consulting$Pty$Ltd$do$not$ accept$ liability$ for$ any$ action$ taken$based$on$ the$ information$provided$ in$ this$paper$or$the$associated$workbooks$or$for$any$loss,$economic$or$otherwise,$suffered$as$ a$ result$ of$ reliance$ on$ the$ information$ presented.$ If$ you$ would$ like$ to$ obtain$information$about$energy$offers$available$to$you$as$a$customer,$go$to$the$relevant$regulator’s$website$or$contact$the$energy$retailers$directly.$$$$The$National$Energy$Market$–$Wrong$Way,$Go$Back?$Observations$from$the$Vinnies’$TariffETracking$Project$$Gavin$Dufty,$St$Vincent$de$Paul$Society,$Victoria$May$Mauseth$Johnston,$Alviss$Consulting$$Melbourne,$September$2014$$$$$St$Vincent$de$Paul$Society$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$Alviss$Consulting$Pty$Ltd$www.vinnies.org.au$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$www.alvissconsulting.com$$

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$©$St$Vincent$de$Paul$Society$and$Alviss$Consulting$Pty$Ltd$This$work$is$copyright.$Apart$from$any$use$permitted$under$the$Copyright$Act$1968$(Ctw),$no$parts$may$be$adapted,$reproduced,$copied,$stored,$distributed,$published$or$put$to$commercial$use$without$prior$written$permission$from$the$St$Vincent$de$Paul$Society.$$$$


! 2!

Acknowledgements$$This$ project$ was$ funded$ by$ grant$ from$ the$ Consumer$ Advocacy$ Panel$(www.advocacypanel.com.au)$ as$ part$ of$ its$ grants$ process$ for$ consumer$ advocacy$projects$and$research$projects$for$the$benefit$of$consumers$of$electricity$and$natural$gas.$$The$views$expressed$in$this$document$do$not$necessarily$reflect$the$views$of$the$Consumer$Advocacy$Panel$or$the$Australian$Energy$Market$Commission.$$$Amendment$on$2$October$2014$Charts$3$and$4$have$been$amended$since$the$initial$report$released$on$30$September$2014.$In$the$initial$report,$these$charts$contained$an$error$in$relation$to$the$Energex$figures.$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$


! 3!

Table$of$Contents$

Background:$The$TariffPTracking$Project............................................................................. 4$

1.$Electricity$bills:$Where$does$the$money$go? ................................................................... 5$

2.$Wrong$way .................................................................................................................. 14$

3.$Go$back? ...................................................................................................................... 18$3.1$Recognise$that$standing$offers$are$important$ .......................................................................... 20$3.2$Distinguish$between$positive$product$differentiation$and$unnecessary$confusion$.................... 23$3.3$Standardise$presentations$of$cost$and$charges$on$bills$and$offers$ ............................................ 25$3.4$Clearly$distinguish$between$regulated$monopolies$and$competitive$retailers$ .......................... 28$

Conclusion ....................................................................................................................... 30$

Summary$of$recommendations ........................................................................................ 31$!!!!!!!!

$$$$$$$$$$$$$$$$$$$$$$$$$$$


! 4!

Background:$The$TariffPTracking$Project$The$ St$ Vincent$ de$ Paul$ Society,$ in$ conjunction$ with$ Alviss$ Consulting,$ has$ been$tracking$ changes$ to$ residential$ energy$ tariffs$ and$ reporting$ on$ household$ impacts$since$ 2010.$ Initially$ the$ TariffETracking$ project$ only$ covered$ Victoria$ but$ has$ since$expanded$to$include$New$South$Wales,$Queensland,$South$Australia,$Tasmania$and$the$Australian$Capital$Territory.$$$The$rationale$for$tracking$changes$to$domestic$energy$prices$has$been$to$document$price$ increases,$ analyse$market$ developments$ and$ inform$ the$ broader$ community$about$bill$impacts$and$potential$savings$to$be$made.$$$In$our$view,$there$is$still$a$limited$knowledge$and$understanding$in$the$community$of$the$various$energy$tariffs$available,$how$they$are$changing,$and$how$tariff$changes$impact$on$households’$energy$bills$and$energy$affordability$more$broadly.$$$Only$ by$ improving$ this$ awareness$ and$ understanding$ can$ we$ ensure$ that$ the$regulatory$framework$(for$example,$in$relation$to$price$information$and$disclosure)$is$adequate,$ and$ promote$ a$ competitive$ retail$ market.$ Furthermore,$ this$ increased$knowledge$will$allow$for$close$monitoring$of$the$impact$price$and$tariff$changes$have$on$households’$bills,$and$the$affordability$of$this$essential$service.$$In$addition,$a$key$aim$of$ this$project$has$been$ to$document$and$analyse$price$and$product$ developments$ arising$ from$ government$ policies$ and$ industry$ innovations,$including$the$deregulation$of$retail$prices,$‘green$policies’,$smart$meter$rollouts$and$transitions$towards$other$smart$grid$developments.$$To$ date$ we$ have$ developed$ four$ workbooks$ for$ each$ of$ the$ National$ Electricity$Market$ (NEM)$ jurisdictions.1$ $ The$workbooks$ allow$ the$user$ to$enter$ consumption$levels$and$analyse$household$bills$for$standing$or$regulated$gas$and$electricity$offers,$as$well$as$published$electricity$and$gas$market$offers.2$$The$workbooks,$as$well$as$associated$reports,$can$be$accessed$at$the$St$Vincent$de$Paul$Society’s$website:$www.vinnies.org.au/energy$$This$ paper$ is$ the$ result$ of$ a$ comparison$ of$ the$ state$ by$ stateE$ based$ analyses$undertaken$as$part$of$the$TariffETracking$project,$as$well$as$reflections$on$the$public$debate$on$energy$market$developments$and$reasons$for$price$increases$over$the$last$year.$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1$As$Tasmania$does$not$have$regulated/standing$offers$for$gas,$only$three$workbooks$have$been$produced$for$this$jurisdiction.$2$The$Victorian$workbooks$contain$regulated/standing$offers$from$July$2008$to$July$2014$and$market$offers$from$July$2010$to$July$2014.$$The$NSW$workbooks$contain$regulated$offers$from$July$2009$to$July$2014$and$market$offers$from$2011$and$2014.$The$Queensland$and$South$Australian$workbooks$contain$regulated/standing$offers$from$July$2009$to$July$2014$and$market$offers$from$July$2012$to$July$2014.$The$ACT$workbooks$contain$regulated/standing$offers$from$July$2009$to$July$2014$and$market$offers$from$July$2013$to$July$2014.$The$Tasmanian$workbooks$contain$regulated$electricity$offers$from$July$2009$to$July$2014,$market$(pay$as$you$go)$electricity$offers$from$July$2009$to$July$2014$and$gas$market$offers$from$July$2013$to$July$2014.$$!!


! 5!

1.$Electricity$bills:$Where$does$the$money$go?$$It$is$well$known$that$households$across$Australia$have$been$experiencing$significant$increases$to$their$energy$bills.$Chart$1$shows$price$increases$since$July$2009$and$that$South$Australian$households$pay$the$most$for$electricity$while$ACT$households$pay$the$least.$$$Chart$1$Electricity$price$increases$July$2009$to$July$2014$as$estimated$annual$bills$(nominal,$inc$GST)$for$electricity$regulated/standing$offers,$6,000kWh$per$annum,$single$rate3$$

$$$Although$ recent$ public$ debate$ has$ focused$ on$ the$ fall$ in$ electricity$ demand$ and$wholesale$ prices,$ only$ Tasmanian$ households$ had$ a$ price$ decrease$ in$ July$ 2014$(which$was$ due$ to$ Aurora’s$ anticipated$ repeal$ of$ the$ carbon$ tax).4$ $ One$ common$explanation$for$why$households$have$not$been$experiencing$a$decline$ in$electricity$costs$is$that$the$regulated$network$cost$makes$up$a$large$proportion$of$households’$bills$and$these$prices$keep$going$up.5$$$$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!3$In$Victoria$and$NSW$the$standing$offer$price$is$based$on$the$average$retail$standing$offer$in$each$network$area.$As$the$prices$differ$between$network$areas$in$NSW$and$Victoria,$the$estimated$bills$in$these$two$states$are$based$on$the$average$across$network$areas.$Note$that$the$transitional$tariffs$currently$available$in$NSW$and$South$Australia$are$not$included$in$this$chart,$and$that$the$South$Australian$standing$offers$presented$as$of$July$each$year$in$this$chart$actually$took$effect$in$August$in$2013.$$4$See,$for$example,$The$Conversation,$Four%years%of%falling%electricity%demand:%can%this%continue?$By$Alan$Pears$21$January$2013,$The$Business$Spectator,$No%sign%of%end%to%falling%electricity%demand$by$Hugh$Saddler$and$Hannah$Meade,$5$June$2013,$Sydney$Morning$Herald,$Watts%happening?%Electricity%demand%falling%as%prices%continue%to%rise$by$Ross$Gittins,$22$August$2014.$In$relation$to$Aurora’s$price$adjustment$due$to$the$anticipated$repeal$of$the$carbon$tax$see$Aurora$Energy,$2013$Standing$Offer$Determination,$Pricing$Proposal$Period$2,$July$2014$E30$June$2015,$p$3$$$5$See,$for$example,$Grattan$Institute,$Shock%to%the%system%–%Dealing%with%falling%electricity%demand$by$Tony$Wood$and$Lucy$Carter$(December$2013)$$

1,000!

1,200!

1,400!

1,600!

1,800!

2,000!

2,200!

2,400!

2,600!

2009! 2010! 2011! 2012! 2013! 2014!

Annual!bill!($)! Qld!

NSW!

SA!

VIC!

ACT!

Tas!


! 6!

Chart$2$below$shows$that$Network$Use$of$System$(NUOS)$charges$have$increased$in$all$ of$ the$ NEM$ electricity$ networks$ since$ 2009,$ but$ it$ also$ shows$ that$ the$ NUOS$charges,$as$well$as$increases,$vary$significantly$between$the$networks.$Households$in$country$NSW$(Essential’s$network)$pay$the$highest$NUOS$charges$in$the$NEM$despite$costs$ decreasing$ since$ July$ 2012.$ South$ Australians$ (SA$ Power$ network)$ and$Tasmanians$(Aurora)$also$pay$significant$NUOS$charges.$Although,$compared$to$2009$prices,$ the$ overall$ increases$ have$ been$more$ significant$ in$ South$Australia$ than$ in$Tasmania.$ The$ NUOS$ charges$ are$ lowest$ in$ the$ ACT$ (ActewAGL’s$ network)$ and$Victoria$(Citipower,$Jemena,$Powercor,$United$Energy$and$SP$Ausnet).$This$is$despite$Victorian$ electricity$ bills$ being$ relatively$ high$ (similar$ to$ that$ of$ Queensland$ and$NSW)$in$chart$1$above.$$$Chart$2$NUOS$charges$from$July$2009$to$July$2014$as$estimated$annual$cost$(GST$exclusive)$for$households$using$6,000kWh$per$annum,$single$rate6$$

$$Chart$ 3$below$ looks$ at$NUOS$ charges$ as$proportion$of$ total$ bill.$ It$ shows$ that$ the$NUOS$proportion$of$electricity$bills$has$been$highest$in$country$NSW$(Essential)$and$Tasmania$ (Aurora)$ over$ the$ last$ five$ years$ although$ Aurora’s$ proportion$ higher$ in$July$2014.$AusGrid,$which$had$a$significant$increase$in$2011,$is$the$network$area$with$the$ second$ highest$ NUOS$ proportion$ of$ bills$ in$ NSW.$ In$ the$ Endeavour$ network,$however,$ the$NUOS$proportion$of$bills$has$been$ in$decline$ since$2010.$ $ The$NUOS$proportion$ in$ South$ Australia$ has$ increased$ significantly$ since$ 2012$ and$ it$ is$ now$similar$ to$ that$ of$ Ausgrid$ and$ Energex’$ network$ area$ in$ Queensland.$ The$ five$Victorian$networks$have$the$lowest$NUOS$proportion$of$bills,$and$only$two$of$them$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!6$The$annual$NUOS$charges$have$been$calculated$by$allocating$1,500kWh$per$quarter$(again$based$on$annual$consumption$of$6,000kWh)$to$the$step$charges$stipulated$in$the$NUOS.$$The$annual$NUOS$cost$also$includes$fixed$charges.$$Note$that$as$United$Energy’s$NUOS$charge$has$been$a$seasonal$tariff$over$the$last$three$years,$the$United$Energy$consumption$used$in$these$calculations$is$thus$based$on$a$proportional$allocation$of$a$5$month$summer$tariff$and$a$7$month$nonEsummer$(offEpeak)$rate.!

200!

400!

600!

800!

1000!

1200!

