Tariff reform could strengthen safety net for vulnerable customers

ENA CEO John Bradley
ENA CEO John Bradley

Energy customers could benefit more from shopping around than from government assistance – with potential savings up to five-times the value of the government assistance, according to independent research.

The Energy Networks Association’s (ENA’s) report Supporting Vulnerable Energy Customers shows the potential benefits to vulnerable customers who shop around exceed government financial assistance, Australia-wide.

ENA CEO John Bradley called on Australian governments to undertake a national review of assistance to vulnerable consumers, including not only the financial assistance they provide but also the support for participation in complex retail markets.

“Sweeping changes in energy use and new technology means a national review of assistance is required,” he said.

“For most customers, energy remains a small proportion of the household budget at just 2 per cent, however, the lowest income households are likely to spend more than 10 per cent of their income on energy.

The ENA commissioned the report to identify opportunities to improve assistance for vulnerable energy customers so the ‘safety net’ works for those who need it most. The paper outlines a range of options for governments to consider and for use by energy retailers and network service providers.

“A number of studies show that tariff reform will assist vulnerable customers – in fact, about 80 per cent of those vulnerable customers are paying more than they would under cost-reflective tariffs,” Mr Bradley said.

The Options Paper supported previous calls from the National Roundtable on Energy Affordability for a review by Australian Governments of their assistance to vulnerable customers.

“While there may be some justifiable differences, eligibility rules and the forms of assistance across the national energy market vary widely – such as some states using capped subsidies and others providing percentage-based discounts,” Mr Bradley said.

“Given the sweeping changes in energy use, now is the time for Australian governments to co-operate in a national review of energy assistance schemes to make sure assistance is targeted.”

Mr Bradley said network businesses were keen to support effective solutions with governments, energy retailers and consumer advocates, and would be conducting a number of consultative forums to discuss the Options Paper.

“Networks costs are now moderating or falling in many states but there are still more opportunities for customers to save on their total energy bill. Customers who use comparison websites and access information on their energy usage can achieve energy savings of hundreds of dollars per year,” he said.

Mr Bradley said the introduction of cost-reflective network charges would also provide lower bills to customers who use more of their energy off peak.

“Most network tariffs in Australia currently don’t reward customers who use more energy off-peak and research shows this could be disadvantaging four out of five vulnerable customers,” Mr Bradley said.

Networks are seeking input from stakeholders on how vulnerable customers could reduce their bills, if they are given time to understand and respond to cost-reflective pricing developed in consultation with customer, Mr Bradley said.

“While we can make tariffs fairer, tariffs are generally a relatively blunt tool for assisting vulnerable customers because they struggle to take into account a customer’s financial capacity.

“Some networks are also evaluating the option of ‘social tariffs’ to assist vulnerable customers in the transition to cost-reflective pricing and the Options Paper seeks feedback on this measure.

“At the same time, the ENA supports a co-ordinated national review by governments of the effectiveness of the safety net provided through government-funded energy concessions or hardship assistance to around one in four households in Australia.”

Mr Bradley said the national review should be undertaken in a timely way, to align with new national electricity rules requiring the introduction of more cost-reflective network pricing no later than 2017.