Victoria s Electricity and Gas Retail Markets Review

Transcription

1 Summary of Stakeholder Forum The Panel for the Review of Electricity and Gas Retail Markets in Victoria invited stakeholders to attend a Stakeholder Forum on Wednesday, 8 February A discussion paper was shared in advance with the stakeholders, a copy of which can be found here: The forum was run in a "hearing style" format and was designed for energy market stakeholders, such as: residential consumer and community groups; business consumers and associations; energy networks; energy market bodies and regulators; new energy services and energy experts; and energy retailers. The Panel is grateful to the 69 people who attended the forum and who so thoughtfully considered many of the issues raised by the discussion paper. The work of the Review will be greatly assisted by the ideas, suggestions and advice that were offered during the forum. The Panel asked to hear stakeholder views on a wide range of important issues related to the operation of the retail energy markets. Discussions with all stakeholder groups began by exploring what evidence is available to show consumers are either better or worse off with retail competition in energy markets and if there are issues currently not canvassed in the discussion paper, but should be considered in the review. The following summary provides an overview of many important issues that were raised at the forum. It is not intended to provide a complete record of detailed discussions that took place on the day. The Review Panel looks forward to the outcomes of submissions which are due on the 28 th of February Session 1: Residential Consumer and Community Groups Complexity in determining ways consumers might be better off such as price, choice, products and services. Competition is not effective unless it benefits all consumers. There is evidence that vulnerable consumers are not benefitting from competition. Page 1 of 5

2 Price discrimination between those who actively engage with the market and those who do not; between those who pay on time and those who do not. Energy markets provide an essential service like shelter and food and therefore needs to be treated as such There is lack of public information on how much customers are paying for energy. Research from the latest CHOICE Consumer Pulse survey shows that 81% of households are concerned about energy costs. Marketing by providing information on discounts is meaningless, unhelpful and misleading as the base for calculating discounts is unclear. Retailers set unilateral discounts and contract terms. Consumers are faced with many barriers to switching. Lack of consumer engagement could result in price discrimination when contracts cease and new arrangements are put in place. Customers are not well-informed of the end of their contract term and are put on higher offers at the end of their initial benefit period Some customer groups may have continued inability to access the market. Victoria has a high fixed retail charge with limited relationship to the network fixed charge. Commercial comparison sites may not present a complete picture of all available retailer offers as they may have arrangements with certain retailers Gas pricing is opaque. There is no competition in some regional areas and price is not regulated. Suggestions of gaps in the discussion paper included: o Impact of new energy products and services in market place, such as solar. o Continuous difficulties for third parties to access meter data to enable new business models which could get better consumer deals. Session 2: Business Consumers and Associations Retail competition is good and has delivered benefits. A business association conducted a survey among its members and found almost half of the businesses members were spending less than 1% of income on all forms of energy combined and 7% were spending more than 5%. Cost of supply, security and price are major concerns for businesses. Analysis of retail market should be linked to the wholesale gas market. Degree of competition in the generation and the production of gas in regional Victoria. Retailers take a conservative view of what their future compliance costs may be - this was seen when businesses had to comply with new targets under the Victorian Energy Efficiency Target (VEET) scheme. Page 2 of 5

3 The role of gas supply, the current gas supply crisis and the impact of gas moratorium need to be considered. Small businesses are generally price-takers with regards to energy prices even though they are big users of energy. Trust and confidence in retailers is critical. Session 3: Energy Networks The role of the distributor as one part of the energy supply chain whose role is to keep network charges as low as possible. Greatest price movement from 2008, when first retail electricity price movements occurred, are policy related costs from variety of sources. Some research indicates that between 2001and 2008 there was a decrease in average residential bill (6%), and the biggest driver of the decrease was retail services and distribution charges. A significant cost not explicitly captured, which does not affect all networks equally, is investment into capital expenditure to improve fire safety outcomes. Capital costs such as this take a while to build up in the impact on customer bills. Research by ENA and CSIRO for the Electricity Network Transformation Roadmap shows that 50% of generation will be undertaken at the household level by Access to retail information data could be improved and possible improvements to transparency. Customers can be provided their smart meter data, which could be done through their retailers. Networks can also share data with an energy foundation undertaking a survey, as long as they have the consent of customers. Session 4: Energy Market Bodies and Regulators There is manifestation of consumer detriment in the retail energy markets. Research suggests some of the objectives for good consumer outcomes have not been met. Retailers have a major role to play in improving consumer outcomes. Research shows the most vulnerable do access financial hardship support but other vulnerable groups are not aware that they can access assistance such as payment plans. The Ombudsman considers affordability and hardship as the most important issues to consider with respect to consumer engagement with retail energy markets. Government should develop engagement strategies for different market groups. Research indicates there is an opportunity to reform concession rebates. Page 3 of 5

