This report is a digest of the many matters of interest to our consumer base contained in the 365 page ACCC Report. It has been compiled especially for Consumers SA by our electricity specialist, Brian Attwood.  Overall, Brian considers the ACCC’s report to be “very complete and well documented”.

The report has four parts:

Part 1 BOOSTING COMPETITION IN GENERATION AND RETAIL MARKETS

Part 2 LOWERING SUPPLY CHAIN COSTS

Part 3 IMPROVING CONSUMER EXPERIENCES AND OUTCOMES

Part 4 BUSINESS CUSTOMERS. (Not addressed this in this report.) 

SETTING THE SCENE

The ACCC suggests that there are differences in the way that a number of costs are accounted for by retailers.

Customers in South Australia on standing offers and on offers with discounts of up to 5% are paying around 12-13% higher prices for electricity than average customers in South Australia.

The 50% of customers on less than 10% discounts are, by contrast, paying more than the retailer’s average costs.

Higher solar penetration appears to be an important driver of the fall in average residential electricity usage.

BOOSTING COMPETITION IN GENERATION AND RETAIL MARKETS

Due to South Australia’s greater reliance on gas-powered generation compared to other NEM regions, its average wholesale electricity prices are more sensitive to changes in spot gas prices.

The effects of tight supply-demand in South Australia were also felt in the frequency control ancillary services (FCAS) market. Recent introduction of the Hornsdale Power Reserve Battery Energy Storage System as well as the opening of the FCAS market to demand response, has likely contributed improved outcomes in the South Australian FCAS market from late 2017.

The retail market has developed in a manner that is not conducive to consumers being able to make efficient and effective decisions about the range of available retail offers in the market.

The focus on discounts has become counter-productive, with consumers unable to effectively compare and rank offers or to have a clear idea of what price they will be paying. When confusion prevails in the market this leads to poor outcomes for individual consumers and an inability for smaller retailers to put significant competitive pressure on larger retailers.

The big three retailers have maintained a market share of over 70%. In retrospect, the creation of three very large retailers was not the best starting point for a competitive market.

The ACCC is recommending market making obligations be introduced in South Australia in order to boost market activity and provide access to trading partners for smaller retailers.

Recommendation 9 of the report is that the AMEC should make changes to speed up the customer transfer process, for example by enabling customers to use self-reads of their electricity meters. This will ensure that customers move to new offers quickly and will limit the time available for ‘losing’ retailers to conduct a ‘save’ activity. (this refers to the retailer you are leaving making a counter offer, so as not to lose you as customer)

LOWERING SUPPLY CHAIN COSTS

A key risk for retailers and customers managing the transition to cost reflective tariffs is a lack of data relating to their consumption profile. This data cannot be obtained until the customer has a period of consumption with a smart or interval meter in place.

Stand-alone power systems offer significant potential to reduce overall network costs, particularly for customers on the edge of the grid.

IMPROVING CONSUMER EXPERIENCES AND OUTCOMES

The ACCC considers that the default offer should include the following protections (that are currently included in the National Energy Retail Rules.)

  • simple pricing - no conditional discounts and no additional fees or charges (including early termination fees)
  • guaranteed access to paper bills at no additional cost to the consumer.
  • a minimum period of 13 business days to make payment after a bill is issued or six business after a bill reminder is issued.
  • access to a bill smoothing arrangement that enables consumers to budget and plan for electricity bills.

The ACCC has three concerns with discounting:

  1. Discounts are applied to different underlying tariffs and different parts of the bill, which is confusing and means that offers with any kind of discount cannot be easily compared/
  2. Conditional discounts are often not fair to those facing payment difficulties, leading to equity issues as those who cannot afford to pay are likely to end up with higher overall bills.
  3. Marketing based on discounts is confusing as it is often based on conditions and does not provide actual price information, meaning that consumers cannot use discounts to estimate what they can expect to pay.

The ACCC said retailers should be more proactive in assisting vulnerable consumers, identifying vulnerable consumers earlier and improving retailer hardship programs.

Also there is a need for Government action, particularly in relation to concession schemes, with a number of stakeholders arguing that concession schemes should be consistently applied across the NEM.

The ACCC has identified four areas where concession schemes are not operating effectively :

  1. Concessions should not be applied as only a fixed dollar or percentage amount, as this will lead to disproportionate support for low- and high consumption households.
  2. All concessions should be means tested, to ensure that concessions are targeted at those in need.
  3. Consumers are required to reapply for concessions at certain points, which is both unnecessary and in some cases, is likely to act as a barrier to switching/
  4. Inconsistency between concession regimes is increasing both retail costs for retailers and complexity for consumers.
Posted
AuthorRay Dennis