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From the CEO
Happy belated New Year to you all and thank you for taking the time to join me for our first newsletter of 2021! I hope that you all had a chance to rest and recuperate with friends and family over December and January, though these remain unusual times.
We begin 2021 at Energy Consumers Australia continuing our agenda to bring about a better energy future for consumers. Our vision for that future is that consumer values, expectations and needs are realised through a modern, flexible and resilient energy system. With that in mind, we are currently working on updating our strategy and our priorities for the next 12-18 months, which will include engaging with advocates and other stakeholders.
At this time of year as many of you know, we would normally be welcoming around 200 people from across the sector to our Foresighting Forum. Instead we will shortly be launching a series of webinars under the banner Foresighting Forum 2021, the Digital series. We are hopeful that we can again meet in-person in Sydney on 16-17 February 2022.
In case you missed it in the busy end of year period, we released our bi-annual Energy Consumer Sentiment Survey in December 2020. Around 1 in 5 household consumers report having asked their energy company for help with their bills, or expect to do so, since the pandemic began in Australia. Small businesses report an even higher level of bill stress with more than 50% saying they contacted their retailer for help and a further 18% expect to do so in the near future.
The survey also has positive findings, with satisfaction with the value for money of electricity services continuing to increase, a trend seen over the past three years. Electricity is still behind all comparable services, such as gas and water, in terms of value for money, but 57% of households and 60% of small businesses say they are satisfied with the value they receive – the strongest result since the survey began in 2016. We want to see those numbers continuing to improve and a continuation of wholesale and network prices coming down, combined with more competition, can only lead to further bill reductions for consumers in the coming 6 – 12 months. Ultimately, we want to see further progress toward the Australian Competition and Consumer Commission’s target of 20-25 per cent price cuts, after a decade of price increases saw electricity become unaffordable for too many people.
We also released our Small and Medium Business (SME) Retail Tarriff Tracker during December, which tracks small-medium business electricity and gas retail tariffs across Australia. In our December report we found that electricity bills were, on average, 3% lower than in previous years. However, on average, bills were slightly higher for most small businesses using gas compared with a year earlier. Check out the full report here.
We also made a number of submissions during December. In our submission to the Energy Security Board’s (ESB) Data Strategy Consultation Paper our core message was that the next stage of the ESB Data Strategy should be to move forward from seeing data as an agenda in-of-itself, to planning for data as an enabler to unlock value for consumers. We ask the question ‘what are the data requirements and reforms necessary to support innovation and deliver value for consumers in the new market?’
Both Transgrid and ElectraNet have sought a rule change relating to financing their investment in new capacity between South Australia and New South Wales. In our submission to the Australian Energy Market Commission’s Consultation Paper on the Financeability of ISP Projects we argued there is a need for more innovative thinking in the energy market about how to address the financing of these large national interest infrastructure projects. We did not support the proposed rule change as it would add to already high electricity costs in the short term and we were concerned that there would be a shift in risk from network operators to consumers, who have fewer tools to manage financial risks stemming from changing circumstances in the energy market. Last week the AEMC released their draft determination which rejected the proposal. We welcomed the decision and agree that there needs to be a better way.
We also worked with Strategen to produce a report to accompany our submission to the Australian Energy Regulator (AER) on updating the Ring-Fencing Guidelines for the stand-alone power systems and energy storage devices issues paper. Like the AER we see the potential for emerging technologies and new business models to deliver better outcomes for consumers, at a significantly lower cost, in a very different energy system than we have today. In this context Stand Alone Power Systems (SAPS) and Energy Storage Devices (ESD) are important innovations that in the future will operate at a range of scales, and in the case of ESD both in front of and behind the meter. With Strategen we explored the initial challenges of ring-fencing in a market undergoing transition and recommend that a principles-based, rather than a prescriptive, approach to ring-fencing will provide a means for emerging technologies to be properly evaluated as they mature.
The AER also released its final position on the regulatory treatment of inflation in December. Throughout the review of the regulatory treatment of inflation the AER engaged with their Consumer Reference Group (CRG), which was established to play a critical role in representing the perspectives and interests of consumers in this process and the review of the rate of return. While the CRG supported other aspects of the AER’s decision, it did not agree with the AER’s approach to the term for estimating expected inflation. The AER has set out the merits of its approach in its final position, but for now, the consequence is higher prices for consumers. The CRG is engaging with consumers and other stakeholders, and can be reached via email. Further information on the CRG is available here.
