Tasmanian Energy Reform Market and Regula

Response to

Tasmanian Energy Reform Market and Regulatory Framework Position Paper March 2013 About TasCOSS TasCOSS is the peak body for the Tasmanian community services sector. Its membership comprises individuals and organisations active in the provision of community services to low-income, vulnerable and disadvantaged Tasmanians.

TasCOSS represents the interests of its members and their clients to government, regulators, the media and the public. Through our advocacy and policy development, we draw attention to the causes of poverty and disadvantage and promote the adoption of effective solutions to address these issues.

phone 03 6231 0755 fax 03 6223 6136 postal PO Box 1126 Sandy Bay Tas 7006 www.tascoss.org.au

Authorised by Tony Reidy, Chief Executive For enquiries Kath McLean, Manager, Policy & Research

The Tasmanian Council of Social Service (TasCOSS) appreciates the opportunity to comment on the Tasmanian Energy Reform: Market & Regulatory Framework Position Paper released recently.

At the outset, we would like to register our concern with the brevity of the period provided for comments and inquiries on the Position Paper. We believe this is unfortunate as it will necessarily limit both the number and quality of responses that the project team will receive and therefore the opportunities to consider alternatives that might have been suggested by interested parties if they were given more time.

In general, we appreciate the comprehensive nature of the Position Paper and the important information it provides on the processes involved in the move to full retail competition in Tasmania and other aspects of the State Government’s electricity reforms.

TasCOSS welcomes …

TasCOSS welcomes a number of policy decisions detailed in the Position Paper. In particular we welcome the policy positions relating to concessions, customer transfers and community services, and we are pleased that these decisions have been made – and announced – relatively early in the reform process.

This, when conveyed to consumers, will help to allay fears that many low-income consumers may have regarding the continuity of their concessions in the transfer to a new retailer.

We also especially welcome the following recognition by the Tasmanian Government in this Position Paper: Electricity is an essential service which all Tasmanian households and businesses have a right to access at affordable prices. (Position Paper, p 30) and the associated decisions that:     

Existing customer arrangements will be transferred to the purchasing retailers, including customer debts, credits and payment plans (p 17); Customers who are already registered with Aurora Energy to receive a concession will not be required to reapply and will have their eligibility carried over to their new retailer (p 30); The Government will take responsibility for the Life Support Discount, rebase the rate of discount and index it to future electricity price rises (p 31); The Government will introduce a Medical Cooling Rebate for concession customers who have a medical need for air-conditioning; and The Government will accept responsibility for maintaining Aurora Energy’s existing ‘hardship fund’ contributions, administered by the Salvation Army, to community sector emergency relief agencies and will continue Aurora Energy’s support for the No Interest Loan Scheme.

1

Regarding this last commitment, TasCOSS seeks assurance from the project team / Government that the ‘hardship fund’ to be continued by the Government will also be indexed to electricity price rises, as it has been when provided by Aurora Energy.

TasCOSS believes that indexation to price rises is necessary in order for the ‘hardship funds’ to maintain their value and to remain an effective assistance measure against hardship.

Aurora Pay AS You GO prepayment meter system We note that there is very little of substance in the Position Paper about the Aurora Pay As You Go (APAYG) product; however, we understand that the Government intends to maintain the status quo in relation to the APAYG product and price regulation. That is, when the APAYG customer base is sold or transferred to a new retailer (or retailers) it is intended that prices will continue to be unregulated.

TasCOSS believes that the electricity sector reforms being undertaken, including the introduction of full retail competition, provide a timely opportunity – and very good reasons – to improve APAYG customer protections by subjecting the product to price regulation along with the regulated standard retail contract.

We believe that there is a real danger of significant price rises for APAYG in the new retail environment. Firstly because Aurora Energy has decided to read all APAYG meters on a regular basis as an obligation under the National Energy Law. This represents a new activity that will obviously increase the costs associated with APAYG, and this cost will be passed on to customers.

Secondly, when the customer base and product are sold to a new retailer, the State Government will need to withdraw the non-Community Service Activity Agreement financial support it currently provides for APAYG (that is, the support that was introduced in 2009 when the Government intervened after a significant APAYG price rise to provide an additional subsidy for concession customers on APAYG in exchange for reduced dividends to the Government from Aurora Energy). TasCOSS believes that this will necessarily increase prices for concession customers.

APAYG is a popular product for low-income households as it is seen by many as useful for budgeting purposes, in fact the Tasmanian Economic Regulator in its Energy in Tasmania - Performance Report 2011-12 states, Of the total number of customers on APAYG, customers who receive a pensioner or health care card discount have consistently represented a higher proportion compared to those on standard tariffs. (Performance Report 2011-12 p 177) TasCOSS is concerned that these customers are particularly vulnerable to prices rises and, while they are able to revert to the regulated standard tariff without cost for a short period following price increases, we believe that they should not be deprived of access to their product of choice due to prohibitively high costs.

2

In addition, the large majority of APAYG meters used in Tasmania are not compliant with the National Energy Customer Framework (NECF). This means that neither incidences nor duration of disconnection events from those meters can be identified or recorded, making it difficult to identify and assist APAYG customers experiencing hardship, or indeed to identify the extent of hardship among APAYG customers in Tasmania.

It also means that the majority of the prepayment meters in use in Tasmania have other constraints, including not being able to be set to adhere to the disconnection times and days mandated in the NECF. In short, the majority of Tasmanian prepayment meters in use are sub-standard products that preclude their users from enjoying the full range of consumer protections under the NECF. These issues will remain until all prepayment meters in Tasmania are updated and compliant with the NECF. In the meantime, we see this as providing an additional imperative for APAYG prices to be regulated.

Retail price regulation in general TasCOSS welcomes the decision to continue retail price regulation and to make price- regulated retail contracts available to Tasmanian consumers under full retail competition. However, we hope that the methodology selected to determine the wholesale energy allowance is realistic, appropriate and not unnecessarily inflated.

While price regulation is not our area of expertise, we are aware of the regrettable consequences of earlier Government pricing regulations (that mandated the methodology to be used by the Tasmanian Economic Regulator in setting the wholesale energy price) that set an inflated wholesale energy price and contributed to a significant increase in the regulated retail price in Tasmania.

We therefore urge the Government to ensure that the decision to employ the ‘regulated price for load-following swaps offered by Hydro Tasmania’ provides for a fair and reasonable wholesale energy allowance.

The importance of an effective communications strategy While TasCOSS appreciates the information provided in this Position Paper, we are aware that its audience is likely to be small and specialist.

The decisions announced in this paper must be conveyed to the Tasmanian public in a clear, accessible and unambiguous manner.

Some of these issues matter very much to low-income Tasmanians and their early and effective promotion is critical to allay concerns and anxiety about the coming changes to the supply of this essential service.

3

We therefore urge the Government to see that an appropriate and effective communications strategy is developed and implemented as early as possible.

We hope that these comments are helpful in your further deliberations. Please contact Kath McLean at TasCOSS if you have any questions or require any further information.

kath@tascoss.org.au or phone: 6231 0755

4