1400!

2009! 2010! 2011! 2012! 2013! 2014!

NUOS!charges!$!per!annum!

Essential!

SAPower!

Aurora!

Energex!

AusGrid!

Endeavour!

SP!Ausnet!

UE!

Powercor!

Jemena!

ActewAGL!

Citipower!


! 7!

United$ Energy$ and$ SP$ Ausnet)$ have$ current$NUOS$ proportions$ that$ are$ similar,$ or$higher,$to$what$they$were$back$in$2009.$$The$retail$bills$(chart$1$above)$show$that$the$regulated$retail$rate$in$the$ACT$produces$significantly$lower$annual$bills$compared$to$the$ average$ standing$ offer$ in$ Victoria,$ yet$ chart$ 3$ below$ shows$ that$ the$ NUOS$proportion$of$the$total$bill$is$higher$in$the$ACT$than$it$is$in$the$Victorian$networks.$$$Chart$3$NUOS$charges$(excl$GST)$from$July$2009$to$July$2014$as$proportion$(%)$of$annual$retail$bill$(incl$GST)$for$electricity$regulated/standing$offers,$6,000kWh$per$annum,$single$rate7$$

$$$Chart$ 4$ below$ shows$ the$ average$ annual$NUOS$ cost$ and$ the$ average$ annual$ nonENUOS$ cost$ over$ a$ five$ year$ period$ (2009E2014).$ It$ also$ shows$ the$ average$ NUOS$proportion$(%)$ for$each$network$area$during$that$period.$The$five$Victorian$energy$network$areas$look$very$different$to$the$other$jurisdictions$in$this$chart.$The$overall$bills$ (NUOS$and$nonENUOS$combined)$are$relatively$high$but$the$NUOS$amount$ (in$red)$and$the$NUOS$proportion$(dotted$line)$are$relatively$low.$The$cost$of$the$NUOS$in$United$Energy$(UE),$for$example,$is$similar$to$that$in$the$ACT$(ActewAGL)$but$the$overall$average$bill$is$almost$$420$more$per$annum.$While$costs$associated$with$the$Victorian$ smart$ meter$ rollout$ do$ come$ under$ nonENUOS$ costs$ in$ this$ chart,$ the$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!7$In$Victoria$the$standing$offer$bill$is$based$on$the$average$incumbent$(AGL,$Origin$and$Energy$Australia)$standing$offer$as$of$July$every$year.$In$NSW$the$retail$bill$is$based$on$the$regulated$rate$from$2009$to$2013$and$the$incumbent$retailer’s$standing$offer$in$each$of$the$network$areas$(Origin$or$Energy$Australia)$as$of$July$2014.$In$South$Australia$the$retail$bills$are$based$on$the$regulated$rates$as$well$as$AGL’s$standing$offer$post$retail$deregulation.$In$all$other$jurisdiction$the$retail$bills$are$based$on$the$regulated$rates.$Note$that$as$United$Energy’s$NUOS$charge$has$been$a$seasonal$tariff$over$the$last$three$years,$the$United$Energy$consumption$used$in$these$calculations$is$thus$based$on$a$proportional$allocation$of$a$5$month$summer$tariff$and$a$7$month$nonEsummer$(offEpeak)$rate.$$

10!

20!

30!

40!

50!

60!

70!

2009! 2010! 2011! 2012! 2013! 2014!

NUOS!as!proportion!(%)!of!total!bill! Aurora!

Essential!

AusGrid!

Energex!

SAPower!

Endeavour!

ActewAGL!

SP!Ausnet!

UE!

Powercor!

Jemena!

Citipower!


! 8!

average$annual$cost$of$the$rollout$does$not$come$close$to$$400,$as$examined$in$table$1$and$charts$5$and$6$below.8$$$Chart$4$Average$NUOS$component$of$total$bill$from$July$2009$to$July$2014$as$$$per$annum$(excl$GST),$average$(2009E14)$nonENUOS$component$of$total$bill$as$$$per$annum$(incl$GST)$and$average$(2009E14)$NUOS$proportion$(%)$of$total$bill$for$electricity$regulated/standing$offers,$6,000kWh$per$annum,$single$rate9$$

$$$In$ order$ to$ examine$ what$ households$ actually$ pay$ for$ the$ various$ services$ (and$policies)$that$are$costed$by$the$supply$chain$and$passed$on$to$consumers$in$the$form$of$ a$ retail$ bill,$ table$ 1$ below$ deducts$ estimated$ cost$ components$ off$ the$ average$annual$retail$bill$(from$2009E2014)$for$households$using$6,000kWh$per$annum.$After$deducting$ GST,$ NUOS$ costs,$ wholesale$ costs,$ the$ cost$ of$ environmental$ policies$(“green$schemes”)$and$the$cost$of$rolling$out$smart$meters$(Victoria$only),$amounts$in$ the$ final$ column$are$ as$ low$as$ $190$ (in$NSW’s$Ausgrid$network)$ and$as$high$ as$$529$(in$Victoria’s$Powercor$network).$Chart$5$below$shows$the$same$bill$deductions$as$those$included$in$table$1.$$$$$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!8$The$cost$of$the$smart$meter$rollout$is$not$accounted$for$in$the$NUOS$charges$due$to$the$AMI$Cost$Recovery$OrderEInECouncil$that$ensures$that$the$distributors$are$able$to$recover$expenditure$associated$with$the$AMI$program$from$consumers$on$a$cost$passEthrough$basis.$$9$In$Victoria$the$standing$offer$bill$is$based$on$the$average$incumbent$(AGL,$Origin$and$Energy$Australia)$standing$offer$as$of$July$every$year.$In$NSW$the$retail$bill$is$based$on$the$regulated$rate$from$2009$to$2013$and$the$incumbent$retailer’s$standing$offer$in$each$of$the$network$areas$(Origin$or$Energy$Australia)$as$of$July$2014.$In$South$Australia$the$retail$bills$are$based$on$the$regulated$rates$as$well$as$AGL’s$standing$offer$post$retail$deregulation.$In$all$other$jurisdiction$the$retail$bills$are$based$on$the$regulated$rates.$Note$that$as$United$Energy’s$NUOS$charge$has$been$a$seasonal$tariff$over$the$last$three$years,$the$United$Energy$consumption$used$in$these$calculations$is$thus$based$on$a$proportional$allocation$of$a$5$month$summer$tariff$and$a$7$month$nonEsummer$(offEpeak)$rate.$$

0!10!20!30!40!50!60!70!80!90!100!

0!

500!

1,000!

1,500!

2,000!

2,500!

Avg!NUOS!component!(%

)!

Avg!electricity!bill!($/annum)!

Avg!NUOS!($)!component! Avg!NonRNUOS!($)!component!

Avg!NUOS!%!


! 9!

Table$1$Deduction$of$bill$components,$average$annual$bill$based$on$the$July$2009$to$July$2014$period$(for$electricity$regulated/standing$offers,$6,000kWh$per$annum,$single$rate)10$$$$ $

$$$$$$$Retail$bill$incl.$GST^$

$$$$$$$$Retail$bill$excl.$GST$

$$$$$$$Retail$bill$excl.$GST$and$NUOS^$

$$$$$Retail$bill$excl.$GST,$NUOS$and$wholeEsale^^$

$$$Retail$bill$excl.$GST,$NUOS,$wholesale$and$“green$scheme”$costs*$

Retail$bill$excl.$GST,$NUOS,$wholesale,$“green$scheme”$costs$and$smart$meter$costs**$

Citipower$ 1,619$ 1,472$ 1,115$ 879$ 599$ 491$

Powercor$ 1,842$ 1,675$ 1,196$ 960$ 642$ 529$

SP$Ausnet$ 1,830$ 1,664$ 1,124$ 888$ 572$ 447$

Jemena$ 1,817$ 1,652$ 1,189$ 952$ 638$ 463$

UE$ 1,730$ 1,573$ 1,120$ 883$ 584$ 458$

ActewAGL$ 1,314$ 1,195$ 740$ 484$ 221$ E$

Aurora$ 1,759$ 1,599$ 664$ 450$ 402$ E$

Energex$ 1,640$ 1,491$ 770$ 521$ 238$ E$

Ausgrid$ 1,654$ 1,504$ 703$ 446$ 190$ E$

Endeavour$ 1,705$ 1,550$ 834$ 577$ 314$ E$

Essential$ 2,194$ 1,995$ 862$ 605$ 266$ E$

SAPower$ 2,047$ 1,861$ 1,014$ 716$ 363$ E$^$As$per$chart$4$above$^^Based$on$AEMO’s$average$annual$prices$per$fiscal$year$from$2009$to$201411$*In$19%$of$bill$excl$GST$in$Qld,$Vic$and$SA,$17%$in$NSW,$22%$in$the$ACT,$and$3%$in$Tasmania12$$**Based$on$annual$average$AER$approved$smart$meter/AMI$charges$for$2011$to$201513$$$$$$$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!10$This$chart$is$based$on$the$calculation$used$for$chart$4$above$11$The$estimated$wholesale$cost$is$based$on$AEMO’s$annual$average$wholesale$price$for$each$jurisdiction$between$2009$and$2014$(see:$http://www.aemo.com.au/Electricity/Data/PriceEandEDemand/AverageEPriceETables/AverageEPriceETablesEAnnual)$and$multiplied$by$6$MW.$The$average$price$for$6MW$used$in$this$calculation$is:$$257$for$NSW$and$the$ACT,$$248$for$Queensland,$$298$for$South$Australia,$$214$for$Tasmania$and$$236$for$Victoria.$$12$The$“green$scheme”$costs$include$carbon$tax,$Renewable$Energy$Targets,$Feed$in$Tariffs$and$other$jurisdictional$schemes.$The$AEMC$report,$2013%Residential%Electricity%Price%Trends$(December$2013)$estimated$the$cost$of$environmental$policies$for$each$jurisdiction$and$the$percentages$used$for$this$report$are$based$on$the$cost$of$environmental$policies$(c/kWh)$and$total$cost$(c/kWh)$in$2012/13$(the$base$year$of$the$AEMC$study).$We$note$that$the$cost$of$environmental$policies$has$varied$between$2009$and$2014$(the$carbon$tax,$for$example,$did$not$take$effect$before$July$2012)$but$as$the$cost$of$many$environmental$policies$also$has$declined$over$this$period,$we$believe$that$2012/13$figures$provide$a$good$overall$indication.$$$$13$To$estimate$the$impact$of$the$Victorian$smart$meter$rollout$on$the$billEstack,$we$used$AER’s$forecast$charges$for$singleEelement$meters$for$2011$to$2015.$See$table$2$in$AER,$Victorian%Advanced%Metering%Infrastructure%Review,%2012L15%budget%and%charges,$Final$Determination$(October$2011)$$


! 10!

Chart$5$Deduction$of$bill$components,$average$annual$bill$based$on$the$July$2009$to$July$2014$period$(for$electricity$regulated/standing$offers,$6,000kWh$per$annum,$single$rate)14$$$

$$Chart$ 6$ below$ is$ based$on$ the$ same$ calculations$ presented$ in$ table$ 1$ and$ chart$ 5$above$but$shows$the$various$bill$components$as$a$percentage$of$the$total$bill.$While$we$ stress$ that$ some$ of$ the$ cost$ components$ are$ based$ on$ estimates$ rather$ than$actual,$ known$ costs,$we$ believe$ chart$ 6$ clearly$ illustrates$ that$ the$ cost$ of$ retail$ is$significant$in$some$network$areas.15$$$$$According$ to$ our$ estimates,$ between$ 27E33%$ of$ the$ bills$ paid$ by$ Victorian$households$ goes$ to$ the$ retailer.$ That$ is$significantly$ more$ than$ the$ amount$ that$goes$to$pay$for$the$actual$electricity$used$(wholesale),$ which$ accounts$ for$ 14–16%$of$ the$ bill.$ In$ some$ network$ areas,$ it$ is$even$ more$ than$ the$ network$ charges$(NUOS).$We$ acknowledge$ there$ are$ costs$ associated$ with$ retailing$ electricity$ in$ a$competitive$ market.$ Retailers$ pay$ to$ attract$ customers,$ to$ keep$ customers,$ to$service$ customers$ and$ so$ on,$ but$ when$ the$ retail$ component$ of$ households’$electricity$bill$starts$matching$the$cost$of$operating$infrastructure$heavy$utilities,$it$is$time$to$acknowledge$that$something$is$wrong.$$$$$$$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!14$This$chart$is$based$on$the$calculation$used$for$chart$4$and$table$1$above$15$Cost$of$retail$includes$both$retail$costs$and$margins$(profits).$

0!

500!

1,000!

1,500!

2,000!

2,500!

Citipower!

Powercor!

SP!Ausnet!

Jemena!

UE!

ActewAGL!

Aurora!

Energex!

