AER DMO Forum 5 December 2018 Rosemary Sinclair CEO What Ill - - PowerPoint PPT Presentation

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AER DMO Forum 5 December 2018 Rosemary Sinclair CEO What Ill - - PowerPoint PPT Presentation

Mar 02, 2023 93 likes •481 views

AER DMO Forum 5 December 2018 Rosemary Sinclair CEO What Ill cover today (quickly!) 1. Consumer and market context affordability in a market for an essential service 2. Defining the problem 3. How does the DMO relate to other ACCC

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AER DMO Forum

5 December 2018 Rosemary Sinclair CEO

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What I’ll cover today (quickly!)

  • 1. Consumer and market context – affordability in a market for an

essential service

  • 2. Defining the problem
  • 3. How does the DMO relate to other ACCC recommendations?
  • 4. Work already underway
  • 5. Key elements to re-establish the safety-net
  • 6. Pivot to consumers

2

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1. Consumer and market context

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What consumers are telling us … comparing sectors

46 64 64 74 63 73 81 40 28 26 20 31 22 15 14 8 10 6 6 5 20 40 60 80 100 Electricity Gas Internet Mobile Phone Insurance Banking Water

Satisfaction with utilities and services

Positive Neutral Negative

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Energy Consumer Sentiment Survey June 2018

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What consumers are telling us … value for money

46 46 45 40 38 35 37 50 39 40 40 39 43 41 49 51 37 48 14 15 16 18 21 16 12 13 13 10 20 30 40 50 60 NSW VIC QLD WA SA TAS ACT SE QLD Business (all)

Satisfaction with electricity value for money

Positive Neutral Negative

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Energy Consumer Sentiment Survey June 2018

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Do you trust the sector?

25 26 21 35 24 19 14 26 34 35 35 41 41 36 40 33 39 37 40 39 38 25 41 41 53 36 10 20 30 40 50 60 NSW VIC QLD WA SA TAS ACT SE QLD Business

Confidence in the market

Positive Neutral Negative

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Energy Consumer Sentiment Survey June 2018

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In the short term, the price of regaining trust and confidence is the price

  • 1. Immediate action on prices

and to clear up choice for consumers.

  • 2. Longer-term outcomes …
  • rderly transition, seizing
  • pportunities.

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A market you can’t manage

59 50 51 61 26 31 35 37 32 35 10 16 12 8 39 10 20 30 40 50 60 70 Personal ability to make choices Enough easily understood information is available Tools and assistance you need to manage energy use Ability to get problem resolved Overall market working in your long-term interests

Confidence in information and tools – Victoria

Positive Neutral Negative

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Energy Consumer Sentiment Survey June 2018

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A more sophisticated vision of a market for an essential service

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Small business Households

GOVERNMENT GOVERNMENT MARKETS AND REGULATION

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Moving from ‘fight’ to fix’ when it comes to confusopoly and the broken safety-net

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  • 4. We have not listened to or learned enough from our customers, regulators

and employees. Where we've gone wrong has usually been preceded by internal or external signals and warnings. Despite this, we have been too quick to create and accept a convenient narrative to explain our decisions, actions and mistakes. This means we've responded late, and missed or resisted signals that challenged our existing position and presented an opportunity to purposefully question our viewpoint.

  • 5. While we have a strong commitment to customers, we have too often put
  • ther priorities first.

We too rarely asked what the impact of our decisions would be for our customers. We failed to be guided by the reality that good customer outcomes are critical to sound financial performance. We let the perception evolve among employees that delivering

  • n short-term financial results remained the primary focus, despite extensive

changes to remuneration frameworks.

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A consumer statement of expectations…The Energy Charter

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Source: The Energy Charter, https://www.theenergycharter.com.au/

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2. Defining the problem

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ACCC Price Monitoring Discussion Paper

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Less and less households on standing offers …. however

14 Source: ACCC REPI Final Report, Chapter 12 - https://www.accc.gov.au/publications/restoring-electricity- affordability-australias-competitive-advantage

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Consumers on standing offers paying more than their share

15 Source: ACCC REPI Final Report, Chapter 12 - https://www.accc.gov.au/publications/restoring-electricity- affordability-australias-competitive-advantage

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A market you can’t exit

Source: https://www.acoss.org.au/wp-content/uploads/2018/10/Energy-Stressed-in-Australia.pdf 16

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Small business at risk on standing offers

17 Source: ACCC REPI Final Report - https://www.accc.gov.au/publications/restoring-electricity-affordability- australias-competitive-advantage

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There are more than 2.1 million small businesses in Australia!

