Under the National Energy Customer Framework (NECF) and Victorian Payment Difficulties Framework, retailers are required to provide support and assistance to consumers who may be having difficulty paying their energy bills.
Specifically, the National Energy Retail Law (NERL) requires energy retailers to develop and maintain a customer hardship policy for identifying and assisting customers with difficulties paying their energy bills due to hardship. Retailers are also required to have processes in place to promptly identify customers who are in debt and help them better manage their energy bills by offering payment plans.
In Victoria, the Payment Difficulty Framework sets out the minimum standards of assistance residential energy customers anticipating or facing payment difficulties are entitled to. A key feature of the new framework is that any customer with a debt of $55 is entitled to tailored assistance from their retailer.
Alongside the work underway to strengthen the protections for residential customers who are facing financial difficulty, we recommended in our 2018 review that we would look at the programs retailers provide commercially, and how these operate with required hardship provisions. This is in recognition that retailers may go above and beyond their minimum requirements under the law to assist vulnerable customers in accessing the appropriate level of assistance to better manage their energy use and bills.
There are a number of metrics for assessing whether hardship programs are providing support for customers facing financial difficulty, including:
- number of customers on hardship
- level of debt of hardship customers.
The Australian Energy Regulator (AER) reports that the number of electricity customers on hardship remains low, even though numbers have generally increased from 2016-17. The total number of customers on hardship programs increased for:
- electricity by 15 per cent from 59,654 in 2016-17 to 68,832 in 2017-18 (excluding Victoria).
- gas by 10 per cent from 12,421 in 2016-17 to 13,701 in 2017-18. (including Victoria).
The number of customers on hardship programs is shown in the figure below.
Jurisdictions under the NECF have between 0.6 and two per cent of electricity customers, and 0.5 and 1.3 per cent of gas customers on a hardship program.
Number of customers on hardship programs
The average debt on entry to a hardship program is an indicator of energy affordability for vulnerable customers. Higher debt on entry may mean that a customer is less likely to be able to effectively manage their debt and exit a hardship program successfully.
The AER reported that an increased proportion of electricity and gas customers had significant debt at over $2,500. As shown in the figure below, the average debt on entry for electricity hardship customers in the NEM increased in all jurisdictions except Tasmania and New South Wales.
Debt on entry into hardship programs
For the 2019 Retail energy competition review, we considered the different commercially driven initiatives retailers offer to consumers who are having difficulty paying their energy bill. Information on retailer support measures and programs was informed by retailer responses to a retailer survey, the AER performance reports and other public information about retailer payment and hardship policies.
The existing NECF legislative framework provides retailers with the flexibility to determine the level of assistance based on a consumer's circumstance. As a result, retailer support and assistance varies in their application, delivery and access. In Victoria, there are conditions for retailers to offer assistance, for example, a retailer must provide consumers with timely, clear advice on the assistance the consumer is entitled to if they missed a payment and owe in excess of $55.
Our survey and analysis of publically available information found that, generally, there is a suite of retailer programs offered to consumers that extend beyond the minimum legislative requirements. These assistance and support measures vary significantly between retailers, as with their delivery, application and accessibility.
In our review, we identified a range of programs across a number of key areas. Some examples are provided below:
- Awareness and early identification. A few retailers have introduced programs that seek to predict and identify early, those customers that may be at risk of falling into payment difficulties. These customers are notified about the support and assistance available to them.
- Available payment options. Many retailers offer a suite of payment options including incentive payments, more predictable plans, deferral payments, payment extensions and monthly billing if required. Recently, a number of the larger retailers have introduced programs that look to waive debt for customers in hardship or other personal circumstances, for example, domestic violence situations.
- Understanding and managing energy use. Most retailers will offer tailored in home energy audits and financial incentives such as rebates for replacement of appliances. Advances in technology is also allowing retailers to offer on-line and mobile applications that allow customers to monitor their usage and understand what and where energy is being used in their home.
- Partnerships or collaboration with third parties. Most retailers have some level of partnership and collaborate with community groups to provide financial counselling services. Some also are part of outreach programs such as bring your bill day, switched on communities programs and more recently the industry collaboration project Thriving Communities.
Using new rules made by the AEMC, the AER has developed new guidelines on retailer obligations to support vulnerable people so customers can better understand their rights and get the help they need to pay their power bills. The guidelines include standardised statements and greater consistency in the way retailers identify vulnerable customers and how they access retailer support. Further in 2018, the Victorian Essential Services Commission introduced its Payment Difficulties Framework.
These initiatives should improve the way retailers provide support to customers facing payment difficulties due to hardship. However, vulnerable energy consumers need to be made more aware of their rights, particularly in getting the help they need to better manage their power bills.
While many retailers go beyond minimum requirements, we consider that there is room for retailers to improve their approaches and implementation of the support and assistance they offer to consumers. The key areas for improvement include:
- Greater awareness of the support available. Retailers should collaborate with jurisdictions and other organisations to further promote consumer awareness of available support programs. This includes considering a one stop information source on available concessions, government energy rebates and other assistance measures that are available to people experiencing payment and financial difficulty.
- Earlier identification of customers experiencing difficulty paying their bills. This includes retailers implementing better early identification programs to identify people who are having difficulty paying their energy bills and require payment assistance.
- Improving reporting and compliance. The existing indicators and reporting measures could be expanded to provide a better indication of the different consumers requiring assistance and whether they are aware of support measures available and taking these up when required.
As part of the AEMC’s ongoing work, we will be looking at whether the current NECF is fit for purpose – stage one of this work is related to the NECF and Australian Consumer Law mapping carried out as part of this review.
Further consideration of broad themes and issues about consumer protections related to payment and financial difficulty will start in the second half of 2019.