Regulatory Audit of AGL Sales Pty Ltd (AGL) System ...€¦ · Businesses (Electricity and Gas Industries). This Guideline details both the procedures that should be undertaken by

Regulatory Audit of AGL Sales Pty Ltd

(AGL)

System Compliance Audit - Part 1 Obligations

On behalf of the

Independent Pricing and Regulatory Tribunal

September 2010

This document has been prepared for AGL Sales Pty Ltd (AGL) for the purposes of reviewing compliance with the provisions of various Codes and Guidelines, as detailed in the Scope of Work specified by the Independent Pricing and Regulatory Tribunal (IPART). Protiviti takes no responsibility for any reliance placed upon this report by any external party.

Table of Contents

1 Executive Summary.................................................................................................... 1

1.1 Introduction......................................................................................................... 1 1.2 Overview of Compliance Systems Assessment ................................................. 1 1.3 High Level Assessment of AGL Compliance Framework and System............... 2 1.4 Compliance Systems Assessment – Licence Conditions................................... 2 1.5 Opportunities for Improvement........................................................................... 4

2 Scope and Methodology ............................................................................................ 5

2.1 Audit Scope........................................................................................................ 5 2.2 Period Subject to Audit....................................................................................... 5 2.3 Methodology and Approach ............................................................................... 6 2.4 Grading of Compliance Controls ........................................................................ 6 2.4.1 Reporting of Generic Compliance Issues........................................................... 6

3 Overview of Compliance Framework........................................................................ 7

3.1 Compliance Framework ..................................................................................... 7

3.2 Detailed Assessment of Compliance Framework.................................................... 7

4 Compliance System Assessment ............................................................................. 7

4.1 Electricity Supply Regulation (ES).................................................................... 14 Gas Supply Regulation (GS)............................................................................ 14 4.2 Licensee Billing Obligations ............................................................................. 15 4.3 Transfers and Cooling-Off Period Requirements ............................................. 19 4.4 Discontinuance of Supply................................................................................. 22 4.5 Marketing Code of Conduct (MCC) .................................................................. 25

Appendix A – AS3806 Assessment Criteria .................................................................. 31

Appendix B – Scope of Work.......................................................................................... 29

AGL Regulatory Audit on behalf of IPART September 2010

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1 Executive Summary

1.1 Introduction

Under the terms of their licences, each Electricity retailer in New South Wales is required to undertake an audit of its compliance with licence conditions, including obligations to comply with relevant codes and guidelines. Under the authority of the Independent Pricing and Regulatory Tribunal (“IPART”), AGL has been requested to undertake an audit which is to be conducted by an independent party nominated by the holder of the retail licences and approved by IPART.

The audit is comprised of two [2] phases:

Phase 1: A system compliance audit of obligations as listed in Part 1. Phase 2: A performance audit of a sub-set of obligations listed in Part 1 and an audit of

AGL’s 2009/10 Operating Statistics listed in Part 2.

The report deals with the audit procedures associated with Phase 1. Specifically, the auditor is required to conduct sufficient procedures to form and express an opinion on the robustness of AGL’s electricity licence/gas systems for ensuring compliance with key licence conditions listed in Part 1 of the audit scope determined by IPART. The audit should examine the operation of the systems for ensuring compliance and accurate reporting of the extent of compliance. The extent to which the business encourages a climate of full compliance should also be reviewed.

Protiviti has been engaged to undertake the audit as outlined above.

Our report is structured as follows:

1. Section 1 of the report summarises our key findings in relation to the matters subject to audit. This section also details a number of suggestions for improvement that should be considered by AGL management.

2. Section 2 of this report details the scope and methodology applicable to our work.

3. Section 3 provides an overview of AGL’s compliance framework.

4. Section 4 provides our assessment of the compliance systems in place at AGL over the period commencing per the Scope of Work, to the date of the audit (“current compliance”). Compliance obligations will be specifically tested as part of the performance audit to be performed at a date to be specified by IPART.

1.2 Overview of Compliance Systems Assessment

In undertaking our systems compliance audit, we have performed the following procedures:

1. Assessed AGL’s overall compliance framework against AS3806-2006: Compliance Programs. AS3806 sets out various principles “for the development, implementation and maintenance of effective compliance programs within both public and private organisations”. A summary of the results is set out in Section 1.3 below.

2. Assessed the systems controls and processes that support compliance with each of the individual compliance areas highlighted in the IPART audit scope as detailed in Appendix B. A summary of the results is set out in Section 1.4 below.


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1.3 High Level Assessment of AGL Compliance Framework and System We assessed the level of AGL’s compliance with AS 3806 using the rating framework detailed in Appendix A. Overall, our analysis indicates that AGL now has a generally robust compliance framework in place. The results of our assessment are illustrated in the table below.

Principle Summary of Principles Grading

1 Commitment to effective compliance Generally Conforms

2 Compliance policy Generally Conforms

3 Resources assigned to the compliance program Generally Conforms

4 Objectives and strategy of the compliance program Generally Conforms

5 Compliance obligations Partially Conforms

6 Responsibility for compliant outcomes Generally Conforms

7 Competence and training needs Generally Conforms

8 Behaviours that create and support compliance Generally Conforms

9 Controls in place to manage compliance obligations Generally Conforms

10 Monitoring, measurement and reporting Generally Conforms

11 Documentation and practice Generally Conforms

12 Regular review and continual improvement Partially Conforms

We identified a number of opportunities for improvement. These are set out in Section 1.5 below. Section 3.2 provides more detailed commentary on our assessment.

1.4 Compliance Systems Assessment – Licence Conditions

We reviewed the systems in place at AGL to ensure compliance with Licence Conditions as outlined in the IPART scope (refer Appendix B). We have used the grading methodology outlined in Section 2.4 for each obligation. The results of our review of AGL’s system of compliance are detailed in the table below:

Compliance Grading

Licence Conditions (Including Codes & Guidelines) Grading

Electricity Supply General Gas Supply General

Elec Supply (General) Reg cl 11(3) Gas Supply (NGRC) Reg cl 11(4)

Effective

Licensee Billing Obligations

ES (General) Reg cl 27(2) Gas Supply (NGRC) Reg cl 27(1)

Effective


Effective


Effective


Effective


Effective


Effective


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Effective


Effective


Market Operations Rules (MOR)

ES (General) Reg Schedule 2, cl 7(1) Gas Supply (NGRC) Reg Schedule 1, cl 12(1)

Effective

ES (General) Reg Schedule 2, cl 7(1A) Gas Supply (NGRC) Reg Schedule 1, cl 12(1A)

Effective

MOR (ACS) cl 4.3 Effective

MOR (TRRES) cl 4.1 Effective

MOR (TRRES) cl 12.1 Effective

Discontinuance of Supply

ES (General) Reg cl 16 Gas Supply (NGRC) Reg cl 15

Effective

ES (General) Reg cl 13AA(1)(a) Gas Supply (NGRC) Reg cl 13AA(1)(a)

Effective

ES (General) Reg cl 13AA(1)(b) Gas Supply (NGRC) Reg cl 13AA(1)(b)

Effective

ES (General) Reg cl 13AA(1)(c) Gas Supply (NGRC) Reg cl 13AA(1)(c)

Effective

ES (General) Reg cl 13AA(3) Gas Supply (NGRC) Reg cl 13AA(3)

Effective

ES (General) Reg cl 13A(1)(a) Gas Supply (NGRC) Reg cl 13A(1)(a)

Effective

ES (General) Reg cl 13A(1)(b) Gas Supply (NGRC) Reg cl 13A(1)(b)

Effective

ES (General) Reg cl 13A(2) Gas Supply (NGRC) Reg cl 13A(2)

Effective

ES (General) Reg cl 13A(3) Gas Supply (NGRC) Reg cl 13A(3)

Effective

Marketing Code of Conduct (MCC)

Marketing Code of Conduct, section 5.1.2 Effective Marketing Code of Conduct, section 5.2.1 Effective Marketing Code of Conduct, section 6.1.1 Effective Marketing Code of Conduct, section 6.1.7 Effective Marketing Code of Conduct, section 6.2.5 Effective Marketing Code of Conduct, section 6.2.6 Effective Marketing Code of Conduct, section 6.3.1 Effective Marketing Code of Conduct, section 6.3.2 Effective Marketing Code of Conduct, section 6.3.4 Effective Marketing Code of Conduct, section 6.3.5 Effective Marketing Code of Conduct, section 7.1.1 Effective Marketing Code of Conduct, section 7.1.3 Effective Marketing Code of Conduct, section 7.1.4 Effective


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Marketing Code of Conduct, section 7.1.5 Effective Marketing Code of Conduct, section 7.1.7 Effective

1.5 Opportunities for Improvement We reviewed the systems in place at AGL to ensure compliance with Licence Conditions as outlined in the IPART scope and identified the following opportunities for improvement:

All of AGL’s compliance obligations should be appropriately identified and documented in a register

or database. In addition, these obligations should also be assessed to identify high risk areas of compliance failure and the potential impact of these failures, such as financial or reputational impacts. A risk assessment model should be developed that supports the assessment of compliance risk.


