Existing and prospective energy retailers may need to consider whether their hardship policies meet the new requirements under the NERL if the AEMC's draft rule comes into effect.

The Australian Energy Market Commission (AEMC) has proposed a new draft rule National Energy Retail Amendment (Strengthening Protections for Customers in Hardship) Rule 2018 to amend the National Energy Retail Rules (NERR) to require the Australian Energy Regulator (AER) to develop binding customer hardship policy guidelines. The draft rule is aimed at improving retailers' hardship policies so that vulnerable customers can better understand their rights and obtain support from their retailer when they are facing hardship. It is anticipated that the draft rule will be completed in November 2018.

While the AEMC considers that there should only be minimal cost impacts for retailers who already comply with the NERL and offer adequate protections to customers in hardship, it is important that retailers start thinking now about how to ensure their hardship policies will be compliant if the draft rule is implemented. This is particularly important given that the new requirements may become civil penalty provisions, subjecting energy retailers to penalties for failure to comply.

All energy retailers in the NEM, bar Victoria, to be affected

If you are a current energy retailer within the National Electricity Market, or you intend to become an energy retailer, you will be impacted by these changes. You are an energy retailer if you hold a "retailer authorisation" granted by the AER in accordance with Part 5 of the NERR.

The proposed changes in the draft rule will form part of the National Energy Customer Framework which applies in the Australian Capital Territory, Tasmania, South Australia, New South Wales, and Queensland. Therefore, if you are an energy retailer in Victoria you will not be affected by these changes.

What are the current retail energy customer hardship requirements?

Under the National Energy Retail Law (NERL), retailers are required to develop customer hardship policies in respect of residential customers for approval by the AER. The purpose of customer hardship policies is to identify residential customers experiencing payment difficulties due to hardship, and to assist those customers to better manage their energy bills on an ongoing basis. Section 44 of the NERL sets out the minimum requirements those hardship policies must contain, including (but not limited to):

  • processes to identify residential customers experiencing payment difficulties due to hardship;
  • processes for the early response by the retailer;
  • flexible payment options for payment of energy bills;
  • processes to identify and notify customers of appropriate government concession programs and financial counselling services;
  • an outline of a range of programs the retailer may use to assist hardship customers;
  • processes to review the appropriateness of a hardship customer's market retail contract; and
  • processes to assist customers with strategies to improve their energy efficiency.

In addition, the NERR outlines the obligations of retailers in relation to customers in financial hardship, including (but not limited to) the obligation to provide customers with the retailer's hardship policy, and establish a payment plan.

What are the inadequacies of the current hardship provisions?

In 2017, the AER undertook a review into the hardship programs of 9 selected retailers, which identified a number of deficiencies in how retailers actually implement their policies. In particular, the review found that many customers don't receive adequate guidance from their retailer about their rights, and many approved policies contain generic statements which offer only minimal protection to customers.

New requirement for binding hardship guidelines

The draft rule proposes that the AER be required to develop hardship guidelines which include standard statements giving effect to the minimum requirements in section 44 of the NERL (see above). Retailers would then be required to use these consistent and specific statements in their hardship policies to ensure that customers know their rights. The new hardship guidelines would also require retailers to set out:

  • their process for early identification of customers who are experiencing financial hardship; and
  • how they will help vulnerable customers in managing their energy bills on an ongoing basis (ie. by ensuring customers are on the best energy plan to meet their needs, and offering manageable payment plans).

New timeframe for implementing hardship policies

Currently, the NERL provides that a retailer must submit its proposed hardship policy within three months of receiving its retailer authorisation, but there is no set timeframe for when it must be in place. Further, unless there is agreement between the AER and the retailer as to the form and contents of a hardship policy, the policy may never be approved.

The draft rule proposes that existing retailers will need to have a hardship policy approved and implemented within 6 months of the AER publishing the new hardship guidelines, and new retailers will need to have an approved policy in place as soon as practicable after receiving approval from the AER. However, this would still place vulnerable customers of a new retailer at risk, as that new retailer could take on customers and bill them for energy used, submit a policy to the AER but have no policy in place for an indefinite period, and not be in breach of the NERL.

Accordingly, alongside the draft rule, the AEMC is also recommending that the COAG Energy Council implement a change to the NERL to require that new retailers have their hardship policies in place before they receive a retailer authorisation. If this is implemented, new retailers will need to ensure they satisfy this requirement before commencing operation.

New civil penalty provisions for failure to comply with new hardship guidelines

The AEMC has also indicated, in its draft determination on the proposed draft rule, that it will make a joint recommendation with the AER to the COAG Energy Council that the new obligations under the draft rule be classified as civil penalty provisions. This would mean that retailers who failed to comply with the proposed new requirements would face penalties (eg. fines).

What does this mean for you?

If the draft rule is introduced, the AER would have until 1 April 2019 to publish the new hardship guidelines.

If you are an existing energy retailer, you would need to submit an updated hardship policy to the AER which complies with the draft rule within 2 months of the date the AER publishes the hardship guidelines (no later than 1 June 2019). The draft rule proposes that the AER would have 2 months to consider whether to approve your updated customer hardship policy. If approved, you would then be required to implement and publish your updated customer hardship policy within 2 months (no later than 1 October 2019).

If you are a prospective energy retailer, you would be required to submit a compliant hardship policy within 3 months of receiving a retailer authorisation. The AER would then have 3 months to consider whether to approve the policy. If approved, you would be required to implement the policy as soon as practicable. Importantly, prospective energy retailers should note that if the AEMC's proposed law change is made, then any prospective energy retailer would be required to have their hardship policies approved by the AER before receiving a retailer authorisation.

What happens next?

18 October 2018 is the deadline for written submissions on the proposed draft rule.