Energy White Paper 2014 –
Issues Paper submission template
Details of person making the submission
First Name
Gavin
Surname
Dufty
Country (if not Australia)
State
Victoria
Company or Organisation (if relevant)
St Vincent de Paul Society, Victoria
Position in Organisation (if relevant)
Manager, Policy and Research
Type of Organisation. Please choose from the
dropdown list right
Non-Government Organisation
Sector. Please choose from the dropdown list
right
Health Care and Social Assistance
Email. Please provide an email address if you
would like to receive updates from the Energy
White Paper Taskforce
gavind@svdp-vic.org.au
Confidentiality
Submissions may be published on the Department of Industry website.
If you do not wish to have your submission made public, please tick the box.
Issues for comment are listed against each of the Chapter Headings. In making your submission, you
are welcome to make comment against some or all of issues in the fields provided. A field for general
comments is provided at the end of the template.
Input Fields for Energy White Paper – Issues Paper submission template
1
1. The Security of Energy Supplies
The Government seeks comment on:

ways community expectations can be better understood and reflected in reliability standards;

the value of developing fuel reserves to meet Australia’s international oil security obligations, and augment
domestic security;

ways to increase new gas sources to meet demand and measures to enhance transparency in market
conditions; and

issues relating to the regulation of energy infrastructure.
Please provide any comments on The Security of Energy Supplies below:
2. Regulatory Reform and Role of Government
The Government seeks comment on:

priority issues, barriers or gaps within the COAG energy market reform agenda;

possible approaches and impacts of review of tariff structures including fixed network costs, further time-ofuse based electricity tariffs and the use of smart meters;

