Australia’s retail energy regulators have been extremely busy in recent years, securing a range of record enforcement outcomes, many of which have been driven by enforcement priorities relating to the protection of vulnerable or disadvantaged customers. In the context of broader social and political concerns about the cost of living increases, particularly in relation to the supply of essential services, we expect these trends to continue over the coming years.
Protection of customers experiencing vulnerability has been an enduring focus for the Australian Energy Regulator (AER) and Victoria’s Essential Services Commission (ESC). This trend was strongly reflected in enforcement outcomes in 2023, with half of these regulators’ enforcement matters in that year directly relating to vulnerable consumer groups. Similarly, for the Australian Competition and Consumer Commission (ACCC), a priority in 2023 was consumer and fair trading issues relating to essential services, including how energy retailers price and advertise their energy plans.
In a year where cost of living pressures dominated the public debate, it was not surprising that regulators maintained their enforcement efforts in these areas. However, with concerns that consumers, and particularly vulnerable consumers, continue to receive poor outcomes, regulators are now looking beyond enforcing existing protections when things go wrong to develop new measures aimed at reshaping the relationship between retailers and customers.
In this article, we look back over and discuss these enforcement trends and look to the future to what the proposed policy changes could mean for energy retailers and industry stakeholders.
Key takeaways
- 2023 saw an enforcement focus on matters impacting vulnerable customers with multiple enforcement actions taken in relation to wrongful disconnections, life support obligations and door-to-door sales. We expect these to stay in the regulatory spotlight in 2024 and beyond, along with the ACCC’s focus on how energy prices are communicated to consumers.
- The AER’s proposed Game Changer reforms aim to assist vulnerable consumers from a different angle. The regulatory focus has previously been on fixing issues after they occur through enforcement, but the AER’s proposals are proactive, potentially reshaping the relationship between retailers and customers. This should see a reduction in the number of vulnerable customer-related enforcement actions, but it will be important for policymakers to get the balance right when considering additional obligations for retailers.
Recent energy enforcement activity
Energy regulators continued to be active in 2023, using a range of enforcement tools at their disposal to prosecute and deter non-compliance in retail markets, including through instituting civil proceedings, issuing infringement notices and accepting enforceable undertakings. Our analysis shows that enforcement activity during the year largely aligned with regulators’ stated priorities, with a clear focus on pursuing matters that impact vulnerable consumers or that go to consumers’ ability to compare between different plans and find a better deal.
Specifically, the AER and the ESC targeted conduct involving:
- Life support customers: Retailers have certain obligations in relation to life support customers, including providing adequate notice before disconnecting electricity. In 2023, there were three enforcement actions related to life support obligations which included alleged failures to give timely notice of planned interruptions and to maintain information on retailers’ life support registers.
- Payment difficulties and financial hardship: Retailers have obligations in relation to customers experiencing financial hardship and payment difficulties, including providing assistance to customers. Failure to comply with these obligations could lead to a retailer wrongfully disconnecting a customer. This type of conduct can attract significant penalties, as seen in 2023 with one retailer fined $74,000 for allegedly disconnecting a customer who was under the arrears threshold.
- Unlawful door-to-door sales: The ESC commenced two enforcement actions in 2023 (including one civil proceeding) against retailers who allegedly failed to observe Victoria’s prohibition on unsolicited door-to-door energy sales. Both matters involved activities of agents acting on the retailer’s behalf – ESC Commissioner Sitesh Bhojani warned “retailers who try to get around [the ban] by having third parties conduct these activities on their behalf risk enforcement action” (see here).
The ACCC also took action to protect consumers, targeting communications and advertising about electricity prices. This included the ACCC commencing its first court proceedings in relation to an alleged breach of the Electricity Retail Code, which requires retailers to include certain information, such as the percentage difference between the retailer’s electricity price and the reference price set by the government, to help customers compare prices between different deals. Two other retailers also received infringement notices for similar conduct, with the ACCC accepting a court-enforceable undertaking from one of those retailers which requires it to inform impacted customers and implement a compliance program.
While many of the enforcement matters above were resolved without recourse to litigation, some did result in civil proceedings. The AER and ACCC have previously demonstrated their willingness to pursue appropriate cases through the courts, but 2023 was the first year that the ESC sought civil penalties and adverse publicity orders, initiating two proceedings in the Victorian Supreme Court. Both matters are still on foot.
For the most part, however, regulators are still relying on infringement notices and/or enforceable undertakings with ~70% of retail energy enforcement actions taken by the AER, ESC and ACCC resolving this way in 2023, a similar trend to the past three years. The overall number of infringement notices issued to energy retailers by the three regulators did jump from 39 in 2022 to 82 in 2023 but this was mainly because two retailers received a large number of notices for related conduct in 2023.