AusGrid!

Endeavour!

Essential!

SAPower!

$!per!annum!

Avg!RETAIL!($)!

Annual!bill!minus!GST!

Annual!bill!minus!NUOS!(and!all!the!above)!

Annual!bill!minus!Wholesale!(and!all!the!above)!

Annual!bill!minus!"Green!Schemes"!(and!all!the!above)!

Annual!bill!minus!Smart!Meter!costs!(and!all!the!above)!

“Retailers$pay$to$attract$customers,$to$keep$customers,$to$service$customers$

and$so$on,$but$when$the$retail$component$of$households’$electricity$bill$starts$matching$the$cost$of$operating$

infrastructure$heavy$utilities,$it$is$time$to$acknowledge$that$something$is$wrong.”!


! 11!

Chart$6$Estimated$billEstack,$average$annual$bill$based$on$the$July$2009$to$July$2014$period$(for$electricity$regulated/standing$offers,$6,000kWh$per$annum,$single$rate)16$$$

$$

Chart$6$above$also$shows$that$there$are$significant$differences$between$jurisdictions,$as$well$as$networks,$when$it$comes$to$the$network$(NUOS)$proportion$of$bills.$It$is$to$be$expected$that$more$sparsely$populated$network$areas$such$as$Essential,$Aurora$and$SA$Power$network$may$have$to$charge$each$customer$more$for$the$operation$of$the$ network.$ However,$ Ausgrid$ is$ far$ from$ sparsely$ populated$ and$ especially$ not$compared$to$the$two$Victorian$‘country$networks’$SP$Ausnet$and$Powercor.$$As$ the$ calculations$ for$ the$ charts$ above$ are$ based$ on$ standing$ and/or$ regulated$prices,$we$have$also$examined$the$NUOS$proportion$of$Victorian$market$offers.$We$found$ that$ the$ NUOS$ proportion$ of$ retail$ bills$ is$ currently$ the$ same$ for$ standing$offers$and$market$offers$with$guaranteed$discounts$but$ that$ the$NUOS$proportion$was$ higher$ for$ market$ offers$ with$ pay$ on$ time$ discounts$ (assuming$ that$ the$customers$are$actually$able$to$obtain$these$discounts).17$$$Chart$7$below$shows$NUOS$charges$as$annual$cost$(grey$columns),$annual$retail$bills$for$ average$ standing$ offers$ (red$ columns),$ for$market$ offers$ including$ guaranteed$discounts$ (green$columns)$and$market$offers$ including$pay$on$time$discounts$ (blue$columns)$in$Jemena’s$network$area.$$$$$$$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!16$This$chart$is$based$on$the$calculation$used$for$chart$5$and$table$1$above$17$ St$ Vincent$ de$ Paul$ Society,$Victorian% Energy% Prices% July% 2014,% An% update% report% on% the% Victorian%TariffLTracking%Project$by$May$Mauseth$Johnston$(July$2014)$p,$35E37$

38!

58!48! 53! 46!

57!45!

24! 29! 32! 28! 29!

22!

13!17!

17!17!

13!

16!

16! 14!14!

14! 15!

18!

25!

16! 13! 20! 13!19!

33! 32! 27! 28! 29!

22!3!

19! 17! 17! 17! 19!19! 19! 19! 19! 19!

7! 7! 8! 11! 8!

0%!

10%!

20%!

30%!

40%!

50%!

60%!

70%!

80%!

90%!

100%!

Smart!Meters!

Green!schemes!

Retail!

Wholesale!

NUOS!


! 12!

It$ also$ shows$ NUOS$ as$ a$ proportion$ of$ standing$ offer$ bills$ (solid$ line$ with$ red$markers),$ market$ offer$ bills$ including$ guaranteed$ discounts$ only$ (dotted$ line$ with$green$markers)$ and$market$offer$bills$ including$pay$on$ time$discounts$ (dotted$ line$with$blue$markers).18$$Chart$7$Jemena$network$(Victoria):$Annual$retail$bill$(incl.$GST),$NUOS$costs$and$NUOS$as$proportion$of$retail$bills$(based$on$average$single$rate$electricity$offers,$4,800kWh$per$annum)19$

$$Another$ issue$ the$ above$ charts$ clearly$ illustrate$ is$ that$ the$ residential$ billEstack$varies$ significantly$within$ the$NEM.$We$believe$ these$differences$have$been$under$acknowledged,$and$a$possible$implication$of$this$can$have$been$adding$confusion$for$consumers.$The$electricity$supply$chain$and$the$various$cost$components$passed$on$to$ consumers$ are$not$ easily$ explained,$ but$when$ the$decision$ is$ to$bundle$ several$costs$ and$ charges$ together$ into$ a$ final$ bill$ received$ by$ households$ encouraged$ to$engage$ with$ the$ market,$ the$ accuracy$ of$ the$ information$ provided$ becomes$important.$$$Box$ 1$ below$ shows$ some$ of$ the$ explanations$ that$ consumers$ who$ use$ google$searches$ to$ ascertain$ the$network$ component$of$ electricity$bills$will$ find.$ It$ shows$that$ various$ reputable$ sources$ provide$ various$ answers$ that$ may$ or$ may$ not$ be$correct$for$a$particular$household’s$location.$We$do$wish$to$stress,$that$we$raise$this$issue$as$we$believe$ it$ is$ confusing$electricity$consumers$ (as$well$as$policy$debates)$and$we$are$ourselves$among$the$many$commentators$and$organisations$ that$have$communicated$ broad$ estimates$ of$ network$ charges$ in$ order$ to$ simplify$ and$more$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!18$The$NUOS$proportion$of$total$market$offer$bills$has$been$calculated$using$annual$NUOS$cost$calculations$and$the$average$of$the$three$incumbents$retailers’$market$offers$as$of$July$every$year$(from$2010$to$2014),$presented$as$annual$bills$for$households$using$4,800kWh$per$annum$(single$rate)$across$the$five$distribution$areas.!19$This$chart$was$first$published$in!St$Vincent$de$Paul$Society,$Victorian%Energy%Prices%July%2014,%An%update%report%on%the%Victorian%TariffLTracking%Project$by$May$Mauseth$Johnston$(July$2014)$p,$37!

15!

17!

19!

21!

23!

25!

27!

29!

31!

33!

35!

0!

200!

400!

600!

800!

1000!

1200!

1400!

1600!

1800!

2000!

2010! 2011! 2012! 2013! 2014!

NUOS!as!%!of!retail!bills!

$!per!annum!

NUOS!

Retail!(standing)!

Retail!(guaranteed!discounts)!Retail!(all!discounts)!

NUOS!%!Standing!

NUOS!%!Market!(guaranteed)!NUOS!%!Market!(all!discounts)!


! 13!

easily$ communicate$ an$ issue.$ In$ reality,$ however,$ the$ only$ simple$ answer$ to$ a$question$about$where$the$money$goes$is:$it$depends.$$$$$Box$1$How$much$is$the$network$component$of$my$electricity$bill?$$

“It$is$also$important$to$note$that$network$prices$are$only$part$(typically$between$35E55%)$of$the$final$electricity$bill$paid$by$residential$customers”.20$$$

“For$electricity,$a$typical$breakdown$of$the$final$price$is$around$oneEhalf$for$the$network$component$and$40$per$cent$for$the$wholesale$component,$with$the$retail$component$and$margin$comprising$the$remainder”21$$$“Businesses$that$own$the$transportation$networks$and$facilities$that$deliver$gas$and$electricity$to$you$are$called$distributors.$These$are$the$largest$component$of$your$energy$bill,$accounting$for$almost$half$the$cost$of$your$energy$supply.”22$$“Retailers$generally$pay$network$services$charges$and$then$pass$them$on$to$end$users.$These$charges$can$represent$about$10%$to$20%$of$total$costs$for$large$energy$users,$and$about$40–50%$for$residential$consumers.”23$$The$figure$presented$on$Origin$Energy’s$website$shows$that$network$costs$are$clearly$the$largest$component$of$household$energy$bills:24$$$

$$$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!20$Ernst$and$Young,$Electricity%Network%Services,%LongLterm%trends%in%prices%and%costs$available$at$https://www.nsw.gov.au/sites/default/files/miscellaneous/electricity_network_services.pdf$$21$Reserve$Bank$of$Australia,$Bulletin$–$December$quarter$2010,$Developments%in%Utilities%Prices,$Article$by$Michael$Plumb$and$Kathryn$Davis$22$AER,$Factsheet,$Energy%prices%explained,$January$2013$23$The$Energy$Efficiency$Exchange$(a$joint$initiative$of$the$Australian,$state$and$territory$governments$administered$by$Department$of$Industry)$see$http://eex.gov.au/energyEmanagement/energyEprocurement/procuringEandEmanagingEenergy/understandingEyourEretailEbill/$24$See$http://www.originenergy.com.au/4217/UnderstandingEyourEelectricityEcosts$

17/09/14 5:10 PMUnderstanding your electricity costs - Origin Energy

Page 1 of 3http://www.originenergy.com.au/4239/Asset?vurl=asset&name=Understanding_your_Elecricity_Costs.png


! 14!

2.$Wrong$way$$We$believe$a$ rule$change$ that$will$make$ the$network$businesses$better$ reflect$ the$cost$of$providing$services$to$individual$consumers$can$benefit$consumers.$$The$AEMC$recently$ published$ a$ draft$ rule$ determination$ outlining$ the$ rule$ change$ and$ to$highlight$the$importance$of$this$change$the$Executive$Summary$stated:$$

“This$ draft$ determination$ sets$ out$ significant$ changes$ to$ the$ rules$ on$ how$distribution$network$businesses$develop$and$structure$their$prices.$Network$prices$are$responsible$for$around$50$per$cent$of$the$electricity$prices$paid$by$residential$consumers$on$average$across$Australia.”25$$

$$$$$While$we$agree$that$network$pricing$changes$are$important,$we$also$believe$that$the$vast$generalisation$of$networks$counting$for$50%$of$the$bill$also$drives$governments$narrow$focus$on$“fixing$the$network$issues”.26$$$Just$ because$ the$ framework$ for$ energy$ retail$ markets$ are$ based$ on$ competition$rather$than$regulation,$the$market$arrangements$are$still$crucial$to$ensure$that$retail$competition$ is$ effective$ and$deliver$ efficient$prices$ to$ consumers.$ In$our$ view,$ the$market$arrangements$currently$in$place$for$deregulated$retail$markets$do$not$deliver$these$benefits$and$intervention$is$needed.$$$$$$The$ AEMC$ has$ stressed$ the$ complexity$ involved$in$estimated$gross$and$net$ retail$margins$due$to$the$various$assumptions$such$analyses$contain.27$We$ acknowledge$ that$ the$ analysis$ presented$ in$charts$ 5$ and$ 6$ above$ is$ based$ on$ imperfect$assumptions$in$regards$to$wholesale$costs,$green$scheme$ costs,$ and$ to$ a$ certain$ extent,$ smart$meter$ costs.$We$ nonetheless$ believe$ that$ an$ imperfect$ analysis$ is$ better$ than$ no$analysis,$ and$ that$ imperfect$ analysis$ can,$ and$ should,$ be$ used$ as$ an$ indicator$ for$further$investigation.$$$$$Another$recent$report$by$the$AEMC,$assessed$the$effectiveness$of$competition$in$all$NEM$jurisdictions$and$while$it$noted$that$previous$studies$had$found$that$the$gross$retail$margin$appeared$to$be$higher$in$Victoria$compared$to$other$jurisdictions,$the$report$stated$that$this$issue$was$outside$the$scope$of$this$review:$$$

“It$ was$ not$ within$ the$ scope$ of$ this$ NEMEwide$ competition$ review$ to$extensively$analyse$net$retailer$margins$in$Victoria$or$consider$specific$policy$interventions.$ Estimating$ net$ margins$ is$ a$ complex$ and$ resourceEintensive$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!25$AEMC,$Distribution%Network%Pricing%Arrangements,$Draft$Rule$Determination,$28$August$2014,$p$i$26$The$Council$of$Australian$Governments$(COAG)$and$the$NSW$regulator,$IPART,$requested$the$AEMC$to$undertake$this$rule$change.$27$AEMC,$2014%Retail%Competition%Review,$Final$Report,$22$August$2014,$p$175!

“In$our$view,$the$market$arrangements$currently$in$place$for$deregulated$retail$markets$do$not$deliver$these$benefits$and$intervention$is$needed.”$

!