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2 Scope and Methodology

2.1 Audit Scope

The areas subject to review during the course of our audit are contained in IPART’s Scope of Work. This document is included in Appendix B to this report.

The areas identified for review are:

Electricity Supply (General) Regulation

Gas Supply (NGRC) Regulation

Market Operations Rules

Marketing Code of Conduct

Our audit has been conducted in accordance with Guideline No. 22 Regulatory Audits of Retail Energy Businesses (Electricity and Gas Industries). This Guideline details both the procedures that should be undertaken by the auditor to conduct their work and the assessment criteria to be applied when reporting on the compliance system in place for each area outlined in the Scope of Work.

As required by Australian Auditing Standards, our work was undertaken in accordance with AUS 904 “Engagements to Perform Agreed upon Procedures”. The procedures performed as described in section 2.3 below do not constitute either an audit or a review and, as such, no assurance is expressed. Had additional procedures been performed, other matters may have come to our attention that would have been reported.

Our work does not guarantee that errors, irregularities or instances of non-compliance will not occur and may not detect errors, irregularities or instances of non-compliance should they occur. Further, the internal control structure within which the control procedures that we have reviewed operate has not been reviewed, and no opinion is expressed on its effectiveness. Our work is not designed to detect all weaknesses in the system of internal control because it is not performed continuously during the period subject to review, and the tests performed are on a sample basis.

AGL management is fully and solely responsible for applying independent business judgement with respect to the contents of this report, to make implementation decisions, if any, and to determine further courses of action with respect to any matters addressed in any advice, recommendations, services, reports or other work products or deliverables produced as a result of our review.

2.2 Period Subject to Audit

The period subject to audit is detailed below. Phase 1 – System Compliance Audit

Phase 2 – Performance Audit (not part of this report)

- As at 30 April 2010.

- Period ending 30 June 2010


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2.3 Methodology and Approach

The methodology and approach to the conduct of our work is specified below:

1. Assessed AGL’s compliance framework against AS3806-2006: Compliance Programs. AS3806 sets out various principles “for the development, implementation and maintenance of effective compliance programs within both public and private organisations”.

2. Assessed the systems controls and processes that support compliance with each of the individual compliance areas highlighted in the IPART audit scope as detailed in Appendix B. Our assessment included the following procedures: Analysed documented policies and procedures to assess whether they were consistent with

the regulatory definition of the obligation.

Interviewed responsible staff to assess whether they understood and complied with the documented procedures;

Analysed information systems to assess the extent to which they produced information that complied with regulatory definitions;

Analysed quality controls to identify whether non-compliance was detected and fed back through appropriate channels for correction;

Identified changes in systems and documented policies and procedures which may indicate that data accuracy or reliability had varied significantly over the audit time frame, and may lead to the conclusion that the current compliance level is not representative of compliance over the entire time frame.

We highlight that no detailed transactional testing has been performed at the date of our audit to evaluate compliance performance. In accordance with IPART’s scope set out in Appendix B, this will be undertaken in Phase 2 of the audit at a date to be specified by IPART.

2.4 Grading of Compliance Controls

We have used the following methodology to grade the effectiveness of compliance controls for each area within scope. Grading Criteria/Rating

Obligation reflected in documented AGL policies and

procedures

Obligation understood by AGL staff

Obligation subject to effective compliance

monitoring – including complaints monitoring

Effective Above processes are in place for relevant obligations

Partly Effective Majority of above processes are in place for relevant obligation. Minor exceptions noted in some elements.

Not effective Key elements of the above processes are not in place for the relevant obligation.

We have used the model described above as a guide in determining compliance grades. The results of individual gradings should be considered in conjunction with the results of the AS 3806 assessment when considering the effectiveness of AGL’s overall compliance framework.


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3 Overview of Compliance Framework

3.1 Compliance Framework

AGL has outlined its compliance framework in the “Legislative Compliance Policy” which has been in effect since 2008. A revised AGL Compliance Policy, which supersedes the 2008 Compliance Policy was submitted and approved by the Board in June 2010. Both the 2008 and 2010 policies outline the parties responsible for overseeing the compliance program and monitoring AGL’s compliance management objectives and requirements.

The current AGL Compliance Policy will be supported by the AGL Compliance Program 2010 (the “Program”) which supersedes the Legislative Compliance Plan 2008. The Program is due to be submitted to the Audit Risk Management Committee in August 2010 for review and approval. The objective of the Program will be to reinforce AGL’s commitment to compliance by outlining AGL’s compliance processes, in order to achieve effective compliance and set out the key elements of the Compliance Framework which is benchmarked against the principles of AS3806-2006.

All employees are charged with the responsibility of identifying and monitoring compliance, with all incidents and breaches being recorded on a departmental level through the Retail Compliance Action Forum. Group General Managers across the business review all compliance related issues on a monthly basis, with a Compliance Status Report being provided to the Audit Risk Management Committee on a quarterly basis.

At the time of assessment, the current compliance structure is based on a manual process of recording all required compliance obligations. An MS Excel spreadsheet is used as a means of recording incidents and breaches. AGL is in the process of establishing an automated system of recording all compliance regulations that are relevant to its business.

The Energy Regulation team is responsible for submission of data to IPART and for liaising with IPART on general or specific compliance matters. This department is in regular contact with the relevant regulators in order to keep abreast of regulatory requirements.

3.2 Detailed Assessment of Compliance Framework We assessed AGL’s compliance framework against AS3806-2006: Compliance Programs. AS3806 sets out various principles “for the development, implementation and maintenance of effective compliance programs within both public and private organisations”. We have documented activities undertaken by AGL in relation to each Principle. In doing so, we have assessed AGL’s compliance program using the assessment criteria outlined in Appendix B.

Principle 1: Commitment by the governing body and top management to effective compliance that permeates the whole organisation.

Generally conforms

The operations of AGL Energy Limited (“AGL”) are subject to a wide range of legal and regulatory requirements.

AGL has developed a Legislative Compliance Policy ("the Policy 2008") which has been in effect since August 2008. The policy outlines AGL's commitment to actively manage legislative and regulatory compliance with the Law through its governance structures, and is endorsed by the Board of Directors. Under the policy, the governance structure is comprised of the following:

Board of Directors

Group Risk and Executive Team

Compliance Function Managers

Leaders


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Colleagues

A revised 'Compliance Policy' ("the Policy 2010") is set to replace the existing 'Legislative Compliance Policy'. The Policy 2010 was submitted and approved by the Board in June 2010.


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Principle 2: The compliance policy is aligned to the organisation’s strategy and business objectives, and is endorsed by the governing body.

Generally conforms

The Policy 2008 was developed to assist in achieving the objective of, active and consistent management of AGL’s compliance with the Law. This policy is endorsed by the Board of Directors annually, and is subject to a review, based on recommendations from the Audit & Risk Management Committee. The Policy is a formal representation of AGL’s commitment to compliance. It outlines AGL’s objectives, scope, responsibilities and compliance requirements of the organisation. The Policy is not a stand-alone document and is supported by a Legislative Compliance Plan (“the Plan 2008”). The Plan 2008 outlines actions AGL will take to achieve the objectives defined in the Policy. The Plan 2008 consists of numerous operational policies and procedures that apply to all employees and outlines the processes and principles that are adopted by AGL to support the implementation of the Policy. The Policy 2010 includes a statement outlining AGL's commitment to embed compliance risk management practices within the broader risk management and governance framework, and also integrating it within its business processes and operations. This policy is also supported by the AGL Compliance Program which describes the processes necessary to help maintain and manage AGL’s compliance with its obligations and outlines the key elements of AGL’s Compliance Framework.

Principle 3: Appropriate resources are allocated to develop, implement, maintain and improve the compliance framework.

Generally conforms

Under the Policy 2008, the role of the Energy Regulation Department at AGL is to effectively manage compliance through: Preparation of legislative compliance objectives and plans Monitoring of performance against legislative compliance objectives, Annual review Reports on the effectiveness of management systems to deliver legislative compliance, and Analysis of the compliance system for weaknesses.

