Retail protection reviews – A view from the frontline

Over the past two months, both the Australian Energy Regulator (AER) and the Essential Services Commission (ESC) have released separate issues papers to review and consult on changes to their respective regulations around payment difficulty. With many elements of the proposed changes focusing on the interactions between an energy retailer’s call-centre and their hardship customers, we visited one of these call centres to understand how these frameworks are implemented in practice. Drawing on this experience, we look to compare these two reviews.

Background

Consumer protections in Australia’s National Electricity Market (NEM) are covered by two separate frameworks. The National Energy Customer Framework (NECF) came into effect for all eastern states aside from Victoria in February 2013. Victoria, which did not adopt the NECF, has its own Payment Difficulty Framework (PDF), which came into effect in 2019, and is designed to protect customers facing energy hardship.

In a previous EnergyInsider, we provided a broad overview of these consumer protections, noting the various obligations retailers are under to support their customers in times of payment difficulty. To summarise, under NECF obligations, retailers must:

• Establish that disconnecting a hardship customer is only an option of last resort;
• Develop hardship policies for customers experiencing financial hardship; and,
• Offer customers experiencing payment difficulty the opportunity to pay bills through a payment plan.

The Victorian PDF provides a minimum level of entitlements for all customers in the form of Standard Assistance, along with an additional form of Tailored Assistance for customers in arrears. Additional support includes:

• pausing arrears payments for up to six months and allowing part-payments of future bills;
• providing practical advice on reducing energy costs;
• providing practical help to reduce energy bills such as energy audits; and,
• providing help to apply for and lodge utility relief grant applications. 

Retailers take their role as essential service providers seriously, and it is their call centre staff who operate on the front lines, providing regulated levels of support to customers while going above and beyond on what they’re regulated to do.

Interactions between a retailer’s call centre and the customer are of particular importance as it’s where positive engagement can be established, and the worst-case scenario of disconnection can be avoided. It’s been noted that these customer-retailer interactions have been continually improving in recent years. For instance, the ESC has said that since the PDF came into effect in 2019 “the representative sample of recording of retailer calls with customers experiencing payment difficulty revealed constructive and friendly interactions with customers when providing support.”[1]

During a recent visit to a retailer’s call centre, we were able to get some insights into how interactions are handled. For instance, one of the hardship calls involved setting up a payment plan with a customer heavily in arrears. The interaction lasted for over 40 minutes and involved the operator working out a sustainable repayment plan, running through a myriad of energy efficiency measures the customer could undertake while also providing important contact information to financial counselling and other support organisations. Throughout the interaction the retailer took pains to understand the situation of the customer and make sure the repayment plan did not add to the customer’s financial stress while also notifying them of the government grants and rebates that will be/are on offer.

Reviewing the Reviews

Both the NECF and Victorian PDF sets of consumer protections have come under review in the past few months. The AER released an issues paper to consider potential changes to the payment difficulty protections in the NECF while the ESC is looking at aspects of the Victorian PDF as part of a wider review of their Retail Code of Practice.

While there are various reasons why these have been conducted, the rising costs of living and concerns around customer outcomes have been key drivers. The AER argues consumers with payment difficulty are experiencing poor outcomes under the current framework, with this issue becoming “particularly important given increasing costs of living and decreasing energy affordability.” Likewise, the ESC has highlighted there are “growing numbers of Victorians struggling to afford their energy costs” with this being “compounded in recent years, as cost of living pressures grow”.

Broadly, both sets of consumer protections are showing similar outcomes. The AER, for instance, reports around 4.3 per cent of NECF customers are in debt. While in Victoria, the ESC’s review notes that in 2022-23, four per cent of electricity and gas customers owed their retailer over $300 and were not engaged in a payment plan. These customers had an average debt of $1,264 for electricity and $1,109 for gas, figures also roughly comparable for NECF jurisdictions. While it can be difficult to draw a direct comparison between both sets of consumer protections due to different retailer performance reporting requirements, the overall outcomes are not wildly dissimilar [despite slightly varied approaches to the issue].

Review of payment difficulty protections in the NECF

Considering these issues, and following on from Action 8 in the AER’s Towards Energy Equity Strategy, which considered the need for a payment difficulty framework, the Regulator’s latest review seeks to consider the effectiveness of existing NECF provisions and AER instruments that protect consumers experiencing payment difficulty. These include looking at:

• protections for consumers experiencing payment difficulty due to hardship, including those set out in the AER Customer Hardship Policy Guideline;
• protections for other residential consumers experiencing payment difficulty;
• voluntary guidance for retailers in the AER Sustainable Payment Plans Framework; and,
• protections from disconnection (including the minimum disconnection amount and other protections in Part 6 of the National Energy Retail Rules).

Retail Code of Practice Review

Through its review, the ESC is considering changes to the Victorian PDF alongside a wide range of other potential alterations to the Retail Code, which include potential changes to bill information and frequency requirements, further gas abolishment regulations, and clarifications around best offers, among other things. For protections for consumers experiencing vulnerability specifically, the issues paper looks at:

• Strengthening family violence protections, looking to other jurisdictions and sectors such as the National Energy Retail Rules (NERR) and Victorian Water Industry Standards for possible improvements;
• Changing obligations around PDF training requirements to require retailer customer service staff to be “appropriately” trained to assist customers experiencing different vulnerability or hardship issues;
• Potential alterations to the obligation to place debt on hold for six months for customers in arrears;
• Adjustments to obligations for the provision of information on Utility Relief Grants (URGs); and,
• The requirement for retailers to provide practical assistance to help a residential customer facing financial hardship to lower their energy costs.

What are the issues?

Consultation for both the AER’s and ESC’s issues papers have now closed, with the AEC making a submission to each of them. Considering this, it is also worth looking at the issues from a retailer’s more practical perspective.

Call centre operators we have spoken to note while the customer protection frameworks they operate under helped frame a call with a hardship customer, the prescriptiveness of some of the scripts they are required to use can, ironically, often be a barrier to getting a customer the help they need. They lamented that the volume of information that must be conveyed by the retailer in a single call can   be overwhelming and as a result might simply not be properly understood or remembered by the customer.  Indeed, the example we noted above involved a call that went for more than 40 minutes.

Here, there might be a better way. Crucial information like the terms of a payment arrangement could be discussed upfront over the phone. Other, information considered less sensitive, such as energy efficiency tips could be followed up by alternative form of communication, like an email, letter or SMS with the option of a follow up conversation if required, allowing the customer to fully digest more complex advice.

Moreover, it is clear when discussing consumer protections with frontline staff that some aspects of them, while they might sound helpful in theory, lead to worse outcomes in practice. For instance, the Victorian PDFs obligation to place debt on hold for six months for customers in arrears does not provide a long-term solution for the majority of customers. While it may provide some relief for those facing short-term difficulty and low debt, many leave the six-month debt freeze period with a far larger and more unmanageable debt than before, with the process negatively impacting customer’s engagement with their retailer.

Overall, many frontline staff expressed a desire for   regulators and policy makers to visit call centres to witness firsthand how they operate, how their policies are applied on a day-to-day basis, and any issues that arise as a result.

You can view our submission to the Review of payment difficulty protections in the NECF here, and the Retail Code of Practice Review here.

[1] ESC PDF Implementation Review 2022, pg.13 https://www.esc.vic.gov.au/sites/default/files/documents/RPT%20-%20Payment%20Difficulty%20Framework%20implementation%20review%20-%20Findings%20report%20-%20FINAL%20-%2020220531.pdf