Q&A with Lynne Gallagher, Energy Consumers Australia CEO

Lynne, energy consumers australia
Energy Consumers Australia CEO Lynne Gallagher

At a time when engagement with consumers is paramount, we speak with Energy Consumers Australia’s new CEO Lynne Gallagher about their role in advocating for the consumer.

How does ECA engage consumers and what is their recent feedback in how their energy retailers are communicating with them?

Engaging with consumers, and organisations that represent consumers, is in our DNA.

We run a significant consumer research program, and also support consumer insights work by other advocacy and research organisations through the Energy Consumers Australia Grants Program.  

The Energy Consumer Sentiment Survey (ECSS), is our flagship and is a good example of how we engage. Conducted twice per year, the ECSS includes structured discussions with more than 2000 household and small business consumers and provides a current picture of consumer attitudes, satisfaction, confidence and engagement with energy issues and the market.

The ECSS is our baseline and it continues to show deep community concern about energy costs. In recent weeks we also added to this research by engaging with the Australian Bureau of Statistics on their survey of 500 households, and ran our own special surveys online and via telephone to understand the concerns about energy of people who might have lost their job, or had to close down their business because of COVID19.

Because we are worried that people might not know where to get help if they are struggling with higher winter bills, we asked them whether they can remember the latest information they received from their energy provider. Most couldn’t remember being contacted and only about half of the remaining people feel the information they receive from their retailer is useful.

Just as we have started to see consumers get their winter bills, it has been positive to see the industry do better. A good example is the Energy Charter’s We Got You campaign, which is helping get the message out to people from a range of language and other backgrounds that support is available.

I am convinced that efforts like these to deliver ‘better’ – in this case clearer more proactive communications to help people cut through the complexity and manage their bills when they have lost income – are critical to  restoring and building trust with the community.  Particularly retailers need to walk in their customers’ shoes.

This is just the start, if people are to have a better experience of the energy market in the future. Our Power Shift program research into consumer-decisions demonstrates that people need easy, attractive, social, and timely communications, if they are to be engaged.

In the past year or so, the industry has seen a huge focus on improving customer engagement. Can you give some examples of some positive case studies of this?

Across the sector – whether it’s industry, government, regulators, or advocacy organisations such as ourselves – there is a strong focus on stepping up and re-designing their consumer engagement.

The key change from my point of view has been a shift from a focus on how the sector engages with customers about energy markets to a deeper reflection of why it is engaging.

For example, we co-sponsor an annual award which recognises network businesses that have set the bar high for consumer engagement.

Last year’s winner was a gas network in NSW which had really thought about the why. This led them to the realisation that if they really wanted to hear from their customers, they would need to make sure a representative group of people could actually attend their deliberative forums. In the end, they provided a wide range of services to make their consumer engagement more inclusive, like translators, childcare assistance, transport services and in-language consultation.

If you are not simply ticking the box, and you are motivated to align your business with your customer, how you need to engage becomes much clearer.

The NewReg framework that we developed as a collaborative partnership with the Australian Energy Regulator (AER) and Energy Networks Australia (ENA) – and was being trialled by Ausnet Services in its latest revenue proposal – is another important development.

A totally new way of developing network regulatory proposals for network businesses has been used this year, with the networks only presenting their revenue proposals to the AER after detailed consultation and agreement with consumer advocates. That has seen a step-change in the way these proposals are developed, ensuring that consumer priorities are reflected in the plans for future network investment.

This approach contrasts sharply with the recent past where much of the disagreement between networks and consumers was settled acrimoniously in the courts. Those days are starting to fade but there is still further to go.

We are seeing more engagement through customer councils established by the retailers, and these provide opportunities to bring the voice of consumers into the development of innovation in how services are provided. 

There are plenty of examples of best practice out there, but our job at Energy Consumers Australia is to turn best-practice into common-practice. We are looking to vehicles like the Energy Charter to take that on board and share the good examples so that the whole energy sector is actively engaging with consumers and outcomes reflect their expectations.

As the energy system changes, i.e. with the increasing number of rooftop solar systems, batteries, etc, why does this make it more important to have a better dialogue?

It is difficult to overstate the nature of the changes that are happening in the way the electricity system is organised, and the way Australian households and small businesses power their homes and their small businesses.

The mass migration of more than two million households into the world of not just buying electricity but generating it on their roofs is symbolic of a fundamental change that is occurring in our energy system. The shift from consumers who use to simply buy electrons to keep the lights on, to consumers that engage actively with energy and take more control is making necessary a fundamental redesign of the system which is now underway.

If you are setting out to redesign something as fundamental to peoples’ lives and businesses as the energy system, you really have no option but to do it with people rather than to do it to them if you want to succeed.

This is a lesson I’ve learned the hard way, as an unreconstructed economist who spent the better part of the early 2000’s working for the networks trying to design the perfect tariff that would incentivise people to use energy at the ‘right’ times of the day.

The big reason that 10-15 years on from the AEMC’s Power of Choice work, we have made little progress on ‘tariff reform’ comes down to the question of values. If we had really engaged consumers on their terms, and listened to what they were saying was important, we would have discovered that before it is an economic or a technology issue, it is a values issue. 