Regulatory compliance is managed within the Energy Regulation team, with the team providing support services to the Retail and Wholesale energy groups to ensure that AGL regulatory risks are considered, managed and mitigated. The team also manages the AGL relationship with Government Ministers, Government Departments and Regulators on a State and Federal level. In addition, AGL has individual issue and risk managers within the retail business, that are charged with monitoring compliance in their respective areas.

Principle 4: The objectives and strategy of the compliance framework are endorsed by the governing body and top management.

Generally conforms

The objectives and strategy of the compliance program are documented within the current Policy with reference being made to the fact that the Board determines and formally endorses the objectives that are maintained within the policy. The Policy outlines that the objective of the compliance framework at AGL is to ensure compliance with all relevant legislation, regulations, ethical standards and codes. The plan consists of various operational documents which outline: The structure and objectives of the plan; The roles and responsibilities of the people executing various aspects of the plan; Reporting mechanisms; The key resources applied to the plan; and The execution of the plan through detailed work instructions and procedures.

One of the key changes which has been identified in the revised Policy 2010 is the expansion on the number of objectives to support of AGL’s commitment to compliance. This includes extending the scope


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of AGL’s compliance obligations beyond compliance with legislative requirements to also include compliance with contractual obligations, key internal policies and other voluntary standards. As at July 2010, a revised compliance plan was still in the process of development and it is due to be submitted to the Audit Risk Management Committee in August 2010 for review and approval.

Principle 5: Compliance obligations are identified and assessed. Partially Conforms

Compliance obligations that relate to AGL have been manually identified and assessed by the Energy Regulation Department. The current compliance framework, which has been defined in the Policy 2008, covers the specific compliance strands that the business is required to meet. The framework captures on a high level summary, the major legislative and regulatory requirements relevant to AGL. There is no central system that records all relevant compliance obligations including source of obligation, responsibility, reporting requirements (if any), risk rating etc.

Each business unit within AGL is responsible for identifying and assessing compliance obligations. Incidents and issues are reported on a departmental basis, with the Retail Compliance Action Forum (RCAF), which is formalised and supported by the RCAF Charter, being used as a platform for assessing compliance obligations. All incidents and issues (breaches) are recorded in an issues and risk register, with all results being consolidated and reviewed on a monthly basis by the Group General Managers. This forum is used to assess and review the risks of items which have been identified, with a risk materiality rating being applied to each item in the issues and risk register.

Whilst it was noted that there is no annual review of all compliance obligations, the Regulatory Compliance team is responsible for liaising with the relevant regulatory authorities to ensure that AGL is kept up to date with any changes in compliance issues and practices, as well any new compliance obligations.

At the time of assessment, AGL was in the process of implementing a new system which will identify and record all relevant regulatory obligations. This is being undertaken through "Project Boomerang", which will involve an assessment of all process at AGL against all the relevant regulatory obligations. Under this system, AGL aims to establish an automated process of identifying any instances of non-compliance and having this escalated and investigated by the Regulatory Compliance team. Principle 5: Opportunity for Improvement We support the implementation of a more robust compliance management system. We note that many participants in the industry now used a central IT application to:

Record all relevant regulatory obligations and related source legislation Identify responsible personnel Allocate a risk rating to each obligation Document key controls which mitigate the risk of non-compliance Highlight specific action points Supports improved breach reporting Facilitate more effective compliance reporting within the organisation.

All of AGL’s compliance obligations should be appropriately identified and documented in a register or database. In addition, these obligations should also be assessed to identify high risk areas of compliance failure and the potential impact of these failures, such as financial or reputational impacts. A risk assessment model should be developed that supports the assessment of compliance risk. We acknowledge that AGL is in the process of developing a revised Compliance Program (“the Program), which is due to be completed and submitted to the Board for approval in August 2010. The Program will support the objective of identifying and assessing compliance obligations through the establishment of a Centralised Compliance Obligations Register.

Principle 6: Responsibility for compliant outcomes is clearly articulated and assigned.

Generally conforms

Responsibility for compliant outcomes is clearly articulated and assigned in the Policy 2008 and the Plan 2008. The AGL Board of Directors holds ultimate responsibility for ensuring compliance with obligations. Operationally, the Energy Regulation Department has the following key responsibilities in the execution of compliance activities:


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Identifying and monitoring compliance with relevant obligations through communication with regulatory bodies and providing advisory services to the business;

Administering compliance reporting systems Assisting in the development of training material in line with relevant compliance obligations; Integrating compliance obligations into existing procedures, including changes to compliance

obligations; Investigating instances of non-compliance; Measuring and monitoring compliance performance through the distribution of Incident Reports on a

monthly basis to the business and on a quarterly basis to the Board; and Enforcing the Policy 2008 statement that the responsibility for compliant processes rests within the

business. Thus the Energy Regulation Department does not implement process change, but instead assist and monitor the implementation of proposed actions by the business wherever an instance of non-compliance has been identified.

The Energy Regulation Department ultimately reports to the Chief Economist and Head of Corporate Affairs, who is a member of the Audit and Risk Management Committee.

Principle 7: Competence and training needs are identified and addressed to enable employees to fulfil their compliance obligations.

Generally conforms

At AGL it is the responsibility of the business to ensure that all personnel are appropriately trained in relation to AGL’s compliance obligations. Training needs are assessed based on staff members’ responsibilities and changes to compliance obligations. For example, all Customer Sales Representatives are trained on their responsibilities regarding the relevant aspects of the Trade Practices Act so that they are aware of all they’re responsibilities when contacting customers. Refresher training is provided annually.

AGL also provides training to all third parties that are contracted to perform work (e.g. sales). This ensures that third parties are made aware of their obligations under the relevant codes and guidelines.

Principle 8: Behaviours that create and support compliance are encouraged and behaviours that compromise compliance are not tolerated.

Generally conforms

The governance structures and reporting procedures detailed above to execute and monitor compliance activities contribute to a ‘compliance culture’ at AGL. In addition, a Retail Compliance Action Forum (RCAF) which was formally established in May 2010, communicates to staff across the business that regulatory compliance is a priority for the business.

The purpose of the RCAF is to assess the risk of issues and incidents raised in the incident register, and assign ownership and accountability for the resolution of breaches and incidents. The RCAF is held on a fortnightly basis.

The Energy Regulation Department also presents quarterly compliance status reports to the Audit and Risk Management Committee detailing compliance activities including the status of policies, training, employee communications and changes to regulation. Updates on the status of corrective action to address instances of non-compliance are also provided to ensure that these are addressed by the business as a matter of priority.

Principle 9: Controls are in place to manage the identified compliance obligations and achieve desired behaviours.

Generally conforms


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The following elements of AGL's control environment exist to support and manage regulatory compliance:

Documented policies in the form of a Legislative Compliance Policy and Plan, outlined in Principle 1 and 2. These documents are set to be replaced with the Compliance Policy and Program 2010.

Documented operational procedures that have embedded compliance obligations within the work instructions;

Fortnightly reporting of compliance incidents and issues, which are recorded on a departmental basis and reviewed through the RCAF.

Incident Reports generated monthly by the Energy Regulation Department. These reports detail areas of non-compliance and corrective action required. The reports are distributed to Group Management to seek a response on the status of the corrective action. These responses are then recorded and communicated to the Audit and Risk Management Committee on a quarterly basis.

Principle 9: Opportunity for Improvement We identified at the time of assessment that AGL did not have any documented policies and procedures surrounding the process of reporting performance indicators during the period subject to audit. We would view this document as a control that manages the compliance obligations that AGL is required to adhere to. Our assessment is that this issue is not significant enough to warrant a downgrading of the “Generally Conforms” rating that has been assigned to this principle. We acknowledge that subsequent to our findings AGL has developed a draft reporting and procedures manual (effective July 2010) surrounding the process of reporting performance indicators, as a means of addressing this concern.

Principle 10: Performance of the compliance framework is monitored, measured and reported.

Generally conforms

Internal monitoring, measuring and reporting mechanisms reviewed during the audit includes:

Quarterly reports to the Audit and Risk Management Committee escalating and detailing instances of non-compliance, the status of compliance activities, communication with regulators and the status of any corrective action to address instances of non-compliance and near misses;

Issues regarding potential compliance breaches which are recorded on a departmental level in a report every fortnight.

Monthly meetings with the group General Managers to discuss the status of policy and compliance activities including high risk areas of non-compliance based on reported breaches;

Procedures to seek and receive feedback from customers (through Customer Advocacy), employees, vendors, and regulators regarding compliance performance; and

The performance of individual compliance targets are monitored and reported through the “Performance Development & Review Plan” which includes key compliance-related KPIs that are reviewed annually.

Principle 11: The organisation is able to demonstrate its compliance framework through both documentation and practice.

