2 August 2011

RE: VICTORIAN NATIONAL ENERGY CUSTOMER FRAMEWORK DISCUSSION PAPERS

CitiPower and Powercor Australia (the Businesses) refer to the Department of Primary Industries' (DPI) National Energy Customer Framework (NECF) discussion papers released on 6 July 2011. The Businesses appreciate the opportunity to comment on the discussion papers and are supportive of DPI's initiatives in developing a Victorian framework to assist the industry to transition to the NECF by the implementation date, which is currently set for 1 July 2012.

The discussion papers relate to:

  1. Extending the jurisdiction of the Energy and Water Ombudsman (Victoria) (EWOV) (EWOV Discussion Paper); and
  2. Victorian jurisdictional regulatory requirements under the NECF (Jurisdictional Obligations Discussion Paper). (collectively the Discussion Papers).

In the EWOV Discussion Paper, DPI is seeking submissions on whether exempt networks can be effectively accommodated under the EWOV scheme. The Businesses are supportive of initiatives to ensure all customers are able to access cost effective dispute resolution schemes. However, the Businesses highlight that funding arrangements must include all participants fairly.

In the Jurisdictional Obligations Discussion Paper, DPI proposes to introduce a new framework called the Victorian Energy Retail Rules (VERR). The VERR is intended to encompass all Victorian jurisdictional rules and regulations which have not been addressed in the NECF. The Businesses are supportive of initiatives to ensure a smooth transition to the NECF. The Businesses agree that this consultation is not the appropriate forum to discuss policy issues, and accept that drafting of the VERR will be identical to the original jurisdictional provisions to the extent possible. While the Businesses may agree with the inclusion of any given provision, this does not necessarily mean that the Businesses support the policy positions originally taken by DPI or the Essential Services Commission (ESC).

The Discussion Papers identify the following areas of state energy legislation to be covered in any transitional implementing legislation:

  • Jurisdiction of EWOV;
  • Primary legislation;
  • Contracting distribution and retail customers;
  • Transferring electricity customers;
  • Assistance to vulnerable customers;
  • Implementing smart metering in Victoria;
  • Connecting, disconnecting and reconnecting customers;
  • Security, reliability and quality of electricity supply;
  • Public lighting;
  • Undergrounding of distribution fixed assets; and
  • Electrical safety regulation.

The Businesses seek to provide submissions on each of the questions raised in the EWOV Discussion Paper and each of the provisions of the proposed VERR outlined in the Jurisdictional Obligations Discussion Paper. Comments on the VERR are set out in tables, followed by more detailed comments on specific objections. The tables include all provisions listed in Section 4 of the Jurisdictional Obligations Discussion Paper, as well as rules and regulations for which the Businesses seek inclusion into the VERR.

EWOV Discussion Paper

1. What is the most appropriate forum to assist in the resolution of energy complaints between exempt bodies and their customers?

The Businesses note that there are three forums in which the resolution of energy complaints may take place: EWOV, the Victorian Civil and Administrative Tribunal (VCAT), and the courts.

The Businesses are of the view that EWOV is the most appropriate of these forums in resolving energy complaints between exempt bodies and their customers. Resolving complaints at a judicial level is neither cost effective nor accessible for small consumers. The Businesses note that currently customers of exempt networks may only have their complaints resolved directly with the exempt network, or through VCAT. The disadvantages of VCAT are discussed at question 2.

2. Are there advantages for customers and exempt bodies in having complaints heard by EWOV rather than VCAT?

The Businesses agree with the DPI's assessment of the differences between EWOV and VCAT. The Businesses conclude that EWOV is advantageous in terms of:

  • Cost: administration fees and legal costs can frequently be an impediment to consumers lodging formal complaints with VCAT. EWOV does not involve any fees for small consumers and does not require the engagement of solicitors or barristers.
  • Efficiency in decision making: EWOV has experience in dealing with energy rules and regulations. In addition, EWOV has strong relationships with EWOV members and has access to other state ombudsmen. These are important resources for EWOV in understanding the technical nature of the industry.
  • Accessibility for consumers: VCAT procedures are relatively more formal than EWOV, and often consumers feel compelled to engage legal representation to appear at VCAT and prepare evidence in the form of sworn affidavits or statutory declarations. Consumers may also feel intimidated by the adversarial nature of VCAT.

3. If EWOV's jurisdiction was extended, should exempt bodies be obligated to become members of EWOV?

The Businesses submit that exempt bodies must be members of EWOV, who are each subject to annual fixed levies. Membership fees would be a continuing discipline on the industry to resolve matters before they are submitted to EWOV in that membership costs increase with the number of matters heard.

