Energy Green Paper 2014: TasCOSS Submission

Energy Green Paper 2014: TasCOSS submission 4 November 2014

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 Tasmania 7006 www.tascoss.org.au

Authorised by Tony Reidy, Chief Executive For inquiries Kath McLean Senior Policy & Research Officer kath@tascoss.org.au

Introduction The Tasmanian Council of Social Service welcomes the opportunity to participate in the development of a new Energy White Paper that articulates the Australian Government’s approach to energy policy, in this case by responding to the Energy Green Paper.

Earlier this year TasCOSS provided a response to the Energy White Paper: Issues Paper (February 2014) in which we focused our comments on the affordability of energy for low-income and vulnerable households. This Energy Green Paper develops many of the issues and themes outlined in the Issues Paper and our response will once again focus on specific affordability issues and proposals in more detail.

We reiterate our belief that the development of an Energy White Paper is an opportunity to embed in Australia’s long-term energy policy framework the acknowledgment of energy as an essential service and the necessity to develop and maintain policies that ensure the ongoing affordability of energy supply to all Australians as a key outcome of national energy policy.

Electricity prices TasCOSS welcomes the recent attention being paid to escalating electricity prices by the AER, AEMC and Federal and State Governments, and the efforts undertaken to address the market, policy and regulatory failures that have allowed prices to rise so dramatically in recent years.

Below we address the particular issues of network tariff reform and access to advanced metering technology as strategies discussed in the Energy Green Paper to reduce electricity prices. We also call for a comprehensive consumer education campaign to enable consumers to make use of available options.

Network tariff reform While we appreciate and support the intention of network tariff reform efforts to better reflect and apportion the costs of network use, we are also acutely aware of the potential dangers in this for vulnerable consumers. Not only is there a danger that some consumers will not be able to take advantage of potentially cost-saving tariffs (and may therefore be penalised by higher costs), but there is also concern that electricity use choices emanating from cost-reflective tariffs may not be fully understood and therefore not properly utilised by consumers to save money.

As the Energy Green Paper acknowledges, ‘some consumers are not in a position to change their electricity consumption patterns in response to price signals’ (p 30).

TasCOSS contends that the Energy Green Paper, in providing examples of such consumers, greatly under-estimates the type, and therefore the potential numbers of consumers who are likely to be constrained in their ability to shift their load to

TasCOSS submission in response to the Energy Green Paper, November 2014

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cheaper times. This is especially true in Tasmania where peaks occur on cool winter mornings and evenings and are the result of space and water heating, rather than air-conditioning.

We would add to the list of those who may have great difficulty changing their usage patterns and/or responding to price signals:   

people who are largely housebound through immobility associated with age, illness and/or disability; the many who work core hours of 9 am to 5 pm; and families with young children.

We suspect that these groups constitute a large proportion of Tasmania’s – as well as Australia’s – residential electricity users.

Many of these consumers may also be financially vulnerable and would be greatly disadvantaged if tariffs were re-designed with high, unavoidable (and therefore punitive) peak usage charges.

Great care needs to be taken with tariff reform and we appreciate that it has been recognised by the AEMC that a review of concessions should accompany moves to cost-reflective network tariffs (and, we would add, to time-of-use network tariffs in particular). It may, however, be difficult to appropriately target concessions as many current concession recipients may in fact benefit from re-designed tariffs. Therefore, other options such as more targeted assistance and/or alternative network tariff options, such as a ‘safety net’ or concessional tariff, will be need to be considered.

An additional problem with distribution tariff reform efforts could be whether or not cost-reflective network tariffs, once introduced, are passed-through by retailers to customers. In a situation where retailers and a variety of retail market contract offerings stand between distributors’ network tariffs and customers, there is no guarantee that tariffs designed to present price signals to customers will be passed through as designed to customers. This could distort, or indeed nullify the intentions of network tariff reform.

Advanced metering We understand that many flexible tariffs (and other demand-side participation options) will be dependent on the use of advanced metering technology. The provision, through advanced or ‘smart’ meters, of real-time energy use information to consumers will facilitate consumers better understanding their energy use and responding to price signals provided by flexible tariffs.

As advanced metering technology is not currently provided to households in Tasmania (or in a number of other states), the provision of appropriate meters will constitute an additional cost to consumers. The Energy Green Paper states:

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The Australian Government supports access to smart meters and other technologies for consumers who want them as they empower consumers to lower their bills. (p 29) This is a worthy sentiment, however those who may ‘want them’ may not be able to afford them.

While TasCOSS would argue strongly against a consumer-funded mandatory roll-out of advanced metering technology, we are concerned that many households that might benefit from new tariffs may not be able to afford the necessary metering technology to enable them to do so.

While we appreciate that this may be a case of having to ‘spend money to save money’, the reality for many Australian households, is that they simply cannot afford the additional costs involved.