Generally conforms


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The following documents and practices were observed during the audit to demonstrate AGL’s compliance framework:

Incident Reports to record instances of non-compliance and monitor actions undertaken to correct non-compliant practices;

The Policy and the Plan 2008 and 2010, which outlines compliance objectives and assigns accountabilities for compliance activities;

Communication externally through Annual Reports and internally through “Knowledge Communications” of AGL’s continuing commitment to compliance;

The 'Retail Compliance Action Forum Charter & Operating Procedure' document, which outlines the compliance risk management breach and incident reporting structure applicable to AGL.

Minutes from the Retail Compliance Action Forum Charter meetings which occur on a fortnightly basis to discuss incidents and potential breaches.

Compliance Management Status Report, which is provided to the Audit Risk Management Committee, and contains a listing of all incidents, breaches and audit findings.

Principle 12: The compliance framework is regularly reviewed and continually improved.

Partially Conforms

Annual reviews of the relevance, adequacy and effectiveness of the Policy and Plan are undertaken by the Board for relevance and to reflect current compliance objectives. The last review was conducted in August 2008 and the most recent update of the Policy was completed in June 2010. In addition, review of AGL’s compliance framework is also be performed by the in-house Internal Audit function. Internal Audit adopts a risk based approach in its review of internal procedures, with compliance viewed as being key risk to the organisation. A work plan of all internal audit activity is prepared at the start of each year, outlining the business processes which will be subject to review. Therefore, review of compliance at AGL is included in this process. At the time of this assessment, it was identified that Internal Audit had not performed a specific review of AGL’s compliance framework. However, Management advised that a review of the compliance framework has been planned and scheduled for the 2012 financial year. It was also acknowledged that in July 2010, AGL engaged with the third party KPMG, to benchmark its current compliance framework against industry best practice, in an effort to continually improve its compliance framework. This is expected to be completed in August 2010. All findings raised by Internal Audit are presented and reported to the Audit and Risk Management Committee. Furthermore, Group Internal Audit is responsible for tracking, maintaining and following up on status of recommendations raised for continuous improvement and implementation.


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4 Compliance System Assessment

4.1 Electricity Supply Regulation (ES)

Gas Supply Regulation (GS)

Electricity Gas

Obligation Identifier

ES Clause 11(3) – General

GS Clause 11(4) – General

The regulations stipulate that for a customer under a negotiated supply contract, the supplier must provide notice no less than 21 days preceding the end date of the contract.

AGL has outlined in the “General Terms” document that in the event that an energy plan has a “fixed period of end date”, customers will be notified in accordance with the timelines that have been outlined by the regulatory requirements, which in this instance is a minimum of 21 days before the end of the period of supply under the contract.

Notices provided to customers are automatically generated in the SAP system, which identifies energy plans that are set to reach expiry. Any changes that need to be made to the SAP system require approval from the regulatory team as well as approval from any stakeholders that will be impacted by the change, before it can be actioned in SAP.

Preliminary Assessment:

We have assigned a grading of “Effective” for this obligation.


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4.2 Licensee Billing Obligations

Electricity Gas


ES Clause 27(2) & 27(3)

GS Clause 27(1) & 27(2)

As outlined in the regulations, in the event of an overcharge, the energy supplier must pay interest on the overcharged amount and depending on value of the overcharge, the retailer must inform the customer no greater than 10 business days and credit the amount to the customer.

AGL has the following processes to identify instances where a customer may have been overcharged:

1. Self identification by AGL

All energy rates are set in the SAP system. A review of rates is performed by running a system report which details whether the rates have been entered into the system correctly. This review is performed by the billings team whenever new energy rates have been entered into the SAP system.

2. Customer communication

AGL will review complaints from customers and assess whether customers have been charged correctly. This process will then be expanded to a wider pool of customers to identify whether it is an isolated instance.

In the event that a customer has been overcharged, AGL will identify the start and end date of the overcharge, to accurately determine the period in which interest should be credited to the customer. A bill adjustment template is used to calculate the revised bill amount and also the amount of interest owed to the customer.

All customers that have been identified as being overcharged will be recorded in a spreadsheet created by the billing team. This list is then used for mail out, where customers that have been identified as being overcharged by greater than $25 will receive written communication from AGL. AGL staff acknowledged that they are aware of required regulatory timeframes in which this communication must be provided.

Included in the written communication is a statement outlining that customers can contact AGL should they wish to discuss the overcharge indentified. The customer has the opportunity to have the overcharge reimbursed via a number of methods, alternatively the customer account will be credited with the difference of the overcharge, as well as the interest owed in their next energy bill. This is process is managed through the SAP system.

The procedures followed by the billing team at AGL have been outlined in a process document titled ‘AGL – Calculate Adjustment Amount’ that is available to AGL staff in the billing team via the company intranet.




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Electricity Gas


ES Clause 29(1)

GS Clause 29(1)

The regulations require that a supplier must issue a bill to a customer under a customer supply contract no less than once every 3 months.

AGL has outlined the frequency in which it issues bills to customers in its ‘General Terms’ document and ‘AGL Customer Charter’. Bills for customers with an electricity supply and gas supply are issued every three months and this is managed through the SAP system. Any customers that have not been billed are recorded in an exception report which is reviewed by the billing team on a weekly basis.



Electricity Gas


ES Clause 30(1), 30(2), 30(3), 30(5)

GS Clause 30(1), 30(2), 30(3), 30(5)

The regulations outline that that date of payment for a bill must be no less than 12 business days after it has been sent out to the customer. The supplier must also accept payment by a customer through a number of payment methods, and not impose a charge in connection with any of the payment methods used by the customer. A customer also has the right to provide the energy supplier with a payment in advance if required.

We identified that when AGL issues bills to customers for the supply of gas or electricity, the payment due date is set at 14 business days from the dispatch of the bill. The bill due date has been built into the SAP system, which automatically generates billing information. Any changes which need to be made in SAP will need to be approved by the regulatory team and all relevant stakeholders prior to being implemented. The policies and procedures for issuing bills are clearly documented, defined and communicated to staff in the collections team.

As outlined on the back of bills sent to both gas and electricity customers, AGL accepts payments through direct debit, post by means of cheque, telephone by credit card, BPay and also through authorised agents (e.g. Post Office).

As outlined in the “General Terms”, AGL accepts payments in advance from customers for any charges arising under a customer supply contract.


We have assigned a grading of “Effective” for these obligations 30(1), 30(2), 30(3), 30(5).


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Electricity Gas


ES Clause 31(2)

GS Clause 31(2)

As outlined in the regulations, when a customer is issued with a bill, the bill must contain particulars of meter readings and consumption (both current and average).

All AGL bills provide the customer with an indication of the following:

Estimated or measured quantity of gas / electricity supply in megajoules / kilowatt hours

Particulars of any tariffs codes and rates of charges applicable to the supply

Particulars of the average daily consumption

The extent to which the price offered is inclusive of all costs

Particulars of the average daily consumption for the previous billing period

Particulars of the quantity of supplied for the billing period

These are consistent with the requirements outlined in ES Clause 31(2) and GS Clause 31(2).



Electricity Gas


ES Clause 36(5)

GS Clause 36(5)

The regulations outline that all estimated bills must be based on the customers historical meter data, or if that information in not available, the average daily consumption for the same class of customer.

All meter readings whether actual or estimated are performed by the distributor. This information is then provided to AGL in order for customers to be billed. AGL has advised that it does not estimate customer bills.

AGL closely manages the relationship with network operators to ensure that reads are provided to allow AGL to discharge obligations under this clause. The billings team at AGL also monitors unbilled accounts on a weekly basis through exception reports. AGL provides these details to IPART on a monthly basis, and has been doing so for the past 12 months.


AGL does not perform meter reads nor provide estimated meter reads for customers. As a result, we have not provided a grading for this obligation.


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Specific Compliance Issues:

1) Does the Licensee have adequate policies, systems and procedures to ensure customers receive 3 monthly bills?

All customer bills are processed automatically through the SAP system. AGL receives meter reads from distributors, and this data is then fed into SAP. A data file will be generated by SAP and provided to a third party mailhouse for distribution to the customer. A daily exception report is generated to identify instances where a customer bill has violated a business rule that has been built into SAP. This report also identifies customers that have not been billed. A high level report which contains details on the ageing and amount of all unbilled customers is also generated and reviewed on a weekly basis by a manager in the billing team. Team members are assigned responsibility to investigate the reasons as to why customers have not been billed.

2) Does the Licensee have policies and procedures implemented to deal with its recent backbilling issues?

AGL has established a process to identify all customers that have not received a bill to address the backbilling issues that it has experienced in the past. This is managed through the daily generation of an exception report which identifies the number of customers which have not been billed. A high level report which contains details on the ageing and amount of all unbilled customers is also generated on a weekly basis and reviewed by a manager in the billing team.