4. What is the most appropriate model for funding the costs of resolving disputes raised by customers of exempt bodies (eg fee-for-service)?

The Businesses note the funding arrangements established by the Energy and Water Ombudsman NSW (EWON) whereby the costs of complaints against exempt networks are spread across licensees. EWON justifies this arrangement on the grounds that exempt networks would not be able to afford participant fees and would ultimately pass these costs onto the consumer.

The Businesses do not support the EWON arrangement. The Businesses consider that the benefits of having an appropriate forum to resolve disputes effectively and fairly outweigh the costs involved in participation, even where such costs may be passed onto consumers. Dispute resolution mechanisms are of utmost importance because customers of exempt networks have no other reasonable alternative to taking supply.

The Businesses consider that the most appropriate arrangement would be for EWOV to impose fixed annual levies plus fee-for-service charges on all scheme participants, including exempt networks. Fixed annual levies could be calculated on the basis of revenue or number of customers to ensure costs remain affordable for smaller networks. Fee-for-service charges can be priced to recover variable costs, and would impose a discipline on all participants to resolve matters before they are heard at EWOV.

5. Should only certain classifications of exempt customers have access to EWOV?

The Businesses consider that only small customers as defined under the NECF should be eligible for dispute resolution under EWOV. The Businesses note that small customers are defined as:

  • A residential customer; or
  • A business customer consuming less than 100 MWh per annum.

For larger customers who fall outside these thresholds, dispute resolution mechanisms are typically provided for under their connection agreements. The Businesses have in place a complaints and dispute resolution policy available on the internet for all customers. Failing agreement, larger customers may initiate court proceedings to resolve the dispute. The Businesses consider arrangements for larger customers are appropriate because issues tend to be of greater complexity, and larger customers tend to have greater access to resources and commercial and technical expertise.

6. If yes, what classifications of exempt customers should have access to EWOV?

See answer to question 5.

7. What avenues of enforcement could the Government empower EWOV to utilise in the event that an exempt body does not adhere to EWOV's case handling policies or resolutions.

The Businesses note the difficulties faced by EWOV in enforcement. Revocation of an exemption status may be difficult where exempt bodies operate under a deemed exemption.

The Businesses support case escalation policies where breaches of case handling policies incur further costs by the participant. Enforcement of binding decisions may take the form of monetary fines and penalties issued by EWOV or another appropriate body, with enforcement of the fines and penalties carried out by the Australian Competition and Consumer Commission (ACCC) or the Australian Energy Regulator (AER).

The Businesses note, however, that the power of EWOV to impose fines and penalties may need further consideration in terms of how the Victorian legislative framework will interact with the NECF.

8. If, like EWON, EWOV has the power to refer exempt body complaints to another body for enforcement, which body should the matter be referred to?

The Businesses consider the ACCC or the AER are appropriate bodies for enforcement. These bodies have the resources to pursue enforcement by initiating court proceedings to recover fines and penalties imposed by EWOV.

The Businesses note, however, that the legal status of EWOV determinations may need further consideration in terms of how the Victorian legislative framework will interact with the NECF and the powers of the ACCC or AER.

9. Does the difficulty in enforcing resolutions or case handling policies against exempt bodies make it less beneficial for customers to take their matter to EWOV over VCAT?

The Businesses consider that EWOV is no less beneficial to consumers than VCAT in terms of the difficulties in enforcing determinations. The Businesses' proposal at question 8 reflects the process taken to enforce VCAT determinations. The only difference is that the enforcement of VCAT determinations must be pursued by the consumer. Under the Businesses' proposal, EWOV determinations can be pursued by the ACCC or the AER, who have the resources to ensure determinations are complied with.

Jurisdictional Obligations Discussion Paper

10. Overview of Victorian Energy Retail Rules

10.1. What regulation was reviewed?

The VERR is intended to encompass all Victorian jurisdictional rules and regulations which have not been addressed in the NECF. DPI anticipates that significant rationalisation of the current Victorian framework will be necessary to remove duplication and obligations parallel to the NECF. The Businesses are supportive of DPI's approach in this regard.

The Businesses note that the VERR has been compiled from a review of the following Victorian instruments:

  • Electricity Industry Act 2000 (Vic) (EIA);
  • Electricity Safety Act 1998 (Vic);
  • Essential Services Commission Act 2001 (Vic) (ESC Act);
  • Electricity Distribution Code (EDC);
  • Energy Retail Code (ERC);
  • Electricity Customer Transfer Code (ECTC);
  • Electricity Customer Metering Code (ECMC);
  • Public Lighting Code (PLC);
  • Victorian default Use of System Agreement (UoSA); and
  • All ESC Guidelines.

