06 August 2014
On 1 August 2014, the AEMC held the second stakeholder workshop for the competition in metering and related services rule change. The workshop discussed issues relating to the proposed network regulatory arrangements. Materials from the workshop are now available on the project page.
31 July 2014
The Australian Energy Market Commission (AEMC) has made a draft rule to improve the information given to consumers when entering retail energy contracts.
AEMC Chairman, John Pierce, said consumers would be able to shop more confidently for electricity and gas deals if they had access to clearer information on energy contract options.
Research that informed the draft rule was also released by the AEMC today and indicates that some consumers may be entering contracts unaware that prices may change. The research also indicates that people want a range of contract and price options to meet the specific needs of their household or business – with both fixed and variable prices to choose from.
“The survey results showed a mix of preferences with almost half of residential (45 per cent) and small business (47 per cent) consumers preferring a variable price while a third (31 per cent) of residential consumers and a quarter (25 per cent) of small business consumers prefer a fixed rate,” Mr Pierce said.
“Previous AEMC analysis has shown that consumers can save between five and sixteen per cent on their annual electricity bill by shopping around for the best deal and switching away from regulated standing offer contracts. To do that, consumers need to have different types of contracts explained to them very clearly.
“We have released a draft rule that clarifies that energy retailers must tell consumers if prices can change during the term of their retail contracts; and provide clear product disclosure details on when they will notify customers about price changes,” Mr Pierce said.
“We have also called on the Australian Energy Regulator to review the effectiveness of their energy price comparator website, Energy Made Easy, and its guidelines on how retailers market their energy offers to consumers.
“Improved information enables consumers to engage more confidently in retail energy markets and make decisions that better meet their needs. This in turn is likely to enhance competition in retail energy markets,” Mr Pierce said.
The Commission’s draft rule was made in response to a rule change request submitted by Victorian consumer groups, the Consumer Action Law Centre and the Consumer Utilities Advocacy Centre. Their request sought to prohibit retailers from changing their prices during energy contracts that have a defined period of time or a benefit that is offered for a specific period.
The AEMC has called for public submissions on its draft determination (Retailer Price Variations in Market Retail Contracts) which are due by 11 September 2014.
Other key points
About the Research
To inform the Retailer Price Variations in Market Retail Contracts Draft Determination, Newgate Research conducted focus groups with 162 participants and a survey of 2,213 residential and small business consumers across NSW, ACT, SA, VIC, and Queensland. For more details and to access the full report go to our project page.
For more information
AEMC Chairman, John Pierce (02) 8296 7800
Media Contact: Prudence Anderson, Communications Manager (0404) 821 935 or (02) 8296 7817
About the AEMC
The Australian Energy Market Commission is the independent body responsible since 2005 for providing policy advice to Australian governments on the electricity and gas sector. It makes energy market rules which are applied and enforced by the Australian Energy Regulator.
17 July 2014
Registration is now open for the AEMC’s second stakeholder workshop on the competition in metering and related services rule change. The workshop will be held in Brisbane on 1 August 2014 and will focus on the issues related to the proposed network regulatory arrangements.
To register for this workshop, please contact Claire Richards at claire.richards@aemc.gov.au or on (02) 8296 7800, by 25 July 2014. Further information about the workshops is available on the project page.
01 July 2014
On 26 June 2014, the AEMC held the first stakeholder workshop for the competition in metering and related services rule change. The workshop discussed the role of the Metering Coordinator and the gate keeper function for smart meter services. Materials from the workshop are now available on the project page.
11 June 2014
The AEMC will hold a series of stakeholder workshops on the competition in metering and related services rule change over the coming months. These workshops will explore the issues raised by the consultation paper in more detail and give stakeholders an opportunity to provide their views on the proposed arrangements.
Further information about the workshops and the registration process is available on the project page. Registration for the first workshop (26 June 2014 in Sydney) will close on 20 June 2014.
03 June 2014
CEDA Speech by John Pierce – 3rd June 2014
Thank you Simon and CEDA for putting on today’s event. A few weeks ago I was across the Ditch in Wellington, killing a little time in a coffee shop before an appointment. There were two people sitting next to me having a very engaged and animated conversation.....about house insurance. They were comparing notes on the different policies they were on and of other policies from different companies they had received quotes from.