3) Recent Energy & Ombudsman NSW (EWON) complaints records show AGL receiving higher complaints about "disputed" bills than other retailers. What steps are being taken to resolve current high level of complaints about disputed bills

Billing complaints that have been made by customers directly to AGL and also those that have been raised through EWON are recorded in a weekly report which is reviewed by the Customer Advocacy team. This report outlines high level reasons for complaints, number of complaints made and also provides an indication of the aging of the complaint. Results of this report are also forwarded on the billing team and other business units that are affected by this information.

4) Are these policies, systems and procedures fully understood by relevant staff?

Based on discussions, AGL staff in the billings team demonstrated a working knowledge of the policies and procedures in place at AGL surrounding the billing obligations that have been specified in the Electricity Supply and Gas Supply Act. If staff have any uncertainties regarding system usage, they can refer to instructions and simulations regarding billing procedures which are available on the AGL intranet. All billings are handled through the SAP system, and we identified through observation that staff demonstrated a high level of proficiency in using this system.


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4.3 Transfers and Cooling-Off Period Requirements

Electricity Gas


ES (General) Reg Schedule 2, Clause 7(1)

ES (General) Reg Schedule 2, Clause 7(1A)

GS (NGRC) Reg Schedule 1, Clause 12(1)

GS (NGRC) Reg Schedule 1, Clause 12(1A)

The regulations outline that under a negotiated customer supply contract, the customer must have a right to terminate the contract within 10 days, of signing or receiving the contract (whichever is the latter). If the customer terminates under this period, the supplier must provide the customer with a record of the termination.

All customers that enter into a negotiated supply contract with AGL are informed that they have a 10 day cooling off period to terminate the contract. Customers that request a termination under the cooling off period will be provided with a record of the termination by AGL. This is managed through the SAP system. These obligations have been documented by AGL in the ‘General Terms’ document which is provided to all customers.



Electricity Gas


MOR (ACS) Clause 4.3

As outlined by the regulations, a supplier must provide to the customer a summary of the terms and conditions of the standard form customer connection contract, as soon as practicable after an application has been made.

Customers are provided a copy of the terms and conditions 'Information you need to know about your energy plan' upon joining AGL.

Field Sales: Document is provided in the ‘Welcome Pack’ immediately upon joining by the field agent.

Telemarketing Sales: Document is provided in the ‘Confirmation Pack’ which is mailed out to the customer upon joining. A record of the sale is recorded in SAP, with a data file automatically sent to the mailhouse on a daily basis. This file contains a listing of customers that the ‘Welcome Pack’ should be sent to.




20

Electricity Gas


MOR (TRRES) Clause 4.1

As outlined in the regulations, a retail supplier must not initiate or effect the transfer of a customer unless the customer has provided their consent.

When initiating a transfer of a customer, AGL ensures that it has either verbal or written consent prior to effecting the transfer. For all door-to-door sales, customers must complete a verification call which asks specific questions to gauge whether customers understand that they are transferring to AGL. Customers also sign an ‘Offer Summary Form’ indicating that they consent to the transfer. For all outbound telemarketing sales, specific questions are asked to obtain explicit consent from the customer prior to transfer.

In both instances, AGL staff follow a call script to obtain the customers consent to all arrangements with AGL. Calls conducted by staff are subject to quality assurance in the form of monthly reviews of calls to customers. These reviews are conducted by team leaders within the sales team.



Electricity Gas


MOR (TRRES) Clause 12.1

As outlined in the regulations, a new retailer must ensure that the 10 day cooling off period has elapsed, before all approvals for transfers can be completed under the MSATS Procedures and Systems.

Transfers of customers are governed by a number of settings in SAP before they can proceed. When a transfer request is raised, the transfer is not actioned until certain parameters are satisfied including ensuring that the 10 day cooling-off period has elapsed and that consent has been provided.

Before a transfer can be completed, AGL needs to obtain an acknowledgement letter from the market operator indicating that the transfer can proceed. A rejection letter will also be sent to AGL if the transfer has been rejected. This may occur in instances where a customer has a pre-existing contract or debt with another retailer.

AGL has a detailed process flow diagram as well as ‘Manage Transfer Request’ process document. Together these detail the steps that need to be taken, prior to an approval for transfer being completed.




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1) Does the Licensee have adequate policies, systems and procedures for accurately verifying customer accounts prior to transfer?

Audit obtained the Cancellations Process Reference procedure and noted that the document was in draft form at the time of assessment. The Reference procedure does however, provide for accurately verifying customer accounts prior to transfer in ensuring that the customer has a contract prior to transfer/cancellation by the 'Save Team'. Verifying customer accounts prior to transfer is a manual process performed through SAP.

2) Does the Licensee have adequate policies, systems and procedures to ensure a customer's request to terminate the contract (orally or in writing) under a cooling off period is actioned?

When a customer makes a request to terminate a contract either verbally or in writing, a record of this is recorded in the SAP system by a customer service representative. SAP is also used by AGL to terminate a customer contract under a cooling off period. Once a request has been put through SAP, the system will close the account as appropriate and issue the final bill for consumption. The policies and procedures are documented in the Cancellations Process Reference Guide. We note that this document was in draft form at the time of assessment.

3) Does the Licensee have adequate policies, practices and procedures to ensure a record of contract termination under a cooling off period is provided to the customer?

All interactions with customers regarding terminations under a cooling off period are recorded in SAP. SAP will generate a letter which is provided to customers as notice of the termination. AGL has in place documented policies and procedures outlining the process for providing a customer with a record of contract termination under a cooling off period.

4) Are these policies, systems and procedures fully understood by relevant staff?

Based on discussions with AGL customer service representatives, staff demonstrated an understanding of procedures in place, to record and action requests from customers to terminate their agreements under the cooling off period.


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4.4 Discontinuance of Supply

Electricity Gas


ES (General) Reg Clause 16

GS (General) Reg Clause 15

The regulations outline that a supplier must not discontinue the supply of energy to a small retail customer unless the supplier has complied with all requirements that have been outlined in the contract.

Section 9.1 of AGL’s ‘General Terms’ document, outlines that "Where we [AGL] have complied with all relevant obligations under Regulatory Requirements, we may ask your Distributor or Meter Service Provider to disconnect the Supply of energy to the Supply Address..."

When an AGL customer fails to make a payment, the SAP system will commence the collections process, whereby AGL provides customers with a series of payment reminder notices, revised payment dates, disconnection warnings, and telephone calls prior to any disconnection. The process has been documented in a series of documents and flowcharts that are made available to the AGL staff via the company intranet.



Electricity Gas


ES (General) Reg Clause 13AA(1)(a)(b)(c)

GS (General) Reg Clause 13AA(1)(a)(b)(c)

ES (General) Reg Clause 13AA(3)

GS (General) Reg Clause 13AA(3)

The regulations outline that a supplier must develop and implement a customer hardship charter in respect of small residential customers. The existence of this charter should be made aware to customers, be provided at no cost where requested and made available on the suppliers website. The hardship charter must contain a number of details that are further outlined in the regulations.

Customers requesting hardship information are directed to the AGL website which contains the “Staying Connected National Policy”. This policy contains information on the process of identifying hardship customers, process for early response, flexible payment options, information on government concessions and options available under the program. In essence, this document acts as AGL’s hardship charter. Information in community languages is detailed in the “Staying Connected Financial Difficulties” brochure which is also available on the website.

Customers are also made aware of the existence of this document through the “Customer Charter” which has been created for small retail customers.




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1) Does the Licensee have adequate policies systems and procedures to ensure the supply to a small retail customer under a standard customer supply contract (gas) or negotiated contract (electricity) is not disconnected unless the requirements of the contract or the Regulations is complied with.

There are systems and procedures in place so that customers under a standard supply or negotiated contract are not disconnected unless the requirements of the contract or regulations have been complied with.

The disconnections process is outlined within the ‘Staying Connected Reference Guide’ and is managed through the SAP system. The SAP system has been set up to ensure that prior to any customer being disconnected, they will have been provided with the required warnings and notices within the time frames that have been specified in the regulations. Any changes to the notices or time frames which have been set up in the SAP system will require approval from the regulatory compliance team, and other stakeholders affected by the change, prior to being actioned.

2) Does the Licensee have adequate policies, systems and procedures in identifying a customer facing financial difficulties?

There are systems, policies and procedures in place for customers facing financial difficulties. The process of identifying customers facing financial difficulties is documented in the ‘Staying Connected Reference Guide’.