! 15!

task$ that$ is$ prone$ to$ error$ due$ to$ the$ assumptions$ that$ are$ required$ to$ be$made.”28$$

$We$agree$that$analysing$retail$margins$ in$a$deregulated$market$ is$an$onerous$task.$Furthermore,$we$stress$ that$ the$above$analysis$does$not$assess$ retail$margins,$but$retail$costs$to$consumers$(which$include$margins).$That$said,$we$do$not$understand$how$the$AEMC$can$be$ tasked$to$undertake$an$effectiveness$of$competition$review$without$assessing$retail$costs/margins.$The$cost$of$retail$in$deregulated$markets$has$become$ the$ elephant$ in$ the$ room$ that$ governments$ and$ regulators$ continue$ to$ignore.$$As$reiterated$in$the$AEMC$report,$the$vision$for$NEM$reform$in$relation$to$retail$competition$and$price$deregulation$is$that:$$

“As$markets$evolve,$competitive$pressures$should$result$in:$$• prices$that$trend$to$the$efficient$cost$of$supplying$a$service;$$• a$quality$of$service$that$matches$customers'$expectations;$and$$• a$choice$of$products$and$services$that$match$customers'$preferences.”29$$

$After$ 12$ years$ of$ retail$ competition$ and$ 5$ years$ of$ price$deregulation$in$Victoria$you$would$thus$expect$to$see$trends$that$support$ this$vision.$The$Vinnies’$TariffETracking$project$does$not$collect$ information$about$quality$of$service,$but$ it$does$observe$trends$in$relation$to$prices$and$product$choice.$As$ already$ discussed,$ we$ do$ not$ believe$ the$ competitive$pressures$ have$ resulted$ in$ prices$ trending$ to$ the$ efficient$cost$of$retail$services$but$our$data$does$show$that$there$has$been$a$steady$increase$in$product$choice.$$$$$Product$ differentiation$ and$ consumer$ choice$ are$ positive$ aspects$ of$ markets.$$However,$we$do$not$believe$product$differentiation$and$ choice$ in$ itself$ can$ justify$market$arrangements$that$do$not$deliver$effective$competitive$pressures$on$price.$$$The$AEMC$report$found$that$customer$satisfaction$with$the$ACT’s$dominant$retailer,$ActewAGL,$ was$ high$ and$ argued$ that$ the$ “[l]ow$ awareness$ of$ options$ in$ the$electricity$and$gas$market$ is$ reflected$ in$ low$reported$switching$rates”.30$However,$the$AEMC$research$also$found$that:$$

“ACT$ residents$ reported$high$ levels$ of$ interest$ in$ looking$ for$ a$ better$ deal,$but$ very$ few$ are$ actually$ shopping$ around.$ Ten$ per$ cent$ of$ residential$customers$reported$investigating$their$options$in$the$past$twelve$months.”31

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!28$AEMC,$2014%Retail%Competition%Review,$Final$Report,$22$August$2014,$p$174$29$Ibid,$p$18!30$Ibid,$p$127!31$Ibid,$p$126!

$“The$cost$of$retail$in$deregulated$markets$has$become$the$elephant$in$the$

room$that$governments$and$regulators$continue$

to$ignore.”$!


! 16!

In$our$view,$this$could$also$indicate$that$ACT$consumers$actually$would$like$to$have$a$choice$ in$ the$ energy$ retail$ market$ but$ that$ they$ quickly$ realise$ that$ the$ options$available$ to$ them$ are$ not$ worth$ considering.$ The$ Vinnies’$ TariffETracking$ project$found$that$average$consumption$households$in$the$ACT$would$not$be$able$to$reduce$their$electricity$costs$by$switching$to$a$market$offer$(including$discounts$and$pay$on$time$ discounts).$ Furthermore,$ as$ ACT$ market$ offers$ contain$ significant$ Early$Termination$Fees$if$cancelling$contracts$prior$to$the$expiry$date,$there$is$currently$no$good$reason$for$a$residential$consumer$to$shop$around$even$if$they$are$aware$of$the$opportunity$to$do$so.32$ A$ quick$ read$ of$ community$ news$ blogs$ such$ as$ the$RiotACT$ in$ the$ ACT,$ indicates$ that$ ACT$ consumers$ are$frustrated$by$the$lack$of$choice$but$that$they$also$realise$that$ they$ pay$ less$ compared$ to$ those$ “across$ the$border”.33$Consumer$choice$theory$talks$about$revealing$consumers’$ preferences$ but$ the$ theory$ can$ of$ course$only$ be$ properly$ tested$ within$ a$ market.$ Victorian$consumers$are$not$able$to$show$a$preference$for$the$lack$of$ choice$ in$exchange$ for$ACT’s$ lower$electricity$prices,$all$they$can$do$in$terms$of$revealing$their$preferences$is$switching$ between$ market$ offers$ in$ a$ market$ where$prices$continue$to$increase.$$$It$ is$also$unreasonable$to$expect$that$consumers$in$regulated$retail$markets$should$be$confident$that$deEregulation$would$not$result$in$higher$prices$when$the$evidence$is$ questionable$ in$ other$ jurisdictions.$ Why$ would$ ACT$ consumers$ give$ the$ ACT$Government$ the$ mandate$ to$ deregulate$ if$ it$ looks$ like$ regulation$ gives$ a$ better$price?$$$$$$$The$ AEMC$ report$ shows$ that$ consumers$ are$ concerned$ about$ the$ cost$ of$ energy.$NEM$wide$81%$of$residential$survey$respondents$stated$that$they$were$quite$or$very$concerned$ about$ future$ energy$ prices.$ Jurisdictionally,$ the$ level$ of$ concern$ was$lowest$in$the$ACT$(74%)$and$highest$in$regional$South$East$Queensland$(87%).34$$$Chart$8$below$shows$average$accumulated$electricity$expenditure$from$2009$to$2014$(5$ year$ period)$ for$ households$ consuming$ 6,000kWh$ per$ annum.$ It$ shows$ that$households$in$country$NSW$(Essential)$would$have$spent$over$$13,000$on$electricity$bills$ during$ that$period.$By$ comparison,$households$ in$ the$ACT$ (and$bordering$ the$Essential$ network)$would$ have$ spent$ approximately$ $5000$ less.$ It$ also$ shows$ that$households$have$paid$significant$amounts$for$nonENUOS$costs.$Victorian$and$South$Australian$households$have$paid$between$$7,000$and$$8,000$for$nonENUOS$related$electricity$ costs$ during$ this$ period.$ This$ high$ level$ of$ household$ expenditure,$combined$ with$ the$ concerning$ retail$ cost$ trends$ shown$ in$ charts$ 5$ and$ 6$ above,$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!32$St$Vincent$de$Paul$Society,$ACT%Energy%Prices%July%2013%–%July%2014,%An%Update%report%on%the%ACT%TariffLTracking%project$by$May$Mauseth$Johnston$(July$2014)$33$See,$for$example,$http://theEriotact.com/bestEelectricityEdealEinEact/78344$34$AEMC,$2014%Retail%Competition%Review,$Final$Report,$22$August$2014,$p$141$and$70$

“Product$differentiation$and$consumer$choice$are$positive$aspects$of$markets.$$However,$we$do$not$believe$product$differentiation$and$choice$in$itself$can$justify$market$

arrangements$that$do$not$deliver$effective$competitive$pressures$

on$price.”!


! 17!

warrant$ a$ thorough,$ albeit$ complex,$ investigation$ into$ retail$ costs/margins$ in$deregulated$retail$markets.$$$$$Chart$8$Accumulated$NUOS$costs$from$July$2009$to$July$2014$(excl$GST)$and$accumulated$nonENUOS$costs$from$July$2009$to$July$2014$$(incl$GST)$for$electricity$regulated/standing$offers,$6,000kWh$per$annum,$single$rate35$$

$$$$$$$$$$$$$$$$$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!35$In$Victoria$the$standing$offer$bill$is$based$on$the$average$incumbent$(AGL,$Origin$and$Energy$Australia)$standing$offer$as$of$July$every$year.$In$NSW$the$retail$bill$is$based$on$the$regulated$rate$from$2009$to$2013$and$the$incumbent$retailer’s$standing$offer$in$each$of$the$network$areas$(Origin$or$Energy$Australia)$as$of$July$2014.$In$South$Australia$the$retail$bills$are$based$on$the$regulated$rates$as$well$as$AGL’s$standing$offer$post$retail$deregulation.$In$all$other$jurisdiction$the$retail$bills$are$based$on$the$regulated$rates.$Note$that$as$United$Energy’s$NUOS$charge$has$been$a$seasonal$tariff$over$the$last$three$years,$the$United$Energy$consumption$used$in$these$calculations$is$thus$based$on$a$proportional$allocation$of$a$5$month$summer$tariff$and$a$7$month$nonEsummer$(offEpeak)$rate.$$

0!

2,000!

4,000!

6,000!

8,000!

10,000!

12,000!

14,000!

Total!NUOS!(5!years)! Total!NonRNUOS!(5!years)!


! 18!

3.$Go$back?$$We$ believe$ that$ consumers$ generally$ prefer$ to$ have$ choice.$ Furthermore,$ retail$regulation$ is$no$guarantee$ for$ lower$prices.$Queensland,$ the$ACT$and$Tasmania$all$have$regulated$rates,$but$it$is$only$the$ACT$that$has$had$consistently$lower$electricity$rates$compared$to$other$jurisdictions.$$$$The$TariffETracking$project$has$shown$that$there$are$savings$to$be$made$by$shopping$around$in$most$jurisdictions$(ACT$and$Tasmania$being$the$exemptions).$$In$Victoria$a$typical$ consumption$ household$ can$ save$ $700$ E$ $1,000$ per$ annum$ (depending$ on$network$ area)$ by$ switching$ from$ a$ standing$ offer$ to$ the$ best$ market$ offer.$ The$difference$between$best$and$worst$market$offers$ is$approximately$$500$E$$600$per$annum.36$ In$ South$ Australia,$ a$ typical$ consumption$ household$ can$ save$approximately$ $500$ per$ annum$ by$ switching$ from$ a$ standing$ offer,$ or$ the$ worst$market$offer,$ to$ the$best$market$offer.37$ In$NSW$a$ typical$ consumption$household$can$save$$550$E$$700$per$annum$(depending$on$network$area)$by$switching$from$the$worst$ standing$ offer$ to$ the$ best$ market$ offer.$ The$ difference$ between$ best$ and$worst$ market$ offers$ is$ approximately$ $350$ E$ $450$ per$ annum.38$ Queensland$consumers$ switching$ from$ the$ regulated$ rates$ to$ the$ best$market$ offer$may$ save$$450$ E$ $475$ per$ annum.$ The$ difference$ between$ best$ and$worst$market$ offers$ is$approximately$$350$per$annum.39$$$$$$That$said,$we$do$not$believe$a$significant$priceEspread$is$a$key$criteria$to$assess$how$effective$ competition$ is$ in$ regards$ to$ delivering$ efficient$ retail$ prices.$ The$ priceEspread,$ i.e.$ potential$maximum$ saving$ that$ can$ be$ achieved$ by$ switching$ includes$outliers.$ In$ Victoria,$ for$ example,$ the$ difference$ between$ the$ best$ and$ the$ worst$market$ offers$ is$ reduced$ to$ between$ $190$ and$ $260$ per$ annum$ (depending$ on$network$area)$ if$we$exclude$ the$single$best$and$single$worst$market$offer.$Chart$9$below$shows$the$annual$price$of$sixteen$Victorian$market$offers$and$that$the$priceEspread$is$a$lot$less$if$we$ignore$the$extremes$on$either$side.$$$$$$$$$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!36!St$Vincent$de$Paul$Society,$Victorian%Energy%Prices%July%2014,%An%update%report%on%the%Victorian%TariffLTracking%Project$by$May$Mauseth$Johnston$(July$2014)$p,$42!37!St$Vincent$de$Paul$Society,$South%Australian%Energy%Prices%July%2014,%An%update%report%on%the%South%Australian%TariffLTracking%Project$by$May$Mauseth$Johnston$(August$2014)$p,$6!38!St$Vincent$de$Paul$Society,$NSW%Energy%Prices%July%2013%L%July%2014,%An%update%report%on%the%NSW%TariffLTracking%Project$by$May$Mauseth$Johnston$(August$2014)$p,$7!39!St$Vincent$de$Paul$Society,$Queensland%Energy%Prices%July%2013%L%July%2014,%An%update%report%on%the%Queensland%TariffLTracking%Project$by$May$Mauseth$Johnston$(July$2014)$p,$7!


! 19!