Two things struck me about their conversation. The first was the level of emotion..... there was none. Their tone was very ‘matter of fact’ without a hint of angst or frustration borne of confusion. They had the demeanour of people who were confident they knew what they were talking about.
The second was the range of things they were comparing……premiums of course, but also the level of excess, exclusions and how pleasant and 2 informative the voice on the other end of the phone was when they rang this company or that.
And I thought, “that’s it!”
How can we get to a world where people are as comfortable shopping for energy as they are house insurance…….or car insurance or bank loans or a myriad of other services where we take choice and competition for granted.
Now I often hear people say that energy is complicated. Well guess what so are the financial services or telecommunications sectors or even groceries, if you try and explain the retail offerings to people by describing the processes and technology that make up the supply chain.
Of course it wasn’t long before John Pierce the human being, eavesdropping in a coffee shop reverted to Pierce the econocrat who thought “confident, well informed consumers”….. notice how that term depersonalises our thought processes…..” is one thing, but if their choices are going to result in efficient operation, investment and innovation along the supply chain and hence make a positive contribution to productivity growth in the economy more generally, the prices and other characteristics of the services being offered to these individual consumers need to reflect the costs to the system of supplying them. The supply chain then needs to be 3 flexible enough to respond to these consumer choices. Generally this requires price levels AND structures to be capable of communicating the consequences of these choices on underlying demand and supply at each link in the supply chain.”
Pierce of the AEMC recognised that these two New Zealanders were unknowingly living the consumer priority in the Australian Energy Market Commission’s Strategic Priorities for energy market development. The econocrat was thinking about the market priority and both are needed.
Pierce the human being thought it best not to burden the house insurance shoppers with this revelation and left for his appointment without disturbing their search for Pareto Optimality.
The Consumer Priority aims to allow consumers to participate confidently in the energy market and that they can see a benefit to themselves from doing so. Participate in the competitive generation and retail markets, through their consumption and contract choices and in the network sector, through the impact of these choices and through participation in the regulatory processes.
Underpinning this is a view as to who you want to be driving the way the sector operates and develops in response to changing technologies, costs and relative prices.
Importantly, and in common with the market priority, it also requires reflection on how risks of various types are allocated, primarily between consumers and equity investors, but also in this game, taxpayers.
In the old world of state-based utilities, the sector’s development – perhaps quite appropriately for the times – was largely driven by planners employed in what was often labelled the “Power Development Division” where the focus was on building generation capacity. When energy demand was growing at 6 per cent plus per annum some would argue that this focus was fair enough.
A consequence of this type of industry structure however is that investment risks fall on consumers. When demand growth slowed to around 3 per cent per annum but generation plant was still being built as if it was 6 per cent, prices rose to recover the costs of the excess capacity.
With the start of the wholesale NEM more than 15 years ago, it was recognised that the drivers of the way the sector developed would shift from generation to retailers and the way networks were regulated.
It was also recognised, indeed intended, that investment risk would shift to the owners of generation capacity. If too much capacity was built wholesale prices would fall. Competing generators need not be any better at forecasting the future than the planners, but the consequences would sure be different.
What we are experiencing now is….. admittedly what can at times be in an untidy manner……. a transition to the next phase of that trend where consumers, doing what they do best – making consumption decisions – drive the way the sector develops.
Consumer representatives, governments, the businesses operating in the sector, and market institutions such as the AEMC and the Australian Energy Regulator all have a role in facilitating this transition. For the Commission’s part perhaps the two most important or at least visible pieces of work are the Rule changes flowing from the Power of Choice Review and our reviews of retail competition.
Power of Choice was a package with numerous elements. Each element to varying degrees depends on the others. Three fundamental building blocks though are the Rule changes dealing with (i) the way network charges are structured, (ii) the development of a market for the data that new metering technologies can provide consumers, retailers and distribution network operators, and (iii) arrangements that allow for multiple trading relationships at the consumer’s connection point.
All are a bit “techy” and looked at individually each in isolation might not seem world shattering. Taken together however they create the opportunity for consumer choice about how they use this stuff to drive efficient delivery of energy services.
