Jemena Gas Networks (NSW) Ltd

Transcription

1 Jemena Gas Networks (NSW) Ltd JGN Customer Council Agenda Paper: The customer experience - gas supply from energy intermediaries Public 16 December 2016

2 OUR ENGAGEMENT WITH YOU TO DATE 1 OVERVIEW In medium density and high-rise residential and commercial developments gas is typically used for cooking and hot water (primarily centralised hot water 1 ), and to a lesser extent space heating. But most of our customers rarely think about their gas supply they just expect the water to be hot when they step into the shower, and a flame to appear when they turn on their stove. As a gas network service provider, we are responsible for providing: a safe and reliable supply of gas through our network to customers including by maintaining the network, connecting new customers to our network and responding to supply interruptions providing metering services and customer inquiry services to individual households and businesses to allow customers to manage their individual bills, to choose their retail energy supplier and the right to access a range of customer protections. Recent technological, market and policy developments mean some residential and business customers may be supplied gas, hot water, and potentially electricity services through energy intermediaries, rather than taking gas direct from our network. Under these arrangements many of the core responsibilities for supplying these residential and business customers would rest with the intermediary, rather than with us. This is most likely in medium density and high-rise residential and commercial developments. Supply from new energy intermediaries has the potential to change the gas customer experience. Increasing diversity in energy solutions could benefit customers through providing them with access to potentially more innovative, efficient and customer focused energy services. However, it is not clear the extent to which the incentives for energy intermediaries 2 or the regulatory framework will support continued customer access to individual metering, choice of retailer and customer protection measures. This paper provides the Customer Council with background information on our engagement to date on this issue and how we responded in our 2015 Plan, explains the emerging regulatory framework and seeks to prompt discussion on how this framework could evolve to continue support a positive customer experience. Objective (INVOLVE) To: summarise the discussion with the Customer Council to date on the balance between promoting innovation in energy services and customer protection, and our proposed 2015 Plan inform the Customer Council of the emerging policy and regulatory settings and what it means for both energy intermediaries and gas customers prompt discussion about the future direction of the regulatory framework and how it could accommodate the technological, policy and market developments in a way that promotes a positive customer experience 1 2 Gas hot water can be supplied to multiple dwellings through either individual gas storage or gas instantaneous hot water systems in each apartment, or else through a gas centralised hot water system. A centralised hot water system typically takes up less space, and has lower installation and operating costs. And/or incentives for developers of new residential and commercial developments.

3 1 OUR ENGAGEMENT WITH YOU TO DATE 1. OUR ENGAGEMENT WITH YOU TO DATE As part of the development of our 2015 Plan, we engaged with the Customer Council as well as our customers and other stakeholders on: the value customers attach to the current services we provide [Box 1], and any concerns our customers may have in relation to the services being provided by an intermediary [Box 2] how we may (or may not) be able to manage the risks and any changes to the customer experience how we could participate in the policy and regulatory discussions, and keep you informed of technological, policy and market developments that may result in changes in the customer experience. Box 1: What are the current roles and responsibilities? As a gas network service provider, we are responsible for providing a safe and reliable supply of gas through our network to end-use customers including by maintaining the network, connecting new customers to our network and responding to supply interruptions and for providing metering services and customer inquiry services to individual households and businesses. We have actively sought to promote the gas and centralised hot water customer experience in medium density developments. Customers in these developments currently: receive reliable and cost effective gas from our network for use in centralised hot water services are able manage their individual gas and hot water bills and choose their retail supplier that best meets their needs are able to access complaint resolution and customer protection measures We have promoted the gas and centralised hot water customer experience by: working with developers to ensure that gas and centralised hot water systems are designed and installed in an efficient and cost effective way, lowering the cost of gas and hot water for customers in medium density developments testing, maintaining and reading individual gas and hot water meters in medium density developments to ensure customers only pay for the gas (and the gas used to supply hot water) that they individually use ensuring we have the appropriate metering and IT systems to facilitate customers exercising their choice of retail supplier maintaining responsive call centres, appropriate data systems and interfaces with market systems to work with retailers when handling customer inquiries and complaints. Our customers told us that: they value the choice of individual billing and metering and their choice of retail supplier these market changes may require greater regulatory protection for customers supplied by energy intermediaries and more information disclosure about the implications of being supplied by an intermediary we should advocate for policy and regulatory changes to ensure all customers have the choice of individual billing and metering and their choice of retail supplier.