Chart$9$PriceEspread$for$sixteen$Victorian$electricity$market$offers$in$each$network$area$post$July$2014$(incl$GST),$including$discounts$and$pay$on$time$discounts$E$Households$consuming$4,800kWh$per$annum$(single$rate)40$$

$$$We$can$always$encourage$consumers$to$look$for$a$better$deal$and$switch$retailers$to$save,$ but$ the$ litmus$ test$ for$ effective$ retail$ competition$ must$ be$ the$ retail$component$ of$ bills.$ Both$ retail$ costs$ and$ retail$ margins$ are$ relevant$ for$ such$assessments.$ Excessive$margins$would$ naturally$ be$ the$ primary$ concern$ but$ if$ the$cost$ of$ providing$ retail$ services$ is$ spiralling$ and$ existing,$ or$ new,$ retailers$ do$ not$identify$opportunities$to$reduce$these$costs,$this$could$indicate$that$the$competitive$pressures$ are$ too$ weak.$ It$ could$ also$ indicate$ that$ the$ market$ and/or$ regulatory$frameworks$are$unsuitable$for$competitive$retail$markets.$If$the$latter$is$the$case,$we$face$a$significant$challenge$in$ensuring$that$consumer$protections$are$adequately,$as$well$ as$ cost$ effectively,$ delivered$within$ a$ competitive$market$model.$ The$ cost$ of$retailing$is$important$as$it$can$have$a$significant$impact$on$households’$energy$bills$but$energy$is$an$essential$service$and$the$need$for$adequate$consumer$protections$in$order$to$ensure$access$cannot$be$underestimated.$We$do$not$propose$any$scaleEback$of$existing$consumer$protections$or$assistance$schemes,$we$are$however$open$to$a$discussion$about$effective$and$efficient$delivery$models.$$$$$The$ idea$behind$ensuring$ that$ retailers$will$not$misuse$ their$market$powers$ in$ the$retail$ markets$ appears$ to$ be$ anchored$ in$ governments’$ ability$ to$ waive$ the$ reEregulation$stick.$That$is,$as$long$as$governments$retain$the$powers$to$reEregulate$the$retailers$ will$ behave$ and$ coEoperate$ to$ avoid$ such$ an$ outcome.$ $ However,$ we$cannot,$and$should$not,$expect$retailers$to$“discipline$themselves”$in$order$to$enjoy$the$benefits$of$deregulation.$The$Victorian$retailers$are$currently$ like$kids$ in$a$ lolly$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!40$This$chart$was$first$published$in!St$Vincent$de$Paul$Society,$Victorian%Energy%Prices%July%2014,%An%update%report%on%the%Victorian%TariffLTracking%Project$by$May$Mauseth$Johnston$(July$2014)!

900!1000!1100!1200!1300!1400!1500!1600!1700!1800!1900!2000!

0! 2! 4! 6! 8! 10! 12! 14! 16!

$!per!annum!

Retail!offers!

SP!

PC!

Jen!

UE!

CP!


! 20!

shop$and$it$is$the$role$of$governments$and$regulators$to$set$the$parameters$that$can$discipline$the$market.$$$$Firstly,$ we$ encourage$ governments$ and$ regulators$ to$ actually$ acknowledge$ that$there$ is$a$problem.$Rather$than$ just$ looking$for$evidence$that$support$the$claim$of$effective$competition,$such$as$high$switching$rates,$government$and$regulators$must$be$open$to$potential$findings$that$do$not$support$this$claim.$$Consumers$should$not$be$expected$to$accept$a$deregulation$policy$if$it$does$not$look$like$it$is$in$their$long$term$benefit.$$Secondly,$ we$ recommend$ that$ governments$ and$regulators$act$with$urgency.$Victoria$was$deregulated$five$and$a$half$years$ago,$South$Australia$one$and$a$half$ years$ ago,$ NSW$ two$ months$ ago$ and$Queensland$ will$ be$ in$ ten$ months.$ So$ even$ if$ the$problem$ currently$ only$ appears$ to$ exist$ in$ Victoria,$there$ is$no$ reason$ to$believe$ that$ the$same$will$not$occur$ in$ other$ jurisdictions$ when$ fully$ deregulated$(e.g.$when$transitional$tariff$arrangements$expire).$$$$$$Apart$ from$ the$ obvious$ need$ to$ monitor$ retail$ costs$ and$ margins$ in$ deregulated$markets$there$are$also$some$urgent$amendments$needed$to$the$market$design$and$regulatory$framework.$$$3.1$Recognise$that$standing$offers$are$important$$$We$do$not$encourage$consumers$to$stay$on$a$standing$offer$in$a$deregulated$retail$market$ but$well$ structured$ standing$ offer$ arrangements$ can$ discipline$ the$market$and$increase$transparency.$$We$ have$ previously$ raised$ concerns$ about$ the$ Victorian$ standing$ offer$ gazettal$arrangements.41$ The$ legislation,$which$ simply$ stipulates$ that$ retailers$may% change$their$standing$offers$every$six$months,$is$insufficient.42$Firstly,$this$allows$retailers$to$determine$their$price$based$on$what$their$competitors$offer$and,$secondly,$there$is$no$ incentive$ for$ retailers$ to$ change$ their$ standing$ offer$ prices$ in$ an$ environment$where$ prices$ are$ falling.$ The$ Essential$ Services$ Commission$ (ESC)$ touched$ on$ this$aspect$of$the$legislation$in$a$recent$report$pertaining$to$the$repeal$of$the$carbon$tax.$The$ESC$explained$that$the$legislation:$$

“[I]mpose$ time$ restrictions$ on$ when$ a$ retailer$ can$ vary$ its$ standing$ offer$tariff,$ which$ ensures$ a$ level$ of$ price$ stability$ for$ standing$ offer$ customers.$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!41$We$first$raised$this$issue$in$January$2012.$See$St$Vincent$de$Paul$Society,$Victorian%Energy%Prices%July%2011LJanuary%2012,%An%update%report%on%the%Victorian%TariffLTracking%Project$by$May$Mauseth$Johnston$(January$2012)$and$again$in$St$Vincent$de$Paul$Society,$Victorian%Energy%Prices%July%2014,%An%update%report%on%the%Victorian%TariffLTracking%Project$by$May$Mauseth$Johnston$(July$2014)$$42$As$per$section$35$Electricity$Industry$Act$2000(EIA)$and$section$42$of$the$Gas$Industry$Act$2001$(GIA)$

“Rather$than$just$looking$for$evidence$that$support$the$

claim$of$effective$competition,$such$as$high$

switching$rates,$government$and$regulators$must$be$open$to$potential$findings$that$do$not$support$this$claim.”!


! 21!

However,$ this$ could$ result$ in$ standing$ offer$ customers$ not$ immediately$receiving$a$benefit$from$the$removal$of$the$carbon$price,$depending$on$when$a$retailer$last$varied$its$standing$offer$tariff.”43$$

$$The$ legislation$appears$ to$have$been$drafted$based$on$ the$assumption$ that$prices$will$ always$ increase$ and$ that$ a$minimum$ timeframe$ of$ six$months$ between$ price$changes$would$safeguard$consumers.$However,$the$wholesale$price$of$electricity$has$decreased$ in$ recent$ years$ and$ the$ current$ legislation$ serves$ as$ an$ impediment$ to$lower$retail$prices.$$$In$ Victoria,$ none$ of$ the$ incumbent$ retailers$ have$ gazetted$ new$ electricity$ or$ gas$market$ offers$ since$ December$ 2013$ and$ two$ retailers$ (Red$ and$ Neighbourhood)$have$not$changed$their$standing$offer$rates$since$December$2012.44$$$The$AEMC’s$competition$review$noted$that:$$

“The$ requirement$ to$ provide$ a$ standing$ offer$ may$ create$ an$ artificial$benchmark$ for$ retailers'$ pricing$ strategies$ and$ can$ make$ it$ difficult$ for$customers$to$compare$offers.$This$issue$may$warrant$further$investigation.”45$$

$We$agree$with$the$sentiment$that$current$arrangements$make$it$difficult$to$compare$offers$ but$we$ believe$ the$ only$ solution$ to$ this$ issue$ is$ to$ strengthen$ the$ standing$offer$ framework.$Currently,$a$standing$offer$may$create$an$artificial$benchmark$for$retailers’$ pricing$ strategies$ but$ this$ can$ be$ fixed,$ and$ if$ done,$ standing$ offers$ can$provide$an$actual$benchmark$ for$ retailers’$pricing$strategies$and$make$ it$easier$ for$customers$to$compare.$$As$noted$by$one$consumer$surveyed$for$the$AEMC$study:$$

“It's$all$too$confusing.$It's$like$phone$companies.$It's$all$different$but$there's$no$base.$(Maroochydore)”46$$

$As$previously$recommended,$we$urge$the$Victorian$ Government$ to$ change$ these$arrangements.$ We$ propose$ an$arrangement$of$fixed$gazettal$dates$(e.g.$1$June$ and$ 1$ December$ every$ year$ with$tariffs$ taking$ effect$ one$ month$ later)$where$ retailers$ can$ change$ or$ maintain$!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!43$Essential$Services$Commission,$Variations%to%Standing%Offer%Tariffs%Following%the%Removal%of%the%Carbon%Price$–$Final$Decision$Paper$(July$2014),$p$3$$44$Red$and$Neighborhood$Energy$did$gazette$new$standing$offers$in$August$2014$to$adjust$consumption$rates$for$the$repeal$of$the$carbon$tax$(as$required$by$legislation).$Note$that$Momentum$has$gazetted$inaugural$gas$standing$offers$and$two$new$retailers$(Blue$and$Commander)$not$yet$included$in$the$TariffETracking$project$gazetted$their$inaugural$electricity$standing$offers.$Also,$some$retailers$have$separately$gazetted$flexible$pricing$(time$of$use)$offers$at$a$more$recent$point$in$time.$45$AEMC,$2014%Retail%Competition%Review,$Final$Report,$22$August$2014,$p$viii!46$Ibid,$p$21!

“Currently,$a$standing$offer$may$create$an$artificial$benchmark$for$retailers’$

pricing$strategies$but$this$can$be$fixed,$and$if$done,$standing$offers$can$provide$

an$actual$benchmark$for$retailers’$pricing$strategies$and$make$it$easier$for$

customers$to$compare.”$!


! 22!

their$ prices$ but$ are$ required$ to$ explain$ the$ rationale$ for$ their$ decision$ in$ a$supplementary$statement.$This$supplement$should$contain$statements$of$reason$for$why$prices$are$moving$the$way$they$are,$i.e.$movements$in$wholesale$costs,$network$costs$or$retail$costs.$Just$like$regulated$monopolies$need$to$justify$their$costings$to$a$regulator,$retailers$that$are$free$to$set$their$own$price$should$justify$their$costings$to$the$public.47$$$$We$also$recommend$that$the$South$Australian,$NSW$and$Queensland$Governments$introduce$ these$ standing$ offer$ arrangements$ and$ that$ the$ AEMC$ take$ a$ stronger$interest$ in$ adequate$arrangements$ (besides$more$ consumer$ information)$ for$ retail$markets$postEderegulation$when$undertaking$effectiveness$of$competition$reviews.$$We$ envisage$ these$ changes$will$ deliver$ the$ following$ benefits$ to$ competition$ and$consumers:$$

A)$ It$ provides$ consumers$ with$ a$ fair$ and$ transparent$ indication$ of$ each$retailer’s$ maximum$ price.$ As$ this$ price$ is$ set$ every$ six$ months,$ and$independently$of$what$other$retailers$offer,$consumers$can$use$the$standing$offer$prices$ (the$base$price)$ as$a$ tool$ to$assess$ the$price,$ and$discounts,$of$market$offers.$$$As$2nd$tier$retailers$have$very$few,$if$any,$customers$on$standing$offers,$they$have$very$few$reasons$to$publish$new$ones$(and$there$ is$a$cost$attached$to$gazetting$ standing$offers).$ The$ three$ incumbents$ do$ still$ have$ a$ reasonable$number$ of$ standing$ offer$ customers$ and$ thus$ have$ an$ incentive$ to$ publish$new$ ones% if$ costs$ go$ up.$ As$ such,$ it$ is$ currently$ impossible$ to$ ascertain$whether$an$individual$retailer’s$standing$offer$rates$bear$any$relation$to$the$rates$ they$ charge$ existing$market$ offer$ customers$ or$ advertise$ to$ potential$new$customers.$$$$$A$Victorian$consumer$searching$for$offers$in$July$2014$would$not$have$been$able$ to$ assess$ whether$ the$ standing$ offer$ listed$ was$ the$ “basic”$ or$ worst$price$for$that$specific$retailer,$nor$would$she$be$able$to$use$the$standing$offer$to$quickly$compare$prices$between$retailers.$ $ Instead,$she$would$have$been$faced$with$various$market$offers$that$varied$in$base$rates,$discounts,$pay$on$time$discounts,$contract$terms$etc.$$$$With$ our$ proposal$ in$ place,$ consumers$ could$ check$ base$ rates$ first$ and$investigate$ whether$ the$ retailer$ has$ contract$ terms,$ discounts$ or$ other$incentives$that$the$consumer$would$like$to$sign$up$for.$$$

$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!47$We$also$made$this$recommendation$in$November$2013.$See$St$Vincent$de$Paul$Society,$Victorian%Energy%Prices%September%2013,%An%update%report%on%the%Victorian%TariffLTracking%Project$by$May$Mauseth$Johnston$(November$2013),$in$Dufty,$G$and$Johnston,$MM$The%NEM%–%Is%there%a%devil%in%the%retail?%(December$2013)$and$again$in$St$Vincent$de$Paul$Society,$Victorian%Energy%Prices%July%2014,%An%update%report%on%the%Victorian%TariffLTracking%Project$by$May$Mauseth$Johnston$(July$2014)$$$


! 23!