4 As new technologies and services enter the market, dispute resolution has not kept pace and is one of the current focus areas for the Ombudsman. As per the AEMC Residential Electricity Price Trends Report, between 2010 and2015 a big driver of increase in retail charges was network prices. Information from retailers on the cost of operation including cost of acquiring customers and cost of billing would be important to consider. New retailers entering the market. A survey of retailers should be undertaken to see if there are barriers to entry or expansion. There are issues with ongoing contracts where discounts run out after 12 months. There is limited understanding of energy by customers desire for simple, easy to understand information. Web based information regarding offers and costs would be useful. The government-run Victorian Energy Compare is a useful information source for consumers and has good functionality. In the gas market, outcomes in the wholesale market are increasingly affecting the retail market. Retailers cannot be compelled to provide data regarding pricing components. In Victoria, the network component comprises 85 per cent of the retail bill. This has decreased in the last few years and the share of wholesale costs have gone up. However, the network component in the retail bill remains higher in Victoria than in other jurisdictions. The AEMC will value and will benefit from greater information on a range of issues. Session 5: New Energy Services and Energy Experts There is lack of innovation in the retail markets - free magazine subscriptions or discounts or bundling of electricity and gas do not constitute innovation. There should be a mechanism by which consumers get the best price irrespective of their engagement. No disclosure of differing cost structures between retailers. There is lack of available data on how much energy is used by consumers. There is a need to review the legislation of ESC to recognise new energy services. An example was cited where a new energy service provider was unable to access information from AEMO as it did not fall under a recognised category. A question was raised on where do people go when their contracts or offers end? Introduction of flexibility and innovation on the distribution side could help consumer outcomes. Page 4 of 5

5 Session 6a and 6b: Energy Retailers There is evidence that the retail energy market was working to benefit consumers including various surveys. Consumers have benefitted from price innovation and improved customer service, but far less customers may have benefitted. Benefits to Victorians over standard offers with more players in market driving innovation. People not engaging and getting stuck on standing offers. Retail price increases do not imply that competition is not working. Prices have risen due to external costs such as wholesale costs. Retailer costs include the costs associated with managing wholesale risk on behalf of customers, credit risk, administering concessions, grants and green schemes, settling disputes with customers and marketing. Cost of wholesale risk management has risen substantially in recent years. Some retailers do offer the extension of benefit period or offer a higher discount if it is available, when a contract ends. Customers are not put on standard contract price. Some retailers offer an evergreen contract and contract offers do not end. There is a pay on time discount but no benefit periods with no barriers to exit. Discounts are mostly offered because late payments have a cost to retailers. Customers need to have a better understanding of how much their energy actually costs. Energy is a complicated product. It is impossible to advertise all of the rates, across all states, all distributors and all meters. Some retailers tried to move away from discounting, but always come back to it due to it being the best model. They also tried different marketing promotions, such as fixed rate products, but these had a low take up. Retailers don t control distribution pricing and wholesale processes. Introduction of demand pricing will be difficult. Claims that in last financial year electricity and gas wholesale prices increased by 50 and 60%. Customers did not see this increase because retailers entered into hedging arrangements. Victoria has fixed metering charges, which are quite steep and are 3-4 times NSW s. Page 5 of 5