The work we have done as part of the Retail Competition reviews identified four things energy consumers need for there to be coffee shop conversations like the house insurance conversation I overheard in New Zealand.
Energy of course is an all-pervasive input to economic activity. There is a strong link between the productivity of this sector and that of the broader economy. This is why the energy sector was a particular focus of the microeconomic and competition policy reforms of the 1990’s and the resulting wholesale market arrangements have been an enduring reform success.
Creating the conditions that allow consumer choice to drive the way the sector and the market for energy services develops will help open the next chapter of what is a productivity improvement story.
Governments naturally tend to have objectives that go beyond these consumer and market priorities for energy market development. Concerns for vulnerable customers and the environmental impacts of the sector are obvious examples. That is quite appropriate of course because after all they are elected to govern and I am not.
How these objectives are pursed,…… whether the instruments used to implement them are compatible with the way energy is bought and sold and the risk allocation that allows the market to operate……. however has important implications for how effectively the energy market can work in the long term interests of consumers.
Like the market arrangements themselves, policy instruments that depend on a particular view of the future, on predictions of relative prices and technology costs are likely to result in inferior outcomes to those that can achieve their objectives whatever the future may bring.
Thank you.
22 May 2014
On 19 May 2014, the AEMC held a stakeholder forum in Melbourne on the Retailer price variations in market retail contracts rule change request. The purpose of the forum was to provide an opportunity for stakeholders to share their views on the scope of the problems identified in the rule change request, the impact of the proposed rule, and any alternative solutions that may better address the identified problems.
The presentations from AEMC staff and stakeholders are now available on the project page for the rule change request.
22 May 2014
The AEMC today published a guide to the National Energy Customer Framework (NECF) – and how it operates in each state and territory.
The NECF is one of the Council of Australian Government’s energy market reforms. It implements the Council’s aim to transfer regulation of the sale and supply of electricity and gas to retail customers from a state-based system to a national regime.
The package includes a number of obligations including quality of information on bills, marketing regulation, and mandatory hardship programs which require every retailer to help customers in financial trouble. As part of NECF a free, independent energy comparison website was launched and you can access the service online by visiting the Australian Government’s Energy Made Easy website or by calling the energy hotline on 1300 585 165.
The NECF consists of the National Energy Retail Law, Rules and Regulations and amendments to the National Electricity Rules and National Gas Rules. The extent to which each of those instruments applies in each state and territory depends on the application legislation passed by each jurisdiction.
The NECF has now commenced in the Australian Capital Territory, Tasmania, South Australia, New South Wales and Commonwealth jurisdictions. States and territories that have not yet adopted the customer framework remain responsible for regulating retail energy markets. Western Australia and the Northern Territory do not propose to implement the framework.
The AEMC has developed this guide to help people affected by the NECF, particularly consumers and their representatives, better understand how the NECF currently applies in each state and territory. The NECF is applied in each jurisdiction through state or territory laws, which can also modify the application of parts of the NECF in each specific jurisdiction. As a result, there are effectively different versions of the NECF that apply in each state or territory.
The AEMC guide includes:
For more information:
AEMC Senior Director (acting), Richard Owens (02) 8296 7800
Media: Communication Manager, Prudence Anderson 0404 821 935 or (02) 8296 7817
08 May 2014
The AEMC published its consultation paper on the COAG Energy Council’s (formerly known as the Standing Council on Energy and Resources) customer access to information about their energy consumption rule change request. Submissions are due by 5 June 2014.
08 May 2014
On 19 May 2014, the AEMC will be holding a stakeholder forum in Melbourne on the Retailer price variations in market retail contracts rule change request. The purpose of the forum is to provide an opportunity for stakeholders to share their views on the scope of the problems identified in the rule change request, the impact of the proposed rule, and any alternative solutions that may better address the identified problems.
The public forum will be held at the Novotel Hotel at 270 Collins Street, Melbourne between 1:00 pm and 4:45 pm.
The forum will be divided into two sessions:
If you are interested in attending the forum, please register here.
The forum will include a mix of presentations and open discussion.
The agenda for the forum is available here.