B)$It$allows$for$a$more$transparent$and$public$debate$about$energy$prices$and$potential$savings.$Standing$offers$allow$consumer$groups,$media$and$private$entities$ (independently$ of$ commercial$ arrangements$ with$ retailers)$ to$analyse$ and$ publicly$ comment$ on$ market$ developments.$ This$ increases$transparency$and$stimulates$consumer$engagement$with$the$market.$$We$do$not$want$ customers$ to$ become$ ‘sticky’$ but$we$ also$ realise$ that$ consumers$are$unlikely$ to$ shop$around$ for$new$energy$ contracts$ several$ times$ a$ year.$Regular$ public$ debate$ about$ the$market$ and$potential$ savings$ twice$ a$ year$can$prompt$consumers$that$have$not$switched$for$a$while$to$look$for$a$better$deal.$$$

$$3.2$Distinguish$between$positive$product$differentiation$and$unnecessary$confusion$$Customer$ confusion$ is$ a$ real$ concern$ for$ the$ energy$ retail$ markets.$ The$ AEMC$report,$for$example,$stated$that:$$

“In$ the$ Victorian$ forums,$ a$ key$ message$ was$ that$ energy$ offers$ were$ too$numerous$and$hard$to$compare$because$they$were$all$presented$differently$and$in$ways$that$were$hard$to$understand.”48$$

$Residential$energy$consumers$are$not$a$homogenous$group$of$customers.$How$much$they$use,$when$they$use,$how$easily$they$can$pay$and$how$they$prefer$to$pay$are$just$some$ of$ the$ factors$ that$ vary$ between$ them.$ As$ such,$ we$ are$ reluctant$ to$ call$ a$restriction$on$the$number$of$offers$available.49$That$said,$we$believe$policy$makers$and$regulators$must$address$the$issue$of$consumer$confusion$as$an$urgent$matter.$$$$$The$ terminology$ used$ by$ energy$ retailers$ could$ be$ simplified$ and$ standardised.$While$we$welcome$product$differentiation$such$as$options$around$billing,$tariff$types$and$ communications$method$we$do$not$believe$a$ varied$and$ creative$ language$ to$describe$contract$terms$is$of$any$benefit$to$consumers.$$The$length$of$the$contract$term$and$early$termination$fees$are$key$contract$features$that$ consumers$ will$ look$ for.$ However$ if$ you$ look$ for$ this$ information$ on$ various$Price$ and$ Product$ Information$ Statements$ you$ will$ see$ that$ the$ terminology$ and$clarity$of$these$messages$varies$significantly.$The$below$provides$some$examples.$$$Term$of$Contract:$2$year$fixed$term50$$Agreement$length:$The$agreement$continues$until$you$or$we$end$it.$The$Energy$Plan$period$is$12$months.$At$the$end$of$your$Energy$Plan$the$benefits$of$your$plan$will$end$but$the$agreement$continues.51$$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!48$AEMC,$2014%Retail%Competition%Review,$Final$Report,$22$August$2014,$p$149$49$In$the$UK,$the$regulator$restricted$retailers$to$offer$four$core$tariffs$for$electricity$and$gas$as$part$of$its$“Simpler,$Clearer,$Fairer”$retail$market$reform.$50$From$the$Lumo$Advantage$offer$in$NSW$51$From$the$Origin$Daily$Saver$Plus$offer$in$Queensland$


! 24!

Term$of$contract:$No$fixed$term$Contract$expiry$details:$No$term$contracts$do$not$expire52$Term$of$contract:$Evergreen$with$fixed$benefit$period.$Contract$expiry$details:$The$Benefit$Term$for$this$plan$is$for$3$years.$We$will$provide$you$with$notice$of$your$options$prior$to$the$end$of$the$Benefit$Term.$Your$contract$will$continue$until$it$is$ended$by$either$party.53$$$A$Market$Contract$will$show$the$start$date$and$the$end$date$in$the$schedule$to$the$Market$Contract.$A$customer$may$terminate$the$Market$Contract$early$by$giving$not$less$than$20$business$days’$notice$in$writing$and$paying$an$early$termination$fee$of$$20.00$(including$GST)$(an$additional$early$termination$fee$may$apply$but$will$be$limited$to$the$proErata$costs$of$any$incentive$provided$under$your$Market$Contract).54$$$SmilePower$is$more$than$just$renewable$energy$generated$from$nature.$It$is$renewable$energy$with$exceptional$rates$and$flexibility$of$12,$24$or$36$month$contracts.$So$it’s$sure$to$make$you$smile.55$$$24$month$contract$term56$$Benefit$term:$The$Benefit$Term$for$this$plan$is$for$3$years.$We$will$provide$you$with$notice$of$your$options$prior$to$the$end$of$the$Benefit$Term.$Your$contract$will$continue$until$it$is$ended$by$either$party.$We$also$reserve$the$right$to$review$the$continuation$of$any$promotional$discounts$(in$addition$to$those$shown$on$this$sheet)$12$months$after$they$are$applied$to$your$account;$and$charge$an$additional$exit$fee$(if$applicable)$to$recover$the$cost$of$the$value$of$any$campaign$rewards$you$may$have$received$as$part$of$this$plan$if$you$leave$within$12$months$of$the$start$of$your$Benefit$Term.57$$$Evergreen$with$fixed$benefit$period.$At$the$end$of$the$1$year$Fixed$Benefit$Period,$the$energy$plan,$including$all$applicable$discounts$and$account$credits,$will$continue$for$a$further$year,$unless$we$advise$you$otherwise$or$your$energy$plan$is$terminated.$An$early$termination$fee$only$applies$for$the$first$1$year$fixed$benefit$period.58$$$Term$of$contract:$1$year$fixed$term$Contract$expiry$details:$Energy$agreement$period$is$12$months59$$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!52$From$Dodo’s$offer$in$NSW$53$From$the$Energy$Australia$Every$Day$Saver$offer$in$NSW$54$From$the$Q$Energy$Freedom$Home$offer$in$Victoria$55$From$the$Momentum$Smile$Power$offer$in$Victoria$56$From$the$People$Energy$On$time$saver$offer$in$Victoria$57$From$the$Energy$Australia,$Everyday$Saver$offer$in$Victoria!58$From$the$AGL$Select$offer$in$Victoria$59$From$the$Q$Energy$Home$Discounter$offer$in$South$Australia$


! 25!

No$term$contract:$Enter$a$“No$Term”$contract$and$receive$20%$Pay$on$Time$Discount$off$your$electricity$consumption$Early$Termination$or$Exit$Fees:$Termination/Exit$fees$apply$do$not$apply$to$“no$term”$contracts$(sic).60$$$The$template$provided$by$the$AER$contains$one$comment$box$for$“Term$of$contract”$next$ to$one$ for$“Contract$expiry$details”,$and$when$used$ this$ template$does$make$things$ clearer.$ Click$ Energy’s$ example$ below$ is$ a$ clear$ and$ efficient$ way$ of$communicating$that$the$contract$has$no$fixed$term.$$Term$of$contract:$No$fixed$term$Contract$expiry$details:$N/A61$$Language$such$as$evergreen$and$fixed$benefit$period$is$particularly$confusing.$Firstly,$fixed$benefit$period$can$easily$be$interpreted$as$everything$(including$rates)$is$fixed$during$ the$ period,$which$ it$ is$ not.62$ Secondly,$ information$ about$ benefits,$ such$ as$discounts,$ should$ be$ listed$under$ that$ category$ rather$ than$ the$ terms$of$ contract.$Simple$measures$such$as$stating$“We$offer$a$10%$pay$on$time$discount$for$the$next$12$months”$rather$than$discussing$benefit$ terms$could$reduce$consumer$confusion$in$the$retail$market.$$We$ therefore$ recommend$ that$ the$ Energy$ Retail$ Association$ of$ Australia$ consult$with$ its$ members$ and$ stakeholders$ to$ develop$ a$ code$ or$ guideline$ for$ clear$ and$efficient$terminology$to$communicate$key$market$contract$features$to$customers.$$$3.3$Standardise$presentations$of$cost$and$charges$on$bills$and$offers$$Standardisation$ of$ the$ terminology$ used$ to$ describe$ contract$ terms$ is$ one$way$ of$alleviating$ customer$ confusion,$ another,$ and$ equally$ important$ change,$ is$ to$standardise$ the$ presentation$ of$ costs$ and$ charges$ on$ both$ bills$ and$ offers.$$Furthermore,$ comparison$ services$ offered$ by$ governments$ and$ regulators$ should$ensure$that$the$offers$are$presented$in$the$same$standardised$way.$$To$ illustrate,$ a$ customer$ in$Melbourne’s$ Citipower$ area$ received$ the$ following$bill$from$Click$Energy$in$February$2014.63$$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!60$From$Dodo’s$offer$in$South$Australia$61$From$the$Click$Superior$offer$in$Victoria$62$See$Consumer$Action$and$Consumer$Utilities$Advocacy$Centre’s$Fix$it$campaign$at$www.fixit.org.au!63$Customer$profile$is$fictional$and$intended$only$to$illustrate$how$a$search$and$switching$process$may$progress.$The$bill$and$offers$are$real$and$correct$as$of$February$2014.$$


! 26!

$$She$had$just$moved$to$Melbourne$from$country$Victoria$to$start$in$her$first$full$time$job.$She$was$renting$a$small$apartment$that$was$costing$her$40%$of$her$take$home$income$so$she$was$desperate$to$find$ways$to$reduce$her$costs.$She$was$upset$about$her$ high$ “fixed$ daily$ charge”$ (being$ 77%$ of$ her$ bill)$ and$ decided$ to$ look$ at$ other$retail$offers$in$her$area.$$The$first$retailer$she$went$to$was$Origin$Energy.$Looking$at$their$Price$and$Product$Information$ Statement$ (PPIS)$ she$ become$ somewhat$ confused$ about$ Click’s$ step$increases$compared$to$Origin’s,$the$way$the$supply$charge$was$presented$on$her$bill$compared$to$Origin’s$PPIS,$and$wondered$whether$there$was$any$significance$to$her$current$supply$charge$being$“fixed”$while$Origin’s$did$not$appear$to$be.$$

$$$She$continued$her$search,$and$the$next$offer$she$looked$at$was$from$Red$Energy.$$It$took$ her$ a$ while$ to$ establish$ exactly$ what$ prices$ to$ compare$ but$most$ of$ all$ she$wondered$whether$a$ ‘Service$ to$Property’$ charge$ is$ the$ same$as$what$Click$ calls$ a$‘Fixed$daily$supply$charge’.$The$charge$was$noticeably$lower$than$Click$(and$Origin’s)$supply$ charges$ so$ she$ became$ suspicious$ that$ this$ charge$ may$ be$ something$different.$$$

61029933501 ACTUALNMI Reading Type Tariff Type

Meter number Current Reading

A4465030 E1 16

Meter number Current Reading

A4465030 E1 25

18/-117 BOUVERIE Street CARLTON VIC 3053

Supply Address

Concession Registered Next Schedule Read DateLife Support RegisteredNo No 01 April 2014

Index Reading 1695.332000

Previous Reading

1737.264000

Current Reading

UsageDetails (28/01/2014 - 26/02/2014) GSTRate (Ex. GST) Total $(Ex. GST) Total $(Inc. GST)

25.44 kWhPeak Usage - Step 1 (A4465030 E1) $0.230000 $5.85 $0.59 $6.4416.49 kWhPeak Usage - Step 2 (A4465030 E1) $0.230000 $3.79 $0.38 $4.17

30 daysFixed Daily Charge (28/01/2014 - 26/02/2014) $1.030000 $30.90 $3.09 $33.99Rounding Adjustment ($0.01) ($0.01)

Sub total NMI: 61029933501 $40.54 $4.05 $44.59

GST this bill $4.05

Charges this bill $44.59

Total AdjustmentsTotal Bill $44.59

just contact any oneof the friendly Click team and we can help you pay your bill over the phone. Just call

directly from your bank account or credit card by completing the direct debit form found atforms at

PAYMENT OPTIONS

Your Payment OptionsCustomer number

158847

Amount Due (inc. GST)

$44.35

1800 77 59 29

Direct Debit Pay

www.clickenergy.com.au

Online Payment using our online paymentfacility at www.clickenergy.com.au

Telephone payment

Telephone and Internet Banking - BPAY Contact your bank credit union or building society to make this payment from you cheque, savings or credit card account.