possible measures to promote greater price transparency in gas markets; and

areas where further privatisation of government-owned assets would contribute to more effective regulatory
frameworks and better outcomes for consumers.
Please provide any comments on Regulatory Reform and Role of Government below:
Introduction
We commend the Government for including regulatory reform and the role of Government as an issue
to be considered for the Energy White Paper.
The St Vincent de Paul Society, in partnership with Alviss Consulting, started tracking residential
energy tariffs in Victoria in July 2010. The Tariff-Tracking Project has since expanded to include all
National Electricity Market (NEM) jurisdictions. [All reports/workbooks can be accessed at
http://www.vinnies.org.au//page/Our_Impact/Incomes_Support_Cost_of_Living/Energy/ the reports are
also available at www.alvissconsulting.com]
Our response to this Issues Paper is based on some of the key challenges for the regulatory framework
that we observed throughout the Tariff-Tracking process. This submission therefore solely addresses
“Priority issues, barriers or gaps within the COAG energy market reform agenda”.
Input Fields for Energy White Paper – Issues Paper submission template
2
Regulation and customer protections
We believe that the National Energy Customer Framework (NECF) may actually create a barrier to
COAG’s reform agenda. While we are not opposed to the NECF per se, however we believe the
significant differences between the jurisdictional retail markets make it difficult to adopt a single, and
effective, customer protection framework. Furthermore, the NECF process focused heavily on
harmonizing the then jurisdictional regulations. Since then, some of the jurisdictional markets have
changed significantly due to reform processes such as retail price deregulation as well as new metering
and market innovation in general. Fast changing energy retail markets and jurisdictional differences
require flexible regulatory instruments to ensure that consumers are adequately protected and able to
benefit from market reform and competition. Amendments to the NECF (which sits under the National
Energy Retail Rules), however, require a resource intensive rule change proposal/process and it is thus
unable to efficiently and adequately respond to market developments that may hamper competition and
erode consumer benefits. [We note that Consumer Action Law Centre and Consumer Utilities Advocacy
Centre has recently requested a rule change to ensure that energy prices are fixed for the length of the
contract (see www.fixit.org.au)]
This not only creates issues for jurisdictions that have adopted the NECF but also for those that have
not. In Victoria, for example, much of the regulatory focus in recent years has been on harmonizing
codes and guidelines with the Rules rather than assessing the effectiveness of the regulatory
instruments already in place in relation to adequate customer protections in a rapidly changing market.
One example we can use to illustrate this point is the increasing use of market contracts offering
discounted rates in return for prompt payments. Very few retailers actually offer non-conditional market
offer discounts anymore, as they tend to favor the so-called ‘pay on time discounts’. These pay on time
discounts can be significant (double digit percentage) and retailers clearly compete to have the greatest
pay on time discount. What consumers are much less likely to know is that some retailers that offer pay
on time discounts also offer consumers less time to pay on time. One retailer requires its customers to
pay their bills within 5 business days in order to qualify for the discount. [See Dufty, G. and Johnston,
M. The National Energy Market – Is there a devil in the detail?, December 2013]
Customer protection regulation typically determines minimum payment times on the principle that
customers should have access to two fortnightly pay cycles to pay utility bills. However, the Victorian
Retail Code (as well as the NECF) did not regard this as essential for market offer contracts. [See
National Energy Retail Rules Clause 26 and Essential Services Commission Victoria, Energy Retail
Code, Version 10, May 2012, Clause 7.1(b). This clause has an asterisk next to it and that means that it
can be varied for market offer contracts.] We would argue that the use of significant pay on time
discounts was not foreseen to be the most common way households could save by switching to a
market offer when the regulation was drafted. A sensible and effective regulation today would clearly be
to ensure that customers have reasonable time to pay their bills and get the discounts advertised. This
otherwise minor example therefore goes to illustrate the importance of flexible and amendable
regulation in a fast changing market.
In order to ensure that the NECF is more adaptable to market development, a less resource intensive
alternative to the current Rule change process should be considered.
Use regulation to stimulate useful product innovation in retail markets
The above example regarding retailers shortening the time customers have to pay a bill can also serve
as an example of un-useful product innovation.
Product innovation makes retail markets more complex for consumers and while we believe consumers
benefit from the majority of these innovations (i.e. choice in tariff structures, billing cycles, channels of
communications and access to consumption profiles to name a few) the regulation should not shy away
from ensuring that the operative framework also protects consumers from “trickery”. This is an
opportunity to create energy retail markets where consumers are empowered to make decisions about
pricing and tariff structures that best suit their households’ needs, preferred communications method
etc. However, this outcome may not be achieved if consumers continually find themselves “locked-in”
to a product that is different to what they expected.
We caution against over-reliance on consumers giving ‘explicit informed consent’ as a tool to protect
consumers if the aim is to empower them. A competitive retail market characterised by multiple
Input Fields for Energy White Paper – Issues Paper submission template
3
retailers’ offering multiple tariff structures, with multiple different discounts and contract terms, means
that consumers already have a big job on their hands without having to check the fine print of multiple
customer charters and unclear documents of terms and conditions as well.
Good and efficient regulations should take care of these issues and leave consumers to exercise choice
on the issues that matter. That is, to examine and compare energy offers that best suit their
consumption and the services that they value.
Market transparency
Market transparency is another issue that has been somewhat overlooked by the COAG reform agenda
as well as state policy makers and regulators.
Transparency can improve competition. It is therefore important that transparency is a key objective
when designing frameworks for deregulated (in relation to price setting) retail markets. In a recent
report we argued that the lack of transparency in the Victorian retail market is eroding the consumer
benefits of competition. [Dufty, G. and Johnston, M. The National Energy Market – Is there a devil in the
detail?, December 2013] If the COAG reform agenda for energy retail markets is going to continue on
the same track (e.g. the aim of deregulation) it is crucial that a market framework that actually ensures
price transparency is developed.
We believe the role standing offers can play in deregulated markets has been overlooked. Not because
we think consumers should be on standing offers (as long as there are better market offers available)
but because standing offers provide an opportunity to increase transparency and competition by
comparison. In a deregulated retail market retailers will of course determine their own standing offer
prices. The market framework, however, can stipulate when and how they publish these prices. We
recommend that retailers should be required to publish (i.e. gazette) on set dates twice a year and that
the price setting should include a brief explanation of why prices have gone up, down or stayed the
same. [This recommendation was first made in St Vincent de Paul Society, Victorian Energy Prices
January 2013 – 2014. An update report on the Victorian Tariff-Tracking Project by May Mauseth
Johnston, January 2014] This simple mechanism could deliver the following benefits:
•
It forces every retailer to reveal what they think is an efficient base price without basing it on
what their main competitors are charging. [Currently, in Victoria, retailers may wait for competitors to
reveal their prices before determining their own.]
•
It forces retailers to justify price increases. Price increases due to increases in network costs,
wholesale costs or government policies are fair enough but in a more transparent market they can be
held accountable for their chosen explanations.
•
It forces the retailer to gazette new prices on a regular basis. Currently, a 2nd tier retailer
(which may not have any standing offer customers) has no incentive to gazette new standing offers in a
market where prices are flattening out or falling. They can still, however, write a letter to all their
existing market offer customers to advise of price increases. Regular gazetting of standing offers would
give consumers a reference point for comparison upon receiving such letters, and instead of the private
one-way communication between retailers and their customers we have today, price changes can more
readily become subject to public debate.
•
It improves price transparency in deregulated markets where the majority of market offers
include substantial conditional discounts (e.g. a pay on time discount). Under the current arrangements
retailers can argue that prices have come down because the conditional discounts are higher. However,
no-one other than the retailers know what price consumers are actually paying. Do most consumers
pay advertised rates minus, for example, 17% in pay on time discount or are they unable to pay their
bills on time and therefore have consumption charges that are 17% above that? This also creates an
issue for governments seeking to reduce the costs energy consumers face due to government policies.
If the removal of a specific policy is estimated to save the average residential consumer, for example,
5%, it would be very difficult to ascertain whether this cost reduction is actually passed on to
consumers in deregulated markets (because of the conditional discounts) without a framework in place
that ensures that all retailers have to gazette standing offer prices (e.g. their base rates).
•
It will increase consumer awareness. By ensuring that all retailers reveal their base rates at the
same time twice a year, media coverage and public debate can make consumers more aware and
Input Fields for Energy White Paper – Issues Paper submission template
4
motivated to check whether they are doing well. Clearly, a retailer may still want to increase the prices
for existing customers by more than they increase their standing offer, however the customer is more
likely to know about it and thus potentially act.
3. Growth and Investment
The Government seeks comment on:

