A key strategic initiative for Energy Consumers Australia (ECA) is to develop strategies to reduce residential and small business disconnections and the associated costs to industry.
This issue was raised with Energy Consumers Australia at the first meeting of its Reference Group and has recurred in a range of consultations (including the 2015 Foresighting Forum) ever since.
Energy Consumers Australia is concerned about this issue because the number of households and small businesses which are being disconnected has increased substantially over the past seven or eight years, roughly in line with the increases in price which consumers have experienced. In addition, there is evidence of many households being disconnected repeatedly, which suggests scope for improving current government support mechanisms and energy retailer hardship programs and practices.
Energy Consumers Australia’s first step was to commission KPMG to estimate the costs of existing energy affordability support measures. The KPMG October 2016 report, shows around 160,000 households and 11,000 small businesses disconnected each year. KPMG found costs to government of affordability related schemes are around $820 million per annum, while ombudsmen schemes are a further $10 million, and direct cost of disconnections to industry was $11 million. KPMG’s analysis only covers those costs which can be directly quantified and so gives an incomplete picture of the costs to society.
As part of this project, Energy Consumers Australia has canvassed views of a wide range of stakeholders (advocates, financial counsellors, retailers, regulators and government). Energy Consumers Australia has also reviewed a range of studies by consumer groups and retailers which have been conducted over recent years.
A key conclusion we have reached is that the underlying causes of disconnections have not changed much over the past decade. What has changed is the scale of the issue, with substantial increases in disconnections in most jurisdictions.
From all this, Energy Consumers Australia understands that the causes and potential solutions for the high levels of disconnections are complex, multi-faceted, and inter-related. Action on any single solution is unlikely to make much difference.
It is also clear to Energy Consumers Australia that action on a range of fronts could, and should, make a difference. Consequently, Energy Consumers Australia has identified eight, inter-related areas for action. We will be working with stakeholders to identify ways in which these actions can be progressed.
The full KPMG report can be read here.