AGL monitors both internal and external indicators in order to identify whether a customer is facing financial difficulties. Indicators that are monitored by AGL include the following: The customer advises that they are having difficulty paying their bill within the credit guidelines The account indicates they have had payment difficulties in the past The customer is actively seeking assistance from a financial counsellor Referrals to hardship program by an external organisation, such as a social welfare or consumer

advocacy organisation, which indicates that a customer may be facing financial difficulties.

As outlined in the ‘Staying Connected Reference Guide’, a monthly report is generated from the SAP system listing customers that have not paid their energy bills. AGL representatives will contact these customers and seek to determine why bills have not been paid. As part of this process AGL representatives will identify whether customers are facing financial difficulties.

3) Are all requirements of regulations being met in establishing Payment Plans including an appropriate assessment of the customers' capacity to pay?

All Staying Connected Consultants have a Staying Connected Cheat Sheet that they use to assess the customer and their eligibility for the Staying Connected program, specifically their willingness to pay. This includes identifying if the customer is making part-payments towards their account and whether they have previously had a good payment history.

Customers are provided information regarding alternative payment options, government assistance and concessions, as well as financial counselling and support services. All customers are sent a welcome letter confirming their payment plan along with brochures on Financial Counselling Services and Energy Saving Advice. Energy conservation advice is also offered to assist customers in reducing their consumption and future energy costs.


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4) Are the Licensee's financial hardship policies, practices and procedures (including the requirement to offer appropriate Payment Plans before disconnection of customers facing financial difficulties) fully understood by call centre and other relevant staff?

We observed that a customer hardship (Stayed Connected) team specifically deals with customers that are facing financial difficulties. Customers requesting to be on the hardship program are referred to the Staying Connected team by either internal or external parties. Prior to acceptance on the program, staff must ensure that they perform an assessment of the customer’s capacity to pay, and inform them of the options that are available under the hardship program. Each Customer Service Representative (CSR) also acts as a case manager and performs a review of customers on the hardship program. Through their day to day dealings, staff in the customer hardship (Staying Connected) team demonstrated a working knowledge of the hardship policies, practices and procedures in place at AGL.

5) Are there systems in place to effectively monitor disconnection requirements (e.g. records of qualifying hardship customers) and quality control (e.g. complaints feedback)?

SAP is the main system that AGL uses to govern adherence to disconnection requirements. SAP has inbuilt queries that generate reminder letters and disconnection warnings upon non-payment of a bill, and/or restrict a customer being disconnected under a number of situations e.g. customer has an unresolved complaint standing with EWON. All actions performed by AGL are detailed in the contact notes with SAP, including records of a customer qualifying for hardship, in-bound and out-bound calls.

Prior to any disconnection a member of the Collections Operations team performs a check of each customer that is about to be disconnected and assesses whether:

AGL has made best endeavours to contact the customer The customer has made informal payment arrangements with AGL The customer has made a last-minute payment

Any complaints regarding disconnections go through the Customer Advocacy Team. Where required, Customer Advocacy will liaise with the team leader of Collections Operations to manage the case/issue.


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4.5 Marketing Code of Conduct (MCC)

Electricity Gas


MCC – Section 5.1.2

As outlined in the Code, a supplier must ensure that persons employed or authorised to carry out marketing activities on behalf of the supplier must comply with the Code.

AGL has outsourced their Marketing function to CPM, a third party who carries out marketing activities through Outbound Telemarketing and Field Marketing. Training is provided to all marketers to comply with the code. In addition, quality and coaching assessments are performed for each marketer. A customer call back service to obtain customer feedback on experience is also conducted.



Electricity Gas



The Code outlines that a marketer must keep a record of complaints made in relation to the marketing activities of the marketer, conduct audits on an annual basis to verifying compliance with the Marketing Code, and provide the Code Administrator with information relating to Code compliance where requested to do so.

All complaints made to AGL are recorded in SAP as notes and are classified by type of complaint (e.g. billing, transfers, marketing etc). Complaint records are kept on SharePoint and SAP for 5 years, and are thereafter archived. Complaints from AGL’s legacy system, CIS can still be extracted.

Open complaint items are tracked on a weekly basis by the Retail Performance Team. Monthly and weekly reporting of SAP complaints are generated and published on the intranet.

The in-house Internal Audit function at AGL performs audits on an annual basis across a number of key operations within the business including marketing. As part of these audits, the internal audit function will verify whether AGL is in compliance with the codes and regulations that it is required to adhere to for the specific operation being audited.

Where IPART has any questions regarding matters of compliance, the Energy Regulation Department will respond to these, and provide the regulators with information relating to Code compliance where required.




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Electricity Gas



The Code outlines that a marketer must not engage in misleading, deceptive or unconscionable conduct whether by act or omission when carrying out marketing.

Both Outbound Telemarketing (OTM) and Field Marketing Agents are trained to understand:

Misleading and deceptive conduct

Unconscionable conduct (including marketing to minors, customers with language limitations, and the aged over 65 years of age)

Conduct and language (including bullying, harassing, tone, and expression and clear understanding)

In addition all outbound telemarketers are subject to quality control in the form of reviews of calls made to customers by team leaders.

All marketing material used by AGL goes through an approval process to ensure that language, cohesion, branding, regulatory compliance are all adhered to by relevant stakeholders including the respective business and legal areas.



Electricity Gas



The Code requires that prior to a customer entering into an electronic transaction, the Marketer must explain that; the customer is bound by the electronic transaction, and that the customer is recognised as having received the information contained in the electronic transaction.

AGL customers are able to initiate or terminate the supply of gas or electricity verbally. For contracts that have been entered into verbally, the current process in place at AGL is to inform the customer that:

"If the Electronic Transaction Act applies, then you will be bound under the provisions of the Act relating to electronic acceptance".

We have identified that AGL customer service representatives (CSR’s) follow telemarketing scripts to satisfy the information requirements outlined the Code. All CSR’s are subject to quality reviews at the end of each month to ensure compliance with the Code.




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Electricity Gas




The Code requires that records of telephone calls made in relation to marketing be kept for at least one year. Specifically, details of the marketer, time and date of calls, as well as the names and telephone numbers of customers contacted must be maintained.

AGL has a system in place that records all calls relating to out bound telemarketing sales, and also the verification call used for field sales. These records are kept for a period of at least 1 year. AGL’s system is also able to capture information relating to the names and telephone numbers of customers, name of the marketer, as well as the time and date of the telephone call.



Electricity. Gas



The Code requires that where a marketer engages in marketing at a customers premise, the marketer must produce an identification card that identifies the marketer, retailer, Australian Business Number, and also the marketers contact number. They must advise the customer of the purpose of the visit and ask whether the customer wishes to proceed further. All field agents conducting sales on behalf of AGL are required to provide at the earliest opportunity: earliest opportunity:

Their name

Who they are representing

The purpose of their visit

Their identification badge

The verification call which is conducted for all field sales provides a verbal indication from the customer that these requirements have been followed by the marketing representative.




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Electricity Gas



The Code requires that a marketer ceases contact with the customer as soon as the customer has indicated that they do not wish to proceed any further.

Marketing Representatives are advised that at the request of a customer, all negotiations must cease immediately and refrain from contact for 30 days, in line with the timeframes that have been specified in MCC 6.6.1.

AGL maintains a No Contact List of all customers that have requested not to be contacted for marketing purposes.



Electricity Gas




The Code requires that records of marketing conducted at a customers premise must be kept for at least one year. Specifically, records of the marketer, time, date and details of the addresses visited must be maintained.

Field Agents are required to maintain a Cold Contact (CC) Walksheet which details the name of the marketer, date, address of customer visited, time of visit (in/out), sales outcome, and customer name. CC Walksheets are submitted weekly to the Team Manager.

AGL maintains a record of all walksheets and details of premises visited for seven [7] years. These records are stored in off-site storage.




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Electricity Gas







The Code requires that prior to a customer entering into a supply agreement, the retailer must obtain the customers acknowledgement that the marketer has provided all documents and information requirements that have been outlined in the Code. The marketer is required to keep a record of these acknowledgements for a period of at least a year.

For outbound telemarketing (OTM) sales, all calls are recorded and serve as a binding contract in the form of a voice signature (the electronic transaction act allows for written consent to be superseded by recorded voice authorisation). The Customer Service Representative will follow a script which covers off all components of Section 7.1.7.

For Field Sales, the Offer Details Form provides a statement (refer to clause 7.1.3) that customers understand the General Terms document and have read the Product Disclosure Statement which covers all conditions of Section 7.1.7.

Items outlined in Section 7.1.7 are covered within the Product Disclosure Statement, the General Terms and Conditions booklet, and the Offer Details Form. A clause within the Offer Details form outlines that when a customer signs this form they understand that they have read the Terms and Conditions and Product Disclosure Statement (PDS).