1588474

26682

Customer Reference number

Biller code

VIC RESIDENTIAL Energy Price Fact Sheet (Effect ive 10 January 2014)ELECTRICITY

CITIPOWER Distribut ion ZoneThe offer set out in this Energy Price Fact Sheet is only available to residential electricity customers who consume less than 160 MWhs of electricity in the relevant distribut ion area with the necessary metering system/ configurat ion. Your charges for the sale and supply of electricity are listed below. The prices are exclusive of any applicable usage discount and apply to customers signing up to this offer from the above effect ive date.

Smart DailySaverPlus

Resident ial Peak Anyt ime (GD/ GR) Unit Excl GST Inc GST

Consumption of first 1020 kWh/ qtr cents per kWh 21.79 23.969

Remaining consumption kWh/ qtr cents per kWh 23.58 25.938Daily Supply Charge cents per day 95.81 105.391

Resident ial 5-Day Time of Use (Winner Tariff GH/ GL) Unit Excl GST Inc GST

Peak - All consumption (7am-11pm AEST, Mon-Fri) cents per kWh 28.19 31.009

Off Peak - All consumption at other t imes. cents per kWh 14.27 15.697Daily Supply Charge cents per day 95.81 105.391

Resident ial Time of Use (Flexible Pricing) Unit Excl GST Inc GST

Peak Consumption (3pm-9pm weekdays, AEST) cents per kWh 29.95 32.945

Shoulder Consumption (7am-3pm, 9pm-10pm, weekdays and 7am-10pm weekends, AEST) cents per kWh 22.07 24.277Off Peak - All Consumption at other t imes. cents per kWh 15.21 16.731

Daily Supply Charge cents per day 95.81 105.391

Dedicated Circuit (Where applicable) Unit Excl GST Inc GST

All consumption cents per kWh 13.81 15.191

Important information

Key Terminology

Discounts

Solar feed-in tariffs

Daily supply charge A charge that applies for supplying electricity to your premises for each day of the billing period, regardless of how much electricity you use.

kWh A 'kWh' stands for kilowatt hour and is the unit of measurement for your electricity bill.

Applicable discounts Any applicable discounts apply to the usage component of the charges only and do not apply to the other components such as the daily supply/ service to property or the green product components.

Direct debit discount A 1% discount on the energy usage charges will apply if your bill is paid by direct debit - see direct debit terms.

Pay on t ime discount A 17% discount on the energy usage charges when you pay your bill in full and by the due date. The Pay on Time discount does not apply to customers on a collect ive billing arrangement, or customers on Power On payment plans (except Power On plans with direct debit).

Energy Monitor An Origin Smart Energy Monitor valued at up to $150, at no addit ional cost when you remain on Smart DailySaver Plus for the term of the Energy Plan. Eligibility criteria apply.

Solar feed-in tariffs Origin offers feed-in tariffs. Please contact us on 1300 791 468 to discuss your eligibility and available tariffs. Further information is also available at www.originenergy.com.au/ 2716/ Feed-in-tariffs.

Origin Energy Retail Limited ABN 22 078 868 425 * Origin Energy (Vic) Pty Limited ABN 11 086 013 283 * Origin Energy Electricity LimitedABN 33 071 052 287 * Origin Energy LPG Limited ABN 77 000 508 369 * Sun Retail Pty Limited ABN 97 078 848 549

GPO Box 1199 Adelaide SA 5001 * Telephone 13 24 63 * Facsimile 1800 132 463 * Web Enquiries originenergy.com.au/ contactus

Page 1 of 2


! 27!

$$The$next$retailer’s$website$she$went$to$was$Powershop.$ $She$was$overwhelmed$by$all$the$different$rates$listed$so$she$decided$to$focus$on$the$supply$charge$first$(as$it$was$ the$ cost$ of$ Click’s$ “Fixed$ daily$ supply$ charge”$ that$ had$ prompted$ this$investigation$ in$ the$ first$ place).$ She$ guessed$ that$ she$ would$ be$ on$ the$ tariff$ that$Powershop$calls$“Anytime$–$Single$rate”$and$noticed$that$the$supply$charge$is$lower$than$Click’s.$However,$ it$also$states$ that$ this$supply$charge$ is$an$average$only.$She$found$this$very$confusing$and$decides$to$look$at$one$of$the$bigger$retailers$instead.$$$

$$$AGL’s$offer$was$easier$to$understand$but$as$the$consumption$charges$were$actually$higher$ than$Click’s$ she$became$uncertain$whether$ the$ slightly$ lower$ supply$ charge$offered$by$AGL$would$make$switching$worthwhile.$She$decided$that$she$would$need$to$calculate$the$cost$of$the$various$rates$for$her$consumption$level.$$$$

Price and Product Information Statement This Price and Product Information Statement provides a summary of the tariff and terms and conditions applicable tothis offer. If you would like further information or are interested in taking up this offer, call 131 806 or email us [email protected]

Residential Offer: Living Energy Saver Connect on a 2 year fixed term contract today and get 10% Pay on Time™ discount on every electricity bill you pay ontime. The Early Termination fee is $20 plus the value of any upfront benefits you receive (as set out on that offer'sterms and conditions). Electricity - Citipower

Pay on Time™ discount Pay on Time™ discounts are off your entire energy bill, not just usage charges. Concessions If you are entitled to any Government rebates or concessions, nothing will change as a result of switching to Red. Variation We may vary your tariff and/or Pay on Time™ discount by providing you with notice of that change. The notice will begiven to you as soon as possible and in any event, no later than your next bill. Eligibility The details presented in this Price and Product Information Statement are for a Residential customer located in theCitipower distribution area(s) with a Single Rate meter type. Methods of Payment Customers can choose to pay their bills by any of our payment options including EvenPay™ where you pay the same,even amount at regular intervals - weekly, fortnightly or monthly. About this Document This Price and Product Information Statement is presented in accordance with the requirements of the EssentialServices Commission (ESC) - the independent regulator of the energy industry in Victoria. For information about theESC's product disclosure requirements, choosing an energy retailer, visit www.esc.vic.gov.au/yourchoice.

Tariff Before Pay on Time™ discount After 10% Pay on Time™ discount

exc GST inc GST exc GST inc GST

Peak Step 1First 11.18 kWh/day

20.0000 c/kWh 22.0000 c/kWh 18.0000 c/kWh 19.8000 c/kWh

Peak Step 2 20.5000 c/kWh 22.5500 c/kWh 18.4500 c/kWh 20.2950 c/kWh

Service to Property 70.0000 c/day 77.0000 c/day 63.0000 c/day 69.3000 c/day

Quote reference #: 32292, as at: 2014-01-07Switch to Red Energy Today. If you have any questions please call us on 131 806Red Energy Pty Ltd, 2 William Street, East Richmond, VIC 3121, T 131 806, redenergy.com.au, ABN 60 107 479 372

Page 1

PSH-CP-30812-MR

Price & Product Information Statement Powershop is designed to give people who pay electricity bills something they’ve never had before - Power.

We give our customers the power of knowing how much electricity they use, of not being shocked by inflated bills and, most of all, the power to buy electricity on their own terms at fair prices.

Product details Unlike most power companies who build a lot of fat into their prices, and smooth it out over the year, Powershop prices go up and down during the year following the cost we pay for wholesale energy. Matching our product prices to wholesale costs reduces our risk so we don't have to charge you extra to fix your rate. This is why we have 12 months of different tariff prices, not just one!

The Powershop Powershop offers some of Australia’s most competitive electricity prices. By also operating an online energy shop, we enable customers to save even more with specials and discounts. For example by regularly taking advantage of our online saver discount you can save an additional 5%. Further details of these products and how to participate in the shop are set out overleaf.

About this document This price and product information statement is presented in accordance with the requirements of the Essential Services Commission (ESC) – the independent regulator of the energy industry in Victoria. For information about choosing an energy retailer, visit: http://www.esc.vic.gov.au/yourchoice !

This product and document is only applicable to Victorian customers in the Citipower distribution area

Powershop - Standard Saver

Standard Saver represents a 15% discount off our Standard Power rates. By regularly purchasing our Online Saver products, an additional 5% discount (20% off in total) is available.

MARKET OFFER FOR RESIDENTIAL / DISTRIBUTION AREA CITIPOWER

Anytime – Single Rate Anytime – Monthly Breakdown

Meter configuration / Tariff Unit Avg. Avg. with

20 % Online Saver

Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Anytime Usage Ex. GST c/kWh 17.92 16.86 16.75 17.26 17.52 17.77 18.28 17.52 17.02 17.52 18.02 18.54 19.30 19.56 Controlled Load Ex. GST c/kWh 11.23 10.57 11.23 Ex. GST

Daily Charge Ex. GST c/day 82.93 78.06 82.93 Ex. GST Anytime Usage Inc. GST c/kWh 19.71 18.55 18.43 18.99 19.27 19.55 20.11 19.27 18.72 19.27 19.82 20.39 21.23 21.52

Controlled Load Inc. GST c/kWh 12.35 11.63 12.35 Inc. GST Daily Charge Inc. GST c/day 91.22 85.87 91.22 Inc. GST

Peak / Off Peak – Two Rate Peak / Off Peak – Two Rate – Monthly Breakdown

Meter configuration / Tariff Unit Avg. Avg. with

20% Online Saver

Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Peak Usage Ex. GST c/kWh 23.06 21.70 21.71 22.29 22.58 22.87 23.45 22.58 21.99 22.58 23.15 23.73 24.74 25.02 Off Peak Ex. GST c/kWh 11.23 10.57 11.23 Ex. GST

Daily Charge Ex. GST c/day 85.03 80.02 85.03 Ex. GST Peak Usage Inc. GST c/kWh 25.37 23.87 23.88 24.52 24.84 25.16 25.80 24.84 24.19 24.84 25.47 26.10 27.21 27.52

Off Peak Inc. GST c/kWh 12.35 11.63 12.35 Inc. GST Daily Charge Inc. GST c/day 93.53 88.02 93.53 Inc. GST

Green Energy You can also choose to take up our green energy offer for an additional 4.95 c/kWh inc GST. See overleaf for details. Eligibility The details presented in this Price and Product Information Statement are for Victorian residential customers located in the Citipower distribution area and subject to verification of your meter configuration. Powershop is currently conducting a beta trial and this market offer is currently generally only available to selected beta trial participants. Further eligibility criteria may apply. See our full terms and conditions at http://www.powershop.com.au/pricing.html for details


! 28!

$$She$ decided$ not$ to$ calculate$ Powershop’s$ complicated$ tariff$ and$ after$ she$ had$figured$out$that$her$low$consumption$level$meant$that$she$would$not$be$affected$by$the$ higher$ consumption$ rate$ even$ when$ the$ step$ increase$ was$ based$ on$ a$ daily$threshold$instead$of$a$monthly$or$quarterly$threshold,$she$was$finally$ready$to$do$the$sums.$Both$AGL$and$Origin$would$cost$her$approximately$$42$per$month,$which$was$just$ marginally$ less$ than$ what$ she$ currently$ paid$ with$ Click.$ By$ switching$ to$ Red$Energy,$ however,$ she$ would$ save$ approximately$ $10$ per$ month.$ She$ decided$ to$examine$ the$ contract$ terms$ more$ closely$ and$ noticed$ that$ both$ AGL$ and$ Origin$offered$ greater$ discounts$ (18%$ and$ 17%$ respectively)$ compared$ to$ Red’s$ 10%.$ It$started$ to$ look$ like$ all$ the$ offers$ would$ be$ pretty$ much$ the$ same$ in$ the$ end.$However,$she$then$saw$the$following$statement$on$AGL’s$PPIS:$“The$discount$does$not$ apply$ to$ fixed$daily$ energy$ supply$ charges”.$ This$was$ important,$ as$ the$ supply$charge$ was$ such$ a$ large$ component$ of$ her$ bill.$ She$ checked$ Origin’s$ and$ their$discount$did$not$ apply$ to$ supply$ charges$ either.$ Red’s$ 10%$discount,$ on$ the$other$hand,$applied$to$the$whole$bill.$She$calculated$the$discounts$and$concluded$that$the$total$monthly$bill$would$be$$10$ less$ compared$ to$Origin$and$AGL,$ and$almost$$15$less$ than$ what$ she$ currently$ paid.$ She$ searched$ the$ term$ “Service$ to$ Property”$charge$and$became$confident$it$was$the$same$as$a$supply$charge.$She$noticed$that$Red$Energy$offer$was$a$two$year$contract,$and$as$she$was$renting$this$could$become$a$problem,$she$nonetheless$concluded$that$a$monthly$saving$of$$15$was$worth$the$risk$of$facing$a$$20$early$termination$fee.$$$$$$The$ issue$ we$ try$ to$ highlight$ with$ the$ above$ scenario$ is$ that$ governments$ and$regulators$must$make$it$easier$for$consumers$to$compare.$$At$the$same$time$it$shows$that$it$was$a$particular$offer$that$was$making$the$difference$for$“our$customer”$and$reducing$the$number$of$product$offerings$could$disadvantage$many.$$$We$ recommend$ that$ the$ AER,$ as$ well$ as$ jurisdictional$ regulators$ where$ the$jurisdictions$ have$ not$ adopted$ the$ National$ Energy$ Customer$ Framework$ (NECF),$streamline$ and$ standardise$ bill$ presentation,$ Price$ and$ Product$ Information$Statements$ (or$Fact$sheets)$and$presentation$on$consumer$tools$such$as$ the$AER’s$Energy$Made$Easy$website.$$$3.4$Clearly$distinguish$between$regulated$monopolies$and$competitive$retailers$ In$section$1$we$discussed$issues$pertaining$to$the$simplification$and$generalisation$of$the$ energy$ supply$ chain$ components$ in$ information$ provided$ to$ consumers.$ We$