4 OUR ENGAGEMENT WITH YOU TO DATE 1 Box 2: What could the new arrangements look like and what does this mean for customers? Technological, market and policy developments are increasingly challenging the conventional business model of energy supply. New providers such as energy intermediaries are supplying gas, hot water, and potentially electricity to customers over smaller localised networks ( embedded networks ), and may even source the energy from small scale gas fired generators ( embedded generators ) located close to the end-user. These embedded networks and/or generators are primarily at sites with large energy consumption, including large heating and/or cooling loads, such as commercial centres (shopping centres, hotels, industrial facilities) or residential centres (multi-dwelling residential buildings). They are most likely in medium density and high rise developments. Under these new arrangements we would be responsible for supplying gas to a point outside the residential or commercial premises (as opposed to each individual customer), and for recording the total consumption of the energy consumers in the premises at this point (as opposed to the individual consumption of tenants). In short, our obligations including those under the National Energy Customer Framework (NECF) would be with the intermediary, rather than the end-energy consumer the intermediary would become our customer. If an energy consumer in a medium density development is supplied gas and/or hot water from an intermediary, issues relating to reliability of gas supply, cost effectiveness of any centralised hot water, individual billing of gas and hot water, as well as access to the competitive retail gas market and customer protection would be matters that individual energy consumers would need to engage on with the intermediary. The policy and regulatory framework (such as exempt seller obligations) covers some of these issues relating to gas supply, although this will depend on the specifics of the arrangement. Supply from new energy intermediaries has the potential to change the customer experience however it is not clear what these arrangements will mean for customers, both in the coming years and the longer term: Increasing diversity in energy solutions could benefit customers through providing them with access to potentially more innovative, efficient and customer focused energy services; This could result in different levels of service for different customers depending on the incentives for energy intermediaries and/or developers and customer preferences (including their access to information). For example, intermediaries could choose to offer customers a service that continues to provide individual metering and billing and easy access to the competitive retail market. Alternatively if customers do not value these services, developers and/or intermediaries may choose a less costly alternative. These cost savings may be passed on to customers. It is not clear the extent to which the regulatory framework will support continued customer access to individual metering, choice of retailer and customer protection measures, particularly for gas used to supply hot water).

5 2 OUR 2015 PLAN 2. OUR 2015 PLAN Our 2015 Plan involves us supplying gas for cooking, hot water, heating and electricity to residential and small business customers in three ways [Refer Figure 2-1]: 1. To individually metered customers - most of our 1.2 million existing residential and small-medium customers and around half of our new customers in medium and high density developments. 3 These customers using gas for cooking, hot water and heating will continue to have access to individual metering and billing, their choice of retailer and customer protection measures. 2. To boundary metered customers - residential and small business customers in higher density developments supplied gas for cooking, hot water or heating by an energy intermediary that sits between the boundary meter and the customers. While there is a choice of retailer at the boundary, outcomes for individual customers will depend on the incentives for intermediaries or developers (i.e. will they install individual meters and have the IT systems to support retail market choice) and the policy and regulatory protections for these customers. 3. To residential distributed generation technology customers - residential customers supplied energy (i.e. hot water or electricity) by an intermediary using technology such as a large-scale cogeneration unit in a residential precinct. 4 While there is a choice of retailer at the boundary, outcomes for individual customers will depend on the incentives for intermediaries or developers (i.e. will they install individual meters and have the IT systems to support retail market choice) and the policy and regulatory protections for these customers. We estimate that by 2020 around half of our new customers in medium density and high rise residential and commercial developments could be supplied gas, hot water and potentially electricity through an intermediary, rather than taking gas directly from our network (under # 2 and # 3 above). This represents around 35,000 new customers by In response to your concerns about some of the potential changes to the customer experience, our 2015 Plan 5 places additional terms and conditions on retailers and other users if they are on-selling energy as an intermediary. These terms and conditions recognise that obligations including those under the NECF would be with the intermediary, rather than with us. However we are not best placed and unable to manage all of the potential changes to the customer experience. A policy and regulatory framework exists to manage these market changes and to support positive customer outcomes With individual metering consuming up to 10 TJ per annum. Consuming more than 50 TJ per annum. Our Reference Service Agreement sets out the terms and conditions that apply to the provision of our transportation service to retailers.