The Businesses also note that the following Victorian instruments are currently being reviewed:

  • Electricity System Code;
  • ESC Guideline 15 – Connection of Embedded Generation;
  • ESC Guideline 18 – Augmentation and Land Access;
  • EDC clause 4; and
  • Victorian Service and Installation Rules.

The Businesses confirm DPI's advice that the technical nature of these instruments necessitates further review. The Businesses note that DPI will consider these rules and regulations in separate targeted stakeholder consultations, including consultations with Energy Safe Victoria (ESV) and Australian Energy Markets Operator (AEMO). No timetable has been provided for these consultations. The Businesses would welcome the opportunity to discuss any areas of concern DPI may have with respect to the instruments currently under review.

The Businesses also note that clause 4 of Guideline 14 – Provision of Services by Electricity Distributors is currently being considered under the AER's consultation for establishing a national connection charge guideline. The AER released an issues paper on 10 June 2011.

10.2. What will the VERR look like?

The Businesses confirm DPI's advice that the form of legislation for the VERR has yet to be confirmed, however, drafting of the provisions of the VERR will be identical to current provisions to the extent possible. The Businesses also confirm that DPI will be releasing a Statement of Intent, which will detail the legislative arrangements for the VERR and how the VERR provisions will be set out generally.

The Businesses are supportive of DPI's approach with respect to drafting. The Businesses are concerned that drafting which deviates from the original text has the potential to revisit policy issues previously determined. Under the current consultation process, there is inadequate time for the Businesses to consider such issues in any depth. The Businesses would appreciate the opportunity to consult on policy issues in the future.

The Businesses acknowledge that DPI has no obligation to provide a draft of the VERR prior to enactment. However, the Businesses would appreciate that the provisions of the VERR be released in the Statement of Intent in order for the Businesses to review its obligations in preparation for implementation of the NECF.

10.3. Who will manage the VERR?

The Businesses note DPI's proposal that oversight of the VERR will be managed by DPI, with the AER managing enforcement and the AEMC managing the rule change process.

The Businesses support the DPI's proposal and reiterate submissions made on 13 May 2011 regarding the Victorian National Energy Customer Framework Discussion Papers. The Businesses consider that it is appropriate for DPI to manage administration of the VERR, and defer enforcement issues to the AER. The Businesses note that the AER released its final Compliance Reporting Procedures and Guidelines and Statement of Approach to compliance with the Retail Law and Rules on 26 July 2011. These documents detail how the AER will monitor compliance and enforce regulations under the NECF. The Businesses agree in principle with the general approach set out by the AER, however refer to its submission made to the AER on 6 May 2011 for specific objections.

11. Primary legislation

Provision Brief description Agree/disagree
Division 2, Part 2 of EIA DPI proposes to amend this part to provide for reserve retail pricing power. Agree.
Section 15A, Division 2, Part 2 of EIA DPI has not included provision relating to regulations for the Advanced Metering Infrastructure program. Disagree, see comments below.
Disagree, see comments below. DPI proposes that this regime be retained for specific clean energy initiatives. Agree.
Divisions 3 and 4, Part 2 of EIA DPI proposes to amend these provisions to accommodate for the retailer authorisation regime under the NECF, and the outcomes of the DPI determination regarding the Licensing Discussion Paper released on 15 April 2011. Agree.
Parts 4-6 of EIA Protection of critical electricity infrastructure, powers of electricity corporations, electricity supply emergency provisions. Agree.
ESC Act DPI intends to amend the ESC Act to ensure consistency with DPI's proposals with respect to oversight of the VERR. Agree.

The Businesses confirm that DPI will not seek reserve powers for economic regulation with respect to distribution pricing. However, the Businesses submit that s 15A must be retained in the VERR for the purposes of the Advanced Metering Infrastructure (AMI) program in Victoria.

12. Contracting distribution and retail customers

Provision Brief description Agree/disagree
Clause 7.5(b) of ERC Prohibiting retailers for imposing fees and charges for merchant service fees (credit card fees) on customers on standing offer contracts. Agree.
Clause 30 of ERC Prescribing that the fees and charges which are allowed to be charged for standing offer contracts are only those explicitly allowed for under the NERR. Agree.
Section 40C EIA Proscribing application of late payment fees to small customers. Agree.
Clause 3.1 of ERC Retaining the two month billing cycle for gas customers on standing contracts until 31 December 2013. Agree.
Clause 3.1 of ERC Retaining the formula for billing customers for bulk hot water. Agree.

The Businesses note that DPI does not intend to introduce any provisions into the VERR with respect to protecting consumers in negotiations with electricity distributors. DPI considers that the NECF and the Australian Consumer Law (ACL) both provide sufficient protections in the following regard:

  • The NECF provides model terms and conditions for deemed standard distribution contracts, and permits variations in very limited circumstances; and
  • The ACL details a list of unfair contract terms which may not be incorporated in any contract.