V_PPIS_R_E_OC_S2EL18_g12p6f0a0b0bt0dd2_SR.docx AGLPF15126(0114)

ELECTRICITY CHARGES Patch 9-11, 45, 46 AGL changes its rates periodically; we may change the below rates with notice to you. If you currently have:

a single rate meter, or a remotely-read smart meter configured for a single rate tariff and have not elected a flexible

pricing structure the following rates will apply. Residential Tariff (GD/GR) GST excl. GST incl. Units Peak - First 1,020 kWh/91 days† 23.78 26.158 c/kWh Peak balance/91 days 24.83 27.313 c/kWh Supply charge 95.27 104.797 c/day †The kWh values in a usage column above are quarterly consumption thresholds up to which the stated price may apply. Billing period consumption thresholds for the stated price are calculated by dividing the quarterly threshold by 91 and multiplying by the number of days in the billing period. Unused amounts for each billing period consumption threshold are not carried forward.

AGL GREEN CHOICETM OPTIONS: You have the option of AGL Green Choice™ products, which means that for an additional charge we will source electricity equal to the relevant percentage of your entire household consumption from renewable energy generators. AGL Green Choice™ products are accredited under the National GreenPower Accreditation Program.

These rates apply if you select a Green Choice option:

AGL Green Choice™ % Renewable GST excl. GST incl. Units AGL Green Spirit 10% 1.00 1.10 $/week AGL Green Living® 20% 1.64 1.80 $/week AGL Green Energy® 100% 5.00 5.500 c/kWh

ELIGIBILITY The details presented in this price and product information statement are for a residential customer in the Citipower Pty Ltd distribution area with a single rate meter or remotely read smart meter. OTHER FEES AND CHARGES Early Termination Fee per energy type

within the first 12 months: $75.00 (GST incl.) $68.18 (GST excl.) within the second 12 months: $50.00 (GST incl.) $45.45 (GST excl.)

Dishonoured Payment Fee (direct debit): $8.00 (GST incl.) $7.27 (GST excl.) Dishonoured Payment Fee (cheque): $16.50 (GST incl.) $15.00 (GST excl.) If you pay a bill using a payment method that results in us incurring a merchant services fee

(including payment by credit card) you may be charged a 0.6% (GST incl.) payment processing fee. Other charges relating to your meter or supply address may apply under this Energy Plan.

See the Fee Schedule and General Terms. OTHER IMPORTANT INFORMATION The initial charges set out in this product and price information statement are based on available

information and assumptions about your distribution region and network tariff. If we subsequently determine that the information was incorrect we will advise you of the new charges that will apply to your Energy Plan from its commencement, and of your options.

The above energy rates do not include any concessions which may apply to you. You may be charged a Refundable Advance if you have not agreed to an instalment plan and through

our credit assessment process AGL forms the view that you have an unsatisfactory credit rating, or you do not provide acceptable identification. If we require a Refundable Advance the amount of $150.00 per energy type will be included as a separate item in your first bill.

About this document This price and product information statement is presented in accordance with the requirements of the Essential Services Commission (ESC) - the independent regulator of the retail energy industry in Victoria. For information about choosing an energy retailer, visit www.esc.vic.gov.au/yourchoice


! 29!

argued$that$the$bundling$of$various$costs$in$the$supply$chain$into$a$single$retail$bill$does$make$the$various$costs$less$transparent.$$$Price$ is$clearly$the$main$driver$for$consumer$engagement$ in$the$retail$markets$and$switching.$The$AEMC$research$found$price,$or$the$search$for$a$lower$price,$being$the$key$ motivation$ for$ consumers$ to$ switch$ in$ all$ jurisdictions.$ The$ report$ section$focusing$on$consumer$issues$in$Victoria$stated:$$

“Of$Victorian$customers$that$switched$electricity$retailer$or$plan,$66$per$cent$of$residents$and$68$per$cent$of$businesses$stated$that$price$was$the$main$reason$to$do$so….$$$A$distant$second$to$price,$nine$per$cent$of$respondents$cited$moving$house$and$nine$per$cent$cited$being$unhappy$with$customer$service$as$being$their$main$reason$for$changing$retailer$or$plan.”64$$

$Research$ presented$ in$ the$ recent$ AEMC$ report$ also$ shows$ that$ many$ energy$consumers$ are$ unaware$ of$ the$ roles$ the$ different$ companies$ in$ the$ supply$ chain$play,$ the$ relationships$ between$ them$ and$ the$ impact$ they$ have$ on$ customers’$energy$supply,$both$in$terms$of$price$and$service$(reliability).$$$In$the$section$about$consumer$awareness$in$the$ACT,$for$example,$the$report$noted$that:$$$

“Limited$ understanding$ of$ the$ impact$ of$ switching$ on$ physical$ supply$ was$raised$in$forum$discussions$in$the$ACT$and$in$other$jurisdictions.$$$

“EnergyAustralia$ might$ have$ a$ better$ deal$ but$ will$ anyone$ ever$respond$ if$ I$ have$ a$ power$ outage?$ Service$ is$ very$ important.$(Canberra,$higher$income)”$$$“I’d$ like$ to$hear$ they$have$a$ response$ if$ something$goes$wrong$with$the$ power.$ I$ know$ ActewAGL$ has$ it$ and$ I’m$ very$ happy$ with$ that$response.$Before$I$sign$up$for$roadside$assistance$I$need$to$know$they$have$cars$on$the$road.$Can$they$respond?$Do$they$own$the$lines,$can$they$touch$the$lines?$I$need$to$know$they$can$be$serviced$by$another$company.$ Do$ I$ get$ a$ service$ charge?$ (Canberra,$ income$unidentified)”65$$$

We$believe$new$and$different$measures$need$ to$be$ introduced$ in$order$ to$ensure$that$consumers$understand$the$basic$make$up$of$the$supply$chain,$the$cost$impacts$of$ the$ different$ components$ and,$ in$ particular,$ an$ improved$ understanding$ of$ the$component$ they$ actually$ have$ a$ choice$ in.$ Chart$ 5$ above$ shows$ that$ an$ average$annual$ bill$ for$ households$ in$ Essential’s$ network$ area$ is$ approximately$ $2,200.$ A$

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!64$AEMC,$2014%Retail%Competition%Review,$Final$Report,$22$August$2014,$p$152$65$Ibid,$p$129!


! 30!

customer$ looking$ for$ a$ better$ deal,$ however,$ is$ only$ looking$ to$ identify$ potential$savings$off$the$approximately$$530$per$annum$that$the$household$spends$on$retail$and$ wholesale$ costs.$ In$ regards$ to$ the$ remaining$ $1,670,$ the$ customer$ has$ no$influence.$$$We$are,$at$this$stage,$uncertain$whether$unbundling$the$cost$ component$ and$ designing$ comparison$ sites$ that$allow$ consumers$ to$ compare$ market$ costs$ only$(wholesale$ price$ plus$ retail$ component)$would$ increase$transparency$and$consumer$confidence$ in$the$switching$process.$We$therefore$recommend$research$and$analysis$to$be$undertaken$in$regards$to$this$issue.$In$addition,$we$recommend$ that$ all$ of$ the$ NEM$ jurisdictions$ look$ at$ways$to$reduce$consumer$confusion$about$the$role$of$a$retailer$ in$ a$ competitive$ energy$ market.$ The$ ACT$ and$Tasmania,$ for$ example,$ are$ the$ only$ two$ jurisdictions$where$the$main,$or$only,$retailer$trades$under$the$same$name$ as$ the$ distribution$ network.$ We$ can$ understand$that$ it$ makes$ commercial$ sense$ for$ Aurora$ and$ActewAGL$to$use$these$household$names$in$a$competitive$retail$market,$but$it$may$also$mean$that$consumers$are$more$likely$to$confuse$a$simple$retail$service$(where$the$key$consumer$choice$criteria$is$price)$with$the$more$complicated$network$service$(where$reliability$and$safety,$as$well$as$price,$are$key$consumer$issues).$$$$$$$$Conclusion$$The$arrangements$ in$place$for$deregulated$energy$retail$markets$are$ insufficient$to$ensure$ that$consumers$benefit$ from$retail$ competition.$ $The$ trend$ is$worrying$and$we$are$heading$in$the$wrong$direction.$As$consumer$choice$is$a$potential$benefit$to$energy$ customers$we$do$not$believe$ reEregulation$ is$ the$best$option$at$ this$ stage.$We$ must,$ however,$ go$ back$ to$ the$ drawing$ board$ and$ ensure$ that$ market$arrangements$ in$ place$ can$ deliver$ consumer$ benefits$ in$ terms$ of$ price,$ as$well$ as$product$choice,$in$deregulated$markets.$$$$$$$$$$$$$$$$$$

“We$believe$new$and$different$measures$need$

to$be$introduced$in$order$to$ensure$that$

consumers$understand$the$basic$make$up$of$the$supply$chain,$the$cost$impacts$of$the$different$components$and,$in$

particular,$an$improved$understanding$of$the$

component$they$actually$have$a$choice$in.”!


! 31!

Summary$of$recommendations$$$Issue$ Recommendations$

$1.$Recognise$that$standing$offers$are$important$

1.1$That$the$Victorian$Government$introduces$fixed$gazettal$dates$for$energy$standing$offers$(e.g.$1$June$and$1$December$every$year$with$tariffs$taking$effect$one$month$later)$where$retailers$can$change$or$maintain$their$prices$but$are$required$to$explain$the$rationale$for$their$decision$in$a$supplementary$statement.$This$supplement$should$contain$statements$of$reason$for$why$prices$are$moving$the$way$they$are,$i.e.$movements$in$wholesale$costs,$network$costs$or$retail$costs.$Just$like$regulated$monopolies$need$to$justify$their$costings$to$a$regulator,$retailers$that$are$free$to$set$their$own$price$should$justify$their$costings$to$the$public.$$1.2$That$the$South$Australian,$NSW$and$Queensland$Governments$introduce$these$standing$offer$arrangements$and$that$the$AEMC$take$a$stronger$interest$in$adequate$arrangements$(besides$more$consumer$information)$for$retail$markets$postEderegulation$when$undertaking$effectiveness$of$competition$reviews.$$

2.$Distinguish$between$positive$product$differentiation$and$unnecessary$confusion$$

2.1$That$the$Energy$Retail$Association$of$Australia$consult$with$its$members$and$stakeholders$to$develop$a$code$or$guideline$for$clear$and$efficient$terminology$to$communicate$key$market$contract$features$to$customers.$

3.$Standardise$presentations$of$cost$and$charges$on$bills$and$offers$

3.1$That$the$AER,$as$well$as$jurisdictional$regulators$where$the$jurisdictions$have$not$adopted$the$National$Energy$Customer$Framework$(NECF),$streamline$and$standardise$bill$presentation,$Price$and$Product$Information$Statements$(or$Fact$sheets)$and$presentation$on$consumer$tools$such$as$the$AER’s$Energy$Made$Easy$website.$$

4.$Clearly$distinguish$between$regulated$monopolies$and$competitive$retailers$$

4.1$That$research$into$whether$unbundling$the$cost$components$would$increase$transparency$and$consumer$confidence$in$the$switching$process$is$undertaken.$$4.2$That$all$of$the$NEM$jurisdictions$look$at$ways$to$reduce$consumer$confusion$about$the$role$of$a$retailer$in$a$competitive$energy$market.$$

$ $$$$$$$$$$$$$


! 32!

$$$$$$$$!

Documents

Observations from the Vinnies’ Tariff-Tracking Project€¦ · Gavin Dufty, St Vincent de Paul Society May Mauseth Johnston, Alviss Consulting September 2014 The NEM Observations