Any of us engaged in debates about the design of the system, should take time to observe how people choose to behave in a range of different ways in their homes, at work and in their businesses rather than deciding as architects of the systems, how people should behave. Designing for social practice, and not just about price signals. 

People will act to achieve a better outcome for themselves, their neighbours, and their community. We see this when there are public calls for people to reduce their electricity use to help keep the power on during very hot days, and to make sure others are safe and comfortable. In these situations, the community responds by voluntarily reducing load by hundreds of megawatts when things are finely balanced and could have gone the wrong way.

A textbook approach would have people send a price signal to reduce their demand – but often this has a perverse effect. When we asked people why they used less, we found that they were worried about their elderly neighbour’s air-conditioning switching off, not because they want a few extra dollars in their pocket. Most people tell us in our ECSS that they will do it for free.

This is really the social compact that exists around energy in action: people responding to open and honest dialogue to voluntarily inconvenience themselves to be part of a bigger community effort. 

Even without progress on tariff reform, our research shows that around half of all consumers already move their energy use outside peak times. So, while price signals have a role to play, there is something else going on which we need to understand and work with. If we work with people on their terms, the rewards from the transformation of the energy system will be the cheaper, greener power they tell us they want, that is both simpler to access and with smart technology their use is more easily managed.

The exciting thing for people running energy businesses, or policy makers, is that there’s now compelling research – some which we’ve done and international literature as well – that shows that people are thinking about the longer-term changes that are happening in the system in a similar way that opens up the potential to build consensus where we haven’t been able to before. We need to engage with people so that they can have their say.

What do you think is a specific problem that needs addressing in the energy industry today?

It all starts with energy bills.

One of the core obstacles to consumers actively engaging with this market is trust and until energy prices return to more normal levels historically, trust will remain low. When consumers see that energy businesses have listened to their over-riding issue – their bills are too high – that will unlock a totally different relationship between consumers and their energy providers.

Rod Sims, on the back of the Australian Competition and Consumer Commission’s (ACCC) reform plan, promised 20-25 per cent price reductions for households and small businesses and consumers. Consumers have an expectation that that this money will be returned to their pockets.

We are making headway with energy network costs falling and wholesale prices at their lowest since 2016, so this needs to be passed on by retailers; and then we need to see bigger gains in the coming 2-3 years to meet the ACCC’s target.

It sounds a little ‘cart before horse’ because clearly there are a whole set of changes that need to drive prices down, but unfortunately the hard reality for the sector is that regaining consumers’ trust means that consumers’ bills must come down. It is up to all of us to find a way to make that happen.

What still needs to be done to enhance the customer-retailer relationship?

While innovative ways of adding value for customers are starting to emerge, the basic retail offering remains based around selling units of electricity and billing the consumer on a monthly or quarterly basis. This business model is reaching the end of its shelf life, as consumers demand a far more sophisticated model of retailing electricity which provides greater flexibility for individual consumers.

Other than lowering prices, the only other way to get energy bills down is to help consumers manage their energy consumption – and increasingly their generation and storage – more flexibly, through unlocking the potential value of their participation in energy markets. In this context consumers will need to see that markets are fair, and that consumer protections surrounding their participation are appropriate.

Without good data, and based on that data useful information or tools, managing energy use in the home remains a matter of guess work for most households and small businesses. And while some retailers are working on their engagement with consumers on energy use, there is not a strong drive to innovate for consumers.

A core question here is whether incumbent businesses can be incentivised to sell less of their product. That is a tough question – some say that those with a long term vision will do so because that is what their customers want but in reality we’re not seeing anywhere near as much effort go into marketing energy savings options as we are into customer attraction marketing campaigns. That says a lot.

The big question about the customer-retailer relationship, is can retailers make the shift from selling a commodity to providing a service based on what the consumer values. The future of the sector turns on the answer to this question.

We are all energy consumers, what can we do to help?

Most consumers have already done a great deal, in their homes and business to manage their bills. It is a myth to think that somehow consumer are indifferent – we see huge numbers adopting energy management technology like solar panels and batteries.

Almost every consumer we ask in our surveys is doing something to manage their power consumption, whether its simple things like turning off their lights, or changing the temperature setting on their air conditioner.

It surprised even us to learn that despite the fact cost reflective pricing is not available to most people, more than half of all consumer, are switching energy use to off-peak times.

At the moment, people are really feeling the pinch with the economic impact of COVID-19 combined with increased energy demand because people are at home more often than usual with social distancing and isolation. There is help available, but again, most consumers are telling us they have not heard from their retailer about what help is available. And even among the 20 per cent of consumers who have called their retailer to ask for help due to loss of income, half of these are being turned away.

If you’re struggling financially, contact your energy retailer and tell them you need help with the support of our PowerCall advice at www.energyconsumersaustralia.com.au.

Is there anything you would like to add?

It is a great privilege to lead the team at Energy Consumers Australia at such a critical time for consumers. The impact of COVID-19 has reached most people in the community by now and we need to do everything in our power to enable people to manage bill pressure.

We also need to make sure we remain focussed on the long-term reforms to the market and changes to industry culture that will ultimately produce better outcomes by working and engaging with energy consumers.