6 OUR 2015 PLAN 2 Figure 2 1: Our 2015 Plan involves us supplying gas for cooking, hot water, heating and electricity to residential and small business customers in three ways #1 #2 #3

7 3 THE POLICY AND REGULATORY FRAMEWORK 3. THE POLICY AND REGULATORY FRAMEWORK Our 2015 Plan responds to what we heard from our customers and commits to doing what we can to support customer participation in, and the functioning of, the NSW retail gas market. Box 3: Our 2015 Plan responds to what we heard from our customers In developing our 2015 Plan, our customers told us they value us doing what we can to support customer participation in, and the functioning of, the NSW retail gas market, including: network pricing that is simple and easy to understand, particularly as many retail market contracts include a pass through of our network charges network pricing that is transparent and predictable, with annual changes in network prices made earlier assistance to make it easier to find a better retail market offer, and to switch retailers. Our 2015 Plan responds to what we heard from our customers. For example, we have: simplified our price and tariff structures, including our disconnection charges, to make it easier for customers to understand and retailers to pass through network price signals, and reduced the charges for special meter reads to reduce barriers to customer switching for all customers improved the transparency of our pricing decisions by publishing a Tariff Structure Statement on our website which details how we decided on our current prices, and how our price structures and levels may change in the future brought forward the timing of our annual changes to network pricing to give retailers more time to prepare market offers, and allow customers more time to shop around and compare retail offers committed to providing clear and accessible information to our customers on how they can find a better retail market offer. In an environment of rising wholesale gas prices, it is important that these actions are supported by appropriate policy and regulatory settings that provide customers with choice of access to individual metering and billing, choice of retailer and customer protection measures. One of the key elements of the framework is role of the Australian Energy Regulator (AER) in regulating the sale of energy under the National Energy Retail Law (Retail Law). [Box 4] The AER has been consulting on the regulatory framework to ensure it supports developments that are occurring in our energy market. 6 However to date, much of the focus has been on the electricity market given that increasing customer involvement in decisions relating to their electricity supply (i.e. uptake of solar PV on residential premises) is creating new businesses models and changing the way customers may interact with retailers (and network businesses). 6 AER, Final Statement of approach for energy selling by alternative energy sellers, 2 July 2014; AER, Issues Paper Regulating innovative business models under the National Energy Retail Law, November 2014.

8 THE POLICY AND REGULATORY FRAMEWORK 3 Box 4: What is the AER s role in regulating the sale of energy? The Australian Energy Regulator (AER) regulates the sale of energy under the National Energy Retail Law (Retail Law). The Retail Law requires any person or business selling electricity or gas to hold a retailer authorisation or to hold an exemption, with the AER being responsible for approving authorisations or exemptions. Holding a retailer authorisation binds a person or business with a range of obligations, and the Retail Law recognises that it may not be appropriate to bind all energy sellers with these obligations. For example, where the costs of authorisation outweigh any benefits to customers. In this instance, the AER may grant an exemption. In making this assessment the AER considers the nature of the service provided to customers, the existing regulations and the benefits of facilitating (and risks of preventing) new market players and services in our energy market. However for those customers that may be supplied gas, hot water or potentially electricity from energy intermediaries it is not clear the extent to which this regulatory framework will support customer access to individual metering, choice of retailer and customer protection measures. For example, the regulatory framework: may not apply to those customers that are supplied hot water from a centralised gas hot water unit in a residential or commercial development, 7 given that the provision of hot water may not be considered the sale of energy. Currently these customers have individual hot water meters that records the water (and therefore gas used), and allows customers to access to individual metering, choice of retailer and customer protection measures. is not in force under the transitional NECF provisions in NSW. 8 We have been engaging with the AER as well as the NSW Government on the potential changes to the customer experiences resulting from gas supply from energy intermediaries. To inform you of the emerging regulatory framework and to hear your experiences and any concerns, the AER will attend the Customer Council meeting on 16 December This is an opportunity to ask any questions you may have on: their role in regulating the sale of energy and how it views the appropriate balance between encouraging innovation in energy services and providing customer access to individual metering, choice of retailer and customer protection measures. what the regulatory framework means for customers that are supplied gas, hot water and potential electricity by energy intermediaries and where these customers can turn for advice or assistance how the framework could evolve to accommodate the technological, policy and market developments in our gas market in a way that promotes a positive customer experience. 7 8 Gas used to produce hot water typically accounts for 80% of individual customers gas usage in medium or high rise developments. Schedule 3 of the National Energy Retail Rules c7b12d32cd8e/national-energy-rule-version-1.aspx