The PDS provides for all information items set out in Appendix 1 (which is an identical list of information items to 7.1.7) in the form of a list (by sections) titled in verbatim according to the requirements.

The following information should be noted in relation to Section 7.1.7:

Customers who enquire about AGL's products and services but do not enter into a contract receive a Quote Pack.

Customers who are contacted by an Outbound Telemarketer receive a Confirmation Pack upon entering the contract.

Customers who are visited by a Field Sales Agent receive a Welcome Pack regardless of whether a sale is made.

Within all packs, a PDS, an ‘AGL Energy Plan Small Customer Market Contract Fee Schedule’, and ‘General Terms and Conditions’ brochure is included.

AGL maintains records of all Offer Detail Forms and outbound verbal recordings calls for a period of at least 1 year.




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1) Does the Licensee have adequate policies systems and procedures in identifying a marketing breach? In particular, how are marketing complaint statistics reviewed to determine whether breaches have occurred?

Team Leaders for OTM and Field Agents conduct side-by-side coaching and silent monitoring of sales activities. These are documented in feedback forms which are relayed back to the marketing representative. Each Customer Service Representative is audited at a minimum of 5 calls per month.

All marketing material used goes through an approval process to ensure that language, cohesion, branding and regulatory compliance are all adhered to by relevant stakeholders including the respective business and legal areas.

Complaint statistics are reviewed on a monthly basis by the Customer Advocacy team and the Energy Regulation Department to identify any instances of breaches.

2) Are there appropriate policies/procedures in place to avoid marketing to vulnerable customers?

In order to avoid marketing to vulnerable customers, training is provided to sales teams and covers issues relating to:

misleading and deceptive conduct;

unconscionable conduct;

marketing to minors;

marketing to aged customers (over 65 or older); and

marketing to customer with limited English language skills.

In addition, flags in SAP are raised if the customer is under 18 or over 65 years of age. This is to prompt the marketer to take action where appropriate.

3) Does the Licensee have adequate training policies for marketing staff?

Induction training is compulsory for all new employees and they must sign-off on an employee declaration training register form. This is applicable for both Out-bound Telemarketing and Field Sales.

Audit reviewed the training manuals and training slides, and noted that training appears to be adequate for marketing staff based on general coverage on Regulatory Compliance requirements.

4) Are these marketing policies, systems and procedures fully understood by relevant staff?

All marketing staff undertake compulsory induction training to ensure that all staff members are fully aware of the policies, systems and procedures surrounding marketing. AGL distributes to the relevant departments, training guides, reference manuals and verification scripts as another measure to ensure that staff are aware of the procedures and policies they are to adhere to in relation to marketing. Marketing staff that are unsure of systems procedures can also refer to the AGL intranet, which provides instructions and simulations which have been developed to be compliant with AGL’s marketing policies and procedures.


31

Appendix A – AS3806 Assessment Criteria Assessment Criteria used to benchmark compliance processes against AS3806-2006 The following methodology has been used to provide an assessment of AGL’s compliance framework against AS3806-2006.

Assessment Criteria – Benchmarking to AS3806-2006

Generally Conforms

Compliance processes are in place which support conformance with the specified Principle in all material respects. Exceptions noted are considered minor.

Partially Conforms Compliance processes are in place which partly support conformance with the specified Principle. Exceptions noted are considered to be significant enough that full conformance with the Principle has not been achieved.

Does Not Conform There are material omissions and/or exceptions in compliance processes which do not support conformance with the specified Principle. Exceptions noted are considered material in nature.

Regulatory Audit on behalf of IPART July 2010

Protiviti | AGL 29

Appendix B – Scope of Work

Systems Audit

The Auditor is required to conduct sufficient procedures to form and express an opinion (reasonable assurance) on the robustness of the Licensees’ systems for ensuring compliance with key Licence Conditions listed in this Scope of Work. The Systems Audit should examine the operation of the systems for ensuring compliance and accurate reporting of the extent of compliance. The extent to which the Licensees encourage a climate of full compliance should also be reviewed.

The Auditor should use his/her professional judgment to ensure the Systems Audit is of sufficient depth and scope that the Auditor can express a high degree of confidence in the effectiveness of the Licensees’ compliance policies and systems. The Auditor should also apply a rating to assist IPART and the Licensees to assess the effectiveness of the systems of compliance controls implemented for each of the licence compliance areas being reviewed. Performance Audit A Performance Audit of a sub- set of Licence Conditions is to be conducted commencing October or November 2010. Performance auditing will assist to evaluate the performance and operation of the Licensees’ internal compliance systems. The Performance Audit will be used to determine whether the Licensees are interpreting the rules correctly and indeed whether the rules themselves need further clarification to meet Government objectives. The Performance Audit should also satisfy on behalf of the Licensees the requirements of section 5.2.1 (b) of the Marketing Code of Conduct, which requires an annual audit to verify compliance with that Code. Operating Statistics Audit

An audit of the Licensees’ 2009/10 Operating Statistics should be conducted in conjunction with the Performance Audit commencing October or November 2010. The Auditor should examine Licensees’ regulatory reporting systems to ensure Operating Statistics are collected in line with the definitions in the Explanatory Notes and verify the accuracy of the 2009/10 Operating Statistics submitted to IPART.


SCOPE OF WORK FOR SYSTEMS AND PERFORMANCE AUDIT OF ELECTRICITY AND GAS LICENCE CONDITIONS

The generic compliance issues to be addressed include: Does the Licensee have adequate policies, systems and procedures to ensure compliance with the licensing obligations? Are these systems fully understood by relevant staff? What procedures / process does the Licensee have in reconciling customer complaints to ensure compliance and accurate compliance

reporting? Obligations under Electricity Condition

Obligations under Gas Condition

Information to be provided to small retail customers in relation to a negotiated customer supply contract

System Audit April 2010

Performance Audit

Oct/Nov 2010

Comment

Elec Supply (General) Reg cl 11(3)

Gas Supply (NGRC) Reg cl 11(4)

Notice must be given no later than 21 days before end of period of supply under negotiated customer supply contract.

Non-compliance reported where 1000’s customers were impacted by late notices in 2008/09

ES (General) Reg cl 42(2A)

Gas Supply (NGRC) Reg cl 50(2A)

Disclosure notice must contain certain information in relation to a negotiated customer supply contract as specified in the Regulation

- Performance audit only

ES (General) Reg cl 42(2)


Supplier must provide a small retail customer with copy of contract and a disclosure notice within 2 business days of the negotiated contract being entered into.

- Performance audit only


Electricity Supply (General) Regulation 2001 Licensee Billing Obligations

Billing issues to be addressed: Does the Licensee have adequate policies, systems and procedures to ensure customers receive 3 monthly bills? Does the Licensee have policies and procedures implemented to deal with its recent backbilling issues? Recent Energy & Water Ombudsman NSW (EWON) complaints records show AGL receiving higher complaints about “disputed” bills than other retailers. What steps are being taken to resolve current high level of complaints about disputed bills?

Are these policies, systems and procedures fully understood by relevant staff?

Obligations under Electricity Condition


System Audit April 2010

Performance Audit

Oct/Nov 2010

Comment



Variation in rates of charges for electricity supplied under negotiated contract may not be imposed unless notice setting out particulars of variation is served on customer.*

- Performance audit only (Auditor should discuss with IPART the compliance requirements of this licence obligation prior to the audit)



Supplier must do certain things if, on review of a complaint or any other time, the supplier determines that customer has been overcharged by more than $25.



If the amount overcharged does not exceed $25, the supplier must do certain things (e.g. credit the amount to customer in next bill & credit interest at a certain rate).



Supplier must issue a bill to a small retail customer under customer supply contract at least once every 3 months.

AGL has had systemic billing delay issues in 2008/09. This has resulted in significantly high disputed bill complaints to EWON. Customer complaints could be related to unusually long periods between bills.



Date for payment of bill issued for 1st time under supply contract with small retail customer not to be less than 12 business days after date on which sent.

-



Supplier must accept payment by small retail customer by certain payment methods.

-




Supplier may not impose charge in connection with a method of payment used by customer.

AGL charged approx 50,000 standard gas customer Merchant service fees in 2008/09 in breach of this obligation.



Supplier must accept payment in advance if requested by small retail customer.

-



A bill issued by supplier under negotiated customer supply contract must include certain information if charges for supply under contract are based on the customer’s consumption.



Estimated bill is to be based on SRC’s historical meter data or the average daily consumption for the same class of customer.

Customer complaints to EWON on disputed and estimated bills are high compared to other retailers.