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Fixing the safety-net an opportunity for an industry leadership

“It is clear that the standing

  • ffer is no longer working

as it is intended and is causing financial harm to customers”

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ACCC recommended standing offers be abolished

20 Source: ACCC REPI Final Report - https://www.accc.gov.au/publications/restoring-electricity-affordability- australias-competitive-advantage

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3. How does the DMO relate to

  • ther ACCC recs?
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And establish a ‘reference bill’ to improve how offers are advertised and marketed

22 Source: ACCC REPI Final Report - https://www.accc.gov.au/publications/restoring-electricity-affordability- australias-competitive-advantage

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Implementing ACCC as a package to secure 20-25% savings

23 Source: ACCC REPI Final Report https://www.accc.gov.au/publications/restoring-electricity-affordability- australias-competitive-advantage

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4. DMO in the context of work already underway

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The DMO in context … rule changes

  • Rule changes:

‐ Strengthening protections for customers in hardship (completed) ‐ Estimated meter reads (completed) ‐ Notification of end of fixed benefit period (completed) ‐ Advance notice of price changes (completed) ‐ Preventing discounts on inflated energy rates (completed)

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Important early steps to re-establish the safety-net

  • AGL 16 November 2018 – “new safety-net … more than 150,000 household electricity customers

across Australia will receive an average annual saving of between $50 - $180 off the standing offer, assuming average annual usage of 4.4 MWh on a peak only tariff.”

  • Energy Australia 27 November 2018 – “eligible concession-card customers on default or "standing
  • ffer" tariffs would receive a 15 per cent discount on their electricity and gas usage.”
  • Origin 30 November 2018 – “concession card holders in New South Wales, ACT, Queensland and

South Australia on standing offers or non-discounted plans will get an automatic 10 per cent discount on electricity usage charges from 1 January 2019.”

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1 January 2019 prices a critical marker

  • Energy Australia 30 November 2018 – “keep electricity prices flat for Victorian households in 2019

by paying more than $15 million worth of increases in supply-chain and other costs.”

  • Origin 30 November 2018 – “hold residential electricity prices flat for all other customers in Victoria

from 1 January 2019, absorbing higher network and green scheme costs. Origin will also freeze natural gas prices for Victorian residential customers despite an increase in network costs.

  • AGL 30 November 2018 – “prices will come down by 1.6% on 1 January 2019…Gas prices will

come down by 0.9% for residential customers and 1.2% for small businesses.”

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New Retail Pricing Guidelines (particularly Basic Plan Information Document) and EME enhancement is positive

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From fact sheets (BPIDs) to billboards …

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Five minutes to midnight

30 Source: https://www.vinnies.org.au/icms_docs/298264_2018_NEM_-_No_guarantee_for_consumers.pdf

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5. Elements of a new safety-net

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ACCC Price Monitoring will provide a new six monthly snapshot of prices and costs

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  • Retailers to commit to the principles of a glide-

path to re-establish the safety-net and provide a reasonable price for people who don’t/can’t switch.

  • AER to use ACCC Price Monitoring and

market info (EME + Tariff Tracker) to set and review every six months using market info.

Review and ratchet

https://www.accc.gov.au/regulated-infrastructure/energy/electricity-market-monitoring-2018-2025/terms-of- reference 33

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Moving prices back to more normal levels

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6. Pivot to consumers

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Success will turn on outcomes

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“We accept that we will be assessed on the changes we make and the actions we take to put customers first. We know that trust is the foundation for a sustainable business. We understand that we will rebuild trust only by demonstrating that we exist to serve customers. Of course, the ability to provide a good return to our shareholders is essential. We cannot operate without reliable access to risk capital. But profitability should not be confused with purpose. We have articulated our purpose in these terms: ‘back the bold who move Australia forward’. Our purpose emphasises the role we play in backing families, businesses, communities and, more broadly, national economic and social development.” (Excerpt from Foreword)

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