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Finkel Review Submission

Author

Chris Alexander

Energy Consumers Australia is the national voice for residential and small business energy consumers. Established by the Council of Australian Governments (COAG) in January 2015, our objective is to promote the long-term interests of energy consumers with respect to price, quality, reliability, safety and security of supply.

This submission responds to the questions and observations in the Preliminary Report, drawing on the evidence we gather through our research into the lived experience of Australia’s households and small businesses in the National Electricity Market (NEM).1)Foremost here is our regular, bi-annual, Energy Consumer Sentiment Survey of 2,300 households and small businesses. We also draw on work we commissioned by KPMG and UMR in 2016 that explored households and small business attitudes and experiences in the solar PV and battery markets. Our contribution is based on what consumers are telling us, making this a unique bottom-up perspective that can complement the evidence and analysis in the Preliminary Report.

The Preliminary Report provides a comprehensive review of the nature and scale of the transformation underway in the NEM. The seven themes it identifies provide a strong basis for analysis and discussion to ensure consumers pay no more than is necessary for the energy services they need as we transition to a cleaner economy, with no one left behind, while maintaining a secure and reliable system. This submission focuses on two of these themes – consumers driving change, and increasing prices.

The analysis must start with the recent history of increasing prices. In the last eight years, energy prices have approximately doubled, placing real stress on household budgets, pushing up the incidence of disconnection and cutting into already thin, small business margins. 2)See Australian Energy Regulator’s State of the Energy Market Report 2015, figures 5.6 and 5.8 at https://tinyurl.com/hsvcwu7 Further increases in prices, absent action to empower consumers to manage their consumption and bills, will undermine confidence in the NEM. Consumers are increasingly becoming interactive participants in the energy market and are investing in technology to generate, store and ultimately trade electricity to manage their consumption and bills.

These pricing and participation drivers have important implications for decisions about managing energy security as the generation mix changes to meet our international emissions reduction commitments. In our view, the blueprint for what can be called ‘NEM 2.0’ must be one that delivers the following:

  1. A national energy system that is secure and reliable, that balances a fleet of lowest cost, low emissions generation technologies with large-scale storage and local loads supported by dynamic ‘smart’ control.

  2. A sophisticated market for energy services for households and small businesses providing:
    a. access to rooftop solar PV, battery storage, insulation, energy efficient appliances and other technology;
    b. information and tools to allow consumers to manage their energy consumption and costs in a way that is easy and convenient i.e. (set and forget);
    c. comprehensive, contemporary consumer protection framework; and
    d. electricity distribution networks supporting trading in electricity and related services at the local level to fully realise the value of consumer investment in generation and storage.

  3. An agreed national integrated energy and emissions reductions policy framework, given effect through sector governance that aligns market and consumer interests to drive efficiency, facilitate innovation and deliver value.

In the new market, energy companies, policy makers and regulators will become much more aware of consumers’ expectations and preferences, and able to respond through the market and set of governance arrangements in a flexible and timely way. Getting this right isn’t easy but it is vital.

NEM 2.0 is a reform of the significance of floating the dollar, compulsory superannuation, Medicare, and the introduction of the GST.

The full submission can be read here.

References   [ + ]

1. Foremost here is our regular, bi-annual, Energy Consumer Sentiment Survey of 2,300 households and small businesses. We also draw on work we commissioned by KPMG and UMR in 2016 that explored households and small business attitudes and experiences in the solar PV and battery markets.
2. See Australian Energy Regulator’s State of the Energy Market Report 2015, figures 5.6 and 5.8 at https://tinyurl.com/hsvcwu7