In our view, because household electricity is an essential service, the cost of which presents an ongoing financial challenge to many Australian households, assistance must be provided to low-income households to allow them to participate in this developing tariff market. We must avoid creating a situation where an ‘under-class’ of consumers has access only to inflexible and possibly expensive tariffs due to their inability to afford an enabling meter.

Consumer education In order to optimise the benefits of flexible tariffs and advanced metering technology consumers will need to be well-informed and capable. It is therefore imperative that a well-resourced, comprehensive and robust consumer education campaign is provided to ensure that as many consumers as possible understand their electricity use choices.

Such a campaign must target in particular hard to reach vulnerable consumers.

These include people who are not proficient in English, including those with poor literacy and numeracy skills. This constitutes a substantial part of the Australian population – in Australia 44.4% of adults have the lowest two levels (of five levels) of literacy skills (Levels 1 & 2). Numeracy skills in Australia are lower still with 54.6% of adult Australians having the lowest two numeracy skill levels.1 The generally low levels of literacy and numeracy skills in the Australian population make information provision, particularly in a complex area such as energy supply, a significant challenge.

Energy productivity A major element of energy affordability is consumption. TasCOSS is firmly of the view that increasing energy productivity (or maximising energy efficiency) of dwellings is a key strategy in making energy more affordable for low-income households.

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In addition, as we stated in our previous submission to the Energy White Paper process, maximising energy efficiency not only contributes to reducing costs, usage and carbon emissions across industry, business, government and households, it is also a powerful strategy to improve affordability across the board, obviate the need for expensive network augmentation and reduce harmful emissions.

We are therefore very pleased to see the improvement of energy productivity in the Energy Green Paper as a key goal of the Australian Government’s proposed future energy strategy.

While TasCOSS supports the National Productivity Plan proposed in the Energy Green Paper 2014, we believe that it must be extended to include an explicit program for increasing the energy productivity of existing residential dwellings, and enabling access to energy efficient appliances to those who cannot afford them.

Tasmania’s cool climate, relatively poor housing stock and lower than the national average incomes mean that Tasmanian households can benefit significantly from efforts to increase energy productivity and the thermal efficiency of their homes.

We reiterate the recommendation made in our previous submission to the Energy White Paper development process: While there has been much progress made in this area through both Commonwealth and state-funded energy efficiency programs, these have tended to be grants-based, time-limited, short-term programs. TasCOSS believes that Australian governments should together develop models of effective energy efficiency retro-fitting, education and support programs for low-income households, (including those in rental housing) from evaluations of the plethora of previous and existing programs. Once developed and tested, the program should be rolled out across all states and territories with joint funding from all governments.

Such a program or programs must include as a component the fitting of ceiling insulation where it is absent or degraded. We understand that the fitting in roof spaces of appropriate ceiling insulation is the most effective thermal efficiency measure that can be undertaken in most dwellings. In spite of the tragic events associated with the previous Government’s insulation program, TasCOSS believes that this method of increasing thermal efficiency must be re-visited with a carefully designed, implemented and regulated program. Insulation is an effective energy efficiency measure and must not be consigned to history for political reasons; it can be done better. 2 We also recommend that further funding be made available for No Interest Loans Schemes (NILS) across the country to make more loans and/or grants available to low-income households for the replacement (and removal) of inefficient appliances with more energy efficient appliances.

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Gas We note with disappointment the Australian Government’s view expressed in the Energy Green Paper that discounts the options of introducing a domestic gas reservation policy and national interest tests to address rising domestic gas prices in Australia. We reiterate the concern expressed in our previous submission that lowincome and vulnerable households using gas will be seriously affected by any significant increase in gas prices.

Considerable evidence is emerging of imminent increases in gas prices as producers seek to align domestic gas prices with export prices. Rising gas prices underline the imperative for adequate and equitable concessions and for providing assistance to low-income households to increase the efficient use of household energy through retro-fitting, education and support programs and through increasing access for low-income Australians to efficient appliances.

Conclusion We hope that our comments are useful in the further development of a new Energy White Paper and we look forward to its release later this year.

Australian Bureau of Statistics (2013) Program for the International Assessment of Adult Competencies (PIACC), Cat No 4228.0, ABS 2 TasCOSS (2014) Submission on the Energy White Paper: Issues Paper, February 2014, p 4.

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This submission was produced by a project funded by the Consumer Advocacy Panel (www.advocacypanel.com.au) as part of its grants process for consumer advocacy projects and research projects for the benefit of consumers of electricity and natural gas.

The views expressed in this document do not necessarily reflect the views of the Consumer Advocacy Panel or the Australian Energy Market Commission.

TasCOSS submission in response to the Energy Green Paper, November 2014

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