Innovation for Consumers in the Energy Market
The AER published its Strategic Plan 2020-2025 in December outlining their purpose, vision, and objectives over the next 5 years, with a “commitment to making energy consumers better off now, and in the future.” Under each of the four objectives, the AER shared their key priorities. While all of the objectives, and priorities, could achieve tangible benefits for consumers, the first objective in particular focusses on the consumer experience in energy markets, which is “protecting vulnerable consumers while enabling consumers to participate in energy markets.” We are looking forward to working collaboratively with AER on each of these priorities, which offer a systemic and innovative change in regulatory approaches on these issues.
In this innovation context, the AER engaged Cambridge Economic Policy Associates (CEPA) to conduct an independent evaluation of the AusNet Services trial of New Reg. The AER published CEPA’s interim evaluation of the New Reg trial in December, using the framework that was developed in consultation with stakeholders in 2018. The trial is one of many models of consumer engagement that networks have undertaken over the last couple of years. There are many learnings to be drawn from all engagement processes, and the interim evaluation report provides a stepping-stone to the final report next year. We, along with the AER and Energy Networks Australia, as the partners in New Reg, are seeking broader feedback on learnings and experiences which will be important in determining ‘where to from here?’ for the sector and consumer outcomes.
In what was meant to be a quiet month we made two submissions. Firstly, our final submission to the AER on the Victorian electricity distribution networks revenue proposals for the period 2021-26, with our feedback on their revised proposals. Overall, we are pleased that the businesses have accepted the majority of the AER’s decisions and with good engagement between parties, we are confident the issues can be rectified, and the proposals can then be capable of acceptance.
We also made a submission to the Australian Energy Market Commission (AEMC) on its draft determination on technical standards. We believe that in the modern, flexible and resilient energy system we are building, any proposed actions that would impose external controls over technologies that empower consumers in how they use or generate energy require ‘social licence’. We are broadly comfortable with the draft rule determination, however we consider that the AEMC should consider an outcomes-based rather than prescriptive standards or otherwise allow for the mutual recognition of international standards.
We have built a new Consumer Values, Expectations and Needs page on our website, to provide easy access to information, presentations and videos dedicated to the work we are doing to help deliver a better future for energy consumers.
Post 2025 Market Design Directions Paper and Health of the NEM
In early January, the Energy Security Board (ESB) released their Post 2025 Market Design Directions Paper and the 2020 Health of the NEM report.
The Directions Paper is particularly significant as it recognises the potential value of a flexible demand side. This acknowledgment that the future system should empower consumers to manage their energy use lines up with our own flexibility agenda, which we described in our submission to the ESB in October 2020. We believe that this should be a priority for the ESB, in addition to getting the market design right, as billions of dollars of potential value can be unlocked through smart, flexible, and increasingly ‘local’ energy services. Flipping the supply chain to support a system of millions of distributed and smart energy devices using proven methods like smart hot water services can contribute to a flexible demand side of the energy system to reduce costs for everyone. We are looking forward to leaning in with other advocates and continuing to work closely with the ESB during 2021 to contribute to a final market design that meets the values, expectations, and needs of all Australians.
The 2020 Health of the NEM assessment report was positive in that it showed real progress has been made in energy reliability, emission reduction, competition, and network investment. However, from our Energy Consumer Sentiment Survey we know that trust and confidence is a major issue between consumers and the market and we feel this should be a marker to be addressed in future reports.
I invite you to watch the latest Community Listening video from our series, which follows ordinary Australians and how they engage with the energy system. Our latest video features Georgina and Kim from Milang who built their sustainable home with renewables front of mind. Learn about their motivation for investing in solar and batteries and the potential for them to help manage grid stability issues.
If you have any questions or comments on any of our work or suggestions for our plans for the year, please feel free to email us or reach out on our social channels and we will get back to you.
Looking forward to a productive year ahead and engaging with you all further as we drive for a consumer-led energy system transition.
Chief Executive Officer
Home Energy Management Project demonstrates need for tailored energy services
Watch our video with Anne Armansin from EnergyAid who collaborated with the St Vincent de Paul Society Queensland to help consumers with energy bill problems in a project funded by a grant from Energy Consumers Australia. This project, the Home Energy Management Service (HEMS), worked with consumers on a personal one-to-one basis, helping them to understand their energy use at home. Read the full story here.
Submission to the draft determination for National Electricity Amendment (Technical Standards for Distributed Energy Resources) Rule 2020.
In our submission to the Australian Energy Market Commission we reiterate our view that any proposed external controls over consumer technology should be sought through an understood ‘social licence’. Read our submission here.
Applications for our first Grants round of 2021 close on Feb 25!
If you have an idea or project which will improve the long-term interests of electricity and gas consumers, and wish to apply for funding click this link for more information and to apply.