Market Operations Rules (NSW Transfer Rules for Retail Electricity Supply) Rules No. 4 of 2001

Transfers and Cooling-off Period Requirements

Specific issues to be addressed: Does the Licensee have adequate policies, systems and procedures for accurately verifying customer accounts prior to transfer? Does the Licensee have adequate policies, systems and procedures to ensure a customer’s request to terminate the contract (orally or in writing) under a

cooling off period is actioned? Does the Licensee have adequate policies, practices and procedures to ensure a record of contract termination under a cooling off period is provide to the

customer? Are these policies, systems and procedures fully understood by relevant staff?



System Audit

April 2010

Performance Audit

Oct/Nov 2010

Comment

ES (General) Reg Schedule 2, cl 7(1)

Gas Supply (NGRC) Reg Schedule 1, cl 12(1)

A supplier’s negotiated customer contract must confer on the customer a right to terminate the contract (orally or in writing) within 10 days after the date the contract is entered into, or the date a copy of the contract is received by the customer, whichever is the later.

In NSW, customers also have the right to terminate contract orally in the 10 day cooling off period.

ES (General) Reg Schedule 2, cl 7(1A)

Gas Supply (NGRC) Reg Schedule 1, cl 12(1A)

A supplier’s negotiated customer contract must require the supplier to provide the customer with a record of contract termination under a cooling off period,

Note: Record of termination can be provided verbally (for example by issuing a unique reference number)

MOR (ACS) cl 4.3

- As soon as practicable after applying to DNSP, supplier must forward a summary of terms and conditions of contract to customer.

-

MOR (TRRES) cl 4.1

- Supplier must not initiate or effect the transfer of a small retail customer without the customer’s written consent.

EWON receives the highest number of complaints about erroneous transfers against AGL. However, AGL’s reported figures are lower than some other retailers.

MOR (TRRES) cl 12.1

- A New Retailer must ensure that the 10-day cooling-off period provided to a small retail customer on entering a negotiated contract has elapsed before all approvals for a transfer are completed.


Discontinuance of supply

Licensee Obligations Prior to Disconnection & Licensee Obligations Towards Customers Facing Financial Difficulties

Specific licensing issues to be addressed: Does the Licensee have adequate policies, systems and procedures to ensure the supply to a small retail customer under a standard customer supply contract

(gas) or negotiated contract (electricity) is not disconnected unless the requirements of the contract or the Regulations is complied with. Does the Licensee have adequate policies, systems and procedures in identifying a customer facing financial difficulties? Are all requirements of regulations being met in establishing Payment Plans including an appropriate assessment of the customers’ capacity to pay? Are the licensee’s financial hardship policies, practices and procedures (including the requirement to offer appropriate Payment Plans before disconnection of

customers facing financial difficulties) fully understood by call centre and other relevant staff? Are there systems in place to effectively monitor disconnection requirements (e.g. records of qualifying hardship customers) and quality control (e.g. complaints

feedback)?



System Audit

April 2010

Performance Audit

Oct/Nov 2010

Comment

ES (General) Reg cl 16

Gas Supply (NGRC) Reg cl 15

Supplier must not discontinue supply to small retail customer unless requirements of negotiated customer supply contract have been complied with.

ES (General) Reg cl 13AA(1)(a)

Gas Supply (NGRC) Reg

cl 13AA(1)(a)

A supplier must develop and implement a customer hardship charter in respect of small customers who own or occupy residential premises.

This obligation became effective 1 March 2010, hence both system and performance audit to be undertaken Oct/Nov 2010.

ES (General) Reg cl 13AA(1)(b)

Gas Supply (NGRC) Reg

cl 13AA(1)(b)

A supplier must publish its customer hardship charter on its website. (see comment)

As above

ES (General) Reg cl 13AA(1)(c)

Gas Supply (NGRC) Reg cl 13AA(1)(

As soon as practicable after a customer is identified by the supplier as a hardship customer, a supplier must inform the hardship customer of the existence of the customer hardship charter and provide the hardship customer with a copy of the customer hardship charter on request and at no expense.

(see comment)

As above

ES (General) Gas Supply A supplier’s customer hardship charter must contain certain matters. (see comment)

As above


Reg cl 13AA(3) (NGRC) Reg cl 13AA(3)

ES (General) Reg cl 13A(1)(a)

Gas Supply (NGRC) Reg cl 13A(1)(a)

A supplier must operate a payment plan applying to small retail customers who own or occupy residential premises and who are experiencing financial difficulties.

Disconnection obligations were not audited in the 2009 limited

audit ES (General) Reg cl 13A(1)(b)

Gas Supply (NGRC) Reg cl 13A(1)(b)

A supplier must operate a payment plan that does certain things and provides for certain things. It must have its payment plan approved by the Minister.

As above

ES (General) Reg cl 13A(2)

Gas Supply (NGRC) Reg cl 13A(2)

Specifies the requirements of a Payment Plan including customer consumption and customer’s capacity to pay

As above

ES (General) Reg cl 13A(3)

Gas Supply (NGRC) Reg cl 13A(3)

A supplier must not discontinue supply, or request discontinuance of supply, to residential premises of small retail customers for failure to make due payment unless the supplier has done certain things including provision of (2) written notices and the availability of a payment plan for customers experiencing financial difficulty.

Note: Minor amendments made to this obligation effective 1

March 2010.


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Marketing Code of Conduct

Specific licensing issues to be addressed: Does the Licensee have adequate policies, systems and procedures in identifying a marketing breach? In particular, how are marketing complaint statistics

reviewed to determine whether breaches have occurred? Are there appropriate policies/procedures in place to avoid marketing to vulnerable customers? Does the Licensee have adequate training policies for marketing staff? Are these marketing policies, systems and procedures fully understood by relevant staff?



System Audit

April 2010

Performance Audit

Oct/Nov 2010

Comment

Marketing Code of Conduct, section 5.1.2

Identical obligation

A marketer must ensure that any person employed or authorised by, or representing the Marketer and engaging in marketing activities, complies with the Code.



A marketer must monitor and keep records of complaints; conduct audits annually to verify compliance with the Code; and provide to the Code Administrator any information relating to Code compliance, if requested.



A marketer must not engage in misleading, deceptive or unconscionable conduct when marketing.

AGL did not initially report any MCC 6.1.1 breaches for 2008/09, until prompted. This is an area where retailers may be prone to under-report breaches. IPART acknowledges that there is some subjectivity in distinguishing between a breach of this obligation and a complaint from a customer. IPART promotes a pragmatic approach. With some customer complaints about marketing, it is quite apparent that breaches have occurred (i.e. fraudulent behaviour). Other cases may not


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be clear cut (i.e. where customer’s and marketer’s account of an incident differs dramatically). In these circumstances, the licensee should examine complaint history regarding the Marketer concerned and report breaches where the history suggests the benefit of doubt should be given to the customer.



If any requirement under this Code is met electronically, the Marketer must explain certain things to the customer prior to the electronic transaction.

Customers should be able to terminate contracts verbally as long as a unique record (e.g. reference number) is provided and recordings of marketing calls retained.



A marketer must maintain certain records in relation to telephone calls involving marketing to customers.



A marketer must keep the records of marketing telephone calls for at least 1 year after the last call for the purpose of marketing.



If a marketer engages in marketing in customer’s premises, the marketer must do certain things.

(check if AGL is undertaking D2D marketing)



If a customer indicates at any time during the visit that he/she does not wish to proceed, the marketer must cease marketing and leave the premises immediately and must not contact the customer for the purposes of marketing in accordance with 6.6.1 or 6.6.2

-



A marketer must maintain certain records of marketing conducted at customers’ premises.

Marketing Identical A marketer must keep records of marketing conducted at customers’


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Code of Conduct, section 6.3.5

obligation premises for at least one year.



Before or at the time a customer enters into a supply arrangement that was arranged or facilitated by a marketer, the marketer must obtain the customer’s written acknowledgement that the marketer has provided certain information items.

-



The customer’s written acknowledgement must be in a certain form. -



Where the customer’s written acknowledgement is obtained in accordance with 7.1.3(b), the marketer must provide the customer with a certain list prior to the customer signing the supply arrangement.

-



Marketers must keep a record of customers’ written acknowledgements for at least 1 year after they were obtained.

-



Before or at the time the customer enters into any supply arrangement, a marketer must provide certain information to the customer. IPART is focused on part (g) which requires information on the difference between the offer and the std contract to be provided.

Auditor should discuss with IPART the compliance requirements of this licence obligation prior to the audit.

Documents

Regulatory Audit of AGL Sales Pty Ltd (AGL) System ...€¦ · Businesses (Electricity and Gas Industries). This Guideline details both the procedures that should be undertaken by