commercial or market initiatives that could enhance growth and investment in the energy and resources
sectors;

areas where approvals processes could be further streamlined while maintaining proper environmental and
social safeguards;

further ways that regulatory burdens could be reduced while maintaining appropriate levels of disclosure and
transparency in energy markets; and

the impacts of variable land access policy and ways the community could be better informed and engaged on
development in the energy sector.
Please provide any comments on Growth and Investment below:
4. Trade and International Relations
The Government seeks comment on:

how to grow the export of value-added energy products and services;

ways to remove unnecessary barriers to continued foreign investment in Australia’s energy sector;

ways to strengthen support for access to export markets; and

ways to support business to maximise export opportunities for Australia's energy commodities, products,
technologies and services, including the value of Australia’s participation in the variety of international forums.
Input Fields for Energy White Paper – Issues Paper submission template
5
Please provide any comments on Trade and International Relations below:
5. Workforce Productivity
The Government seeks comment on:

the nature of any current skills shortages being experienced and how these could be addressed by and with
industry;

the capacity of industry and education sector-led programs to meet long-term training and skills development
needs of the energy and resources sectors; and

specific long-term training and skills development needs for alternative transport fuel, renewable energy,
energy management and other clean energy industries.
Please provide any comments on Workforce Productivity below:
6. Driving Energy Productivity
The Government seeks comment on:

the current suite of energy efficiency measures, ways these could be enhanced to provide greater energy
efficiency or possible new measures that would enhance energy productivity;

the use of demand-side participation measures to encourage energy productivity and reduce peak energy
use; and

measures to increase energy use efficiency in the transport sector.
Please provide any comments on Driving Energy Productivity below:
Input Fields for Energy White Paper – Issues Paper submission template
6
Input Fields for Energy White Paper – Issues Paper submission template
7
7. Alternative and Emerging Energy Sources and Technology
The Government seeks comment on:

ways to encourage a lower emissions energy supply that avoids market distortion or causes increased energy
prices;

the need to review existing network tariff structures in the face of rapidly growing deployment of grid-backedup distributed energy systems, to ensure proper distribution of costs;

additional cost-effective means, beyond current mandatory targets and grants, to encourage further
development of renewable and other alternative energy sources and their effective integration within the wider
energy market;

how the uptake of high efficiency low emissions intensity electricity generation can be progressed;

any barriers to increased uptake of LPG in private and commercial vehicles and CNG and LNG in the heavy
vehicle fleet; and

any barriers to the increased uptake of electric vehicles and advanced biofuels.
Please provide any comments on Alternative and Emerging Energy Sources and Technology below:
General Comments
Any further comments?
Input Fields for Energy White Paper – Issues Paper submission template
8