Consumer Action, Consumer Utilities Advocacy Centre and Victorian Council of Social Service have provided input into the AEMC’s draft determination on distribution network pricing arrangements.
Our organisations agree that there is a need to reform the way distribution networks and services are priced, in order to drive greater efficiency of use, avoid unnecessary investment and drive more efficient prices charged to all consumers. We therefore welcome this rule change and support the new network pricing objective requiring Distribution Network Service Providers (DNSPs) to charge tariffs that reflect their efficient costs of providing distribution services. If this is done effectively, it will create great potential for consumers to take better control of their energy consumption and expenditure, potentially allowing many low income and vulnerable consumers to save money on their energy bills.
The change to flexible distribution network pricing will, however, increase the complexity of an already complex market. The potential for consumer disengagement is therefore high, and special attention needs to be paid to the way the changes are communicated to consumers and the structure of new tariffs. We therefore welcome the AEMC’s acknowledgement of the importance of the consumer perspective and their ability to engage with flexible pricing.
Consumers’ ability to understand the changes and how they are reflected in their energy bills will be fundamental to the success of the reforms. If consumers fail to understand, or actively engage, the market benefits underpinning the reform will not be realised. A critical issue for the success of the reforms is therefore the manner and extent to which energy retailers reflect the changes to network tariffs in their market offerings.
Perhaps more importantly for effective competition, there is also high potential for the reforms to lead to further public backlash and erode trust as some people’s bills increase as a result of the reforms, without their understanding or ability to respond.
Currently the rules do not require any consideration of consumers’ ability to understand the market or engage with the information that is issued about the structure and level of energy prices (and associated fees and discounts), which has led to poor consumer decision making and ineffective competition. It is essential to the success of this rule change, and other Power of Choice reforms, that the consumer impact and their ability to understand the rule changes are properly considered. We therefore encourage the AEMC to use the precedent of consumer impact principles set in this network pricing rule change to apply a consumer impact and understanding principle to all future rule changes. This will greatly enhance the value of the Power of Choice reforms in increasing consumer uptake of demand-side initiatives.
A full copy of our submission is available by clicking: AEMC Rule Change on Distribution Network Pricing Arrangements Draft Determination.