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Table of energy enforcement outcomes in 2023: View the table |
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In addition to enforcement action, the ACCC also continued its long-term inquiries into gas supply and the National Electricity Market. As part of this, the ACCC continued to issue notices to gather information from market participants. On the gas side, in 1H24, the ACCC has its focus on gas retailer behaviour. On the electricity side, this included information about retailers’ costs and margins, and new information on how they changed prices for market offer customers. This will feed into assessing how electricity retailers are complying with the retail pricing prohibition in Part XICA of the Competition and Consumer Act 2010 (Cth) which requires such retailers to make reasonable adjustments to their prices to reflect any sustained and substantial cost reductions in their underlying costs of procuring electricity. In its latest report on the electricity inquiry (issued in December 2023), the ACCC concluded that “many Australian households are on a more expensive electricity plan than they need to be, and changes are needed to improve competition in the electricity market and deliver better outcomes for consumers” (see here).
Game Changer reforms
With those enforcement outcomes in mind, and despite the enduring focus on enforcing matters that impact vulnerable customers, there remain persistent concerns that energy markets are not delivering the best possible outcomes for disadvantaged customers.
In response, the AER is proposing a suite of “Game Changer” reforms to “drive systemic change, better balance cost and risk within the sector and provide better outcomes for consumers experiencing vulnerability” (see here). The proposed reforms, which the AER detailed in late 2023 as part of its strategy for an inclusive energy market, complement existing enforcement activity with more proactive measures. This could reshape the existing relationship between retailers and their customers by shifting more responsibility to retailers to ensure that vulnerable customers receive the best available outcome.
Figure 1 – The Game Changer package – AER, November 2023
In summary, the AER proposes to:
- lower bills for vulnerable and hardship consumers by:
- improving concession and rebate systems to ensure more consumers receive the concessions they are entitled to;
- requiring retailers to automatically place consumers in hardship programs on a better offer, if one is available;
- improve access to financial counselling by building on the current Financial Counselling Industry Funding Model; and
- provide debt relief for consumers and help to reduce their bills long term by providing retailers demonstrating best-practice customer support with access to co-funding from a shared pool to deliver increased debt relief for consumers in financial hardship. Best practice may include early identification of vulnerable customers, applying all available concessions and rebates and reimbursing or crediting late payment fees.
We explore some of the proposed ‘Game Changer’ reforms below.
An implementation plan for the proposed reforms is expected in mid-2024.
A key aspect of the AER’s proposals is making it easier for consumers to access existing options to lower their energy bills, such as concessions and rebates. The regulator is concerned that a significant number of consumers are eligible for concessions but are not taking these up. The ACCC recently shared similar concerns as part of its ongoing Inquiry into the National Electricity Market, finding that 42% of concession customers are on offers at or above the default offers (see here). While the AER recognises that customers are often assisted by their retailers to access concessions, many customers find navigating the system complex.
As part of the Game Changer reforms, the AER wants concession and rebate systems to be upgraded to allow retailers to access centralised concession eligibility data. This would enable retailers to automatically apply a concession or rebate to customer accounts. The AER also wants to ensure that customers can easily switch retailers and retain their concessions. This echoes the ACCC’s concerns that consumers are disengaged, with 79% of residential customers in the regulator’s sample able to achieve a better result if they switched offers. Against this backdrop, the ACCC has confirmed its support for the AER’s Game Changer proposals.
In September 2023, version 2 of the AER’s Better Bills Guidance came into effect, which seeks to increase consumer awareness by requiring retailers to assess whether customers could be on a better offer, and to periodically communicate this on bills.
The Game Changer reforms would take this a step further and require retailers to automatically place hardship customers on a better offer if one is available. This recasts the relationship between retailers and customers by forcing retailers to take more proactive steps to ensure vulnerable consumers receive better outcomes, rather than leaving customers to navigate what is often a complex system.
Enforcement over the horizon
We expect the enforcement trends seen in 2023 to largely continue into 2024 with both the AER and ESC confirming that vulnerable customers remain a priority. The ACCC is expected to announce its 2024 enforcement priorities in March but with its ongoing inquiries into the gas and electricity markets, concerns regarding disengaged customers and the current environment of increased cost of living pressures, we expect that essential services will likely remain in the spotlight.
For the AER, protecting vulnerable customers has long been a strategic objective but the regulator has added a specific enforcement priority for 2023-24 to “improve outcomes for customers experiencing vulnerability, including by improving access to retailer hardship and payment plan protections” (see here). The AER expects to see a significant increase in the number of consumers experiencing financial hardship given challenges in the East-Coast energy market and the cost of living generally. To ensure that retailers are complying with their hardship obligations during this time, the AER has flagged that it may use compulsory notices to gather information.
Also driven by cost-of-living pressures is the AER’s new priority to “make it easier for consumers to understand their plan and engage in the market by focusing on compliance with billing and pricing information obligations including the Better Bills Guideline” (see here). Full compliance with the Better Bills Guideline, which sets out obligations such as to include better offer messaging in bills, was required by 30 September 2023 so the AER is likely to be paying close attention to this in 2024.
For the ESC, protecting customers experiencing vulnerability, the payment difficulty framework, and wrongful disconnections all remain priorities going into 2024. Previous priorities around explicit informed consent and best offer messages now form part of a broader priority of “helping customers navigate the energy market” (see here).
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