The Businesses agree that the ACL and the NECF provide strong protections for consumers in relation to contractual terms, and as such it is unnecessary for any further obligations to be included in the VERR.

13. Transferring electricity customers

Provision Brief description Agree/disagree
Clause 3.1 of ECTC Retaining jurisdictional requirements for data to facilitate efficient customer transfer in the market through AEMO. DPI considers this provision necessary to allow for a jurisdictional body to oversee the standing data schedule. DPI indicate that appropriate arrangements will be put in place to ensure the role continues to be performed for as long as it is required. Agree.
Clauses 4.2 and 4.3 of ECTC DPI has not included provisions relating to the proposed transfer date for customer requests and the meter read methods. Disagree, see comments below.

The Businesses consider that clauses 4.2 and 4.3 of the ECTC should be retained in the VERR. There are currently no provisions in the NECF which provide for the proposed transfer date for customer requests and meter read methods.

With respect to the process for customer transfers under the NECF, the Businesses are concerned that the customer classification provisions under the NECF may create delays for the Businesses to implement the NECF by 1 July 2012. This is because the changes to the customer classification provisions in the NECF are likely to require changes to AEMO MSATS and B2B procedures.

Changes to the AEMO procedures follow a specific timeframe. For the Businesses to meet the implementation date of 1 July 2012, the industry and AEMO must finalise changes in May 2012. This, however, requires that White Papers are released by 31 July 2011. The B2B and MSATS Reference Group have not met this deadline. This means that public consultation on the white papers, publication of final determination, and participant development times will all be delayed.

14. Assistance to vulnerable customers

Provision Brief description Agree/disagree
Clause 3.1 of ECTC Requiring retailers to enter into agreements for the provision of community service rebates and grants. Agree.
Part 2, Division 7 of EIA General provisions relating to community service agreements. Agree.
Section 43(2) of EIA Requiring retailers to offer home energy audits and flexible options for the purchase of appliances in their hardship policies. Agree.

The Businesses have no further comments.

15. Implementing smart metering in Victoria

Provision Brief description Agree/disagree
Clause 2.2 of ECMC DPI has not included provision relating to ownership of metering equipment. Disagree, see comments below.
Clause 6.1(aa) of ECMC DPI has not included provision relating to smart meters whereby minimum standard of metering equipment must meet smart meter requirements under AMI OIC. Disagree, see comments below.
Clause 6.2 of ECMC DPI has not included provision relating to embedded networks. Disagree, see comments below.
Clause 7.1 of ECMC Requirement on retailers and distributors to provide historical billing and metering data within 10 business days to customers with smart meters. Agree.
Clause 7.2 of ECMC Requirement on retailers and distributors to maintain confidentiality of the data in accordance with the relevant laws. Disagree, see comments below.
Clause 7.3 of ECMC DPI has not included provision relating to ownership of metering data. Disagree, see comments below.
Clause 9.1.13.1 of EDC Requirement for the distributor to have its telephone number on meters so that customers have a contact point if the premises are de-energised. Agree.
Clause 9.1.14 of EDC Requirement for the distributors to send notices to customers to advise of potential tariff changes by their retailer after the installation of the smart meter. Agree.
Clauses 12.3 and 12.4 of EDC The distributor must remotely disconnect a customer at either a customer's or retailer's request within two hours of the request if it can safely do so. Agree.
Clause 13.1.2 of EDC The distributor must use best endeavours to remotely reconnect the customer within 2 hours of the request if it can safely do so. Agree.
Clauses 4.7, 5.2, 6.1, 20, 12A, 13.1, 13.2, 15.2, 26.4, 27.2, 4.2 and 4.4 of ERC Provisions in ERC relating to information on the bill, costs of meter testing, variation to tariffs, retailer supply capacity control, information on disconnection, disconnection of vulnerable customers, timeframe for remote connections, and access to billing and metering data. Agree.
Clause 7.1(c) of the UoSA DPI has not included provision to allow a distributor to render an invoice to the retailer for distribution charges incurred where the distributor has been unable to carry out or complete the services as a result of any act or omission of the Retailer. Disagree, see comments below.
Clause 9.9 of UoSA DPI has not included provision requiring distributors and retailers to notify each other of suspected theft of electricity. Disagree, see comments below.

The Businesses submit the following comments with respect to each of the provisions of the ECMC highlighted in the above table:

  • The Businesses consider that clauses 2.2 and 7.3 of the ECMC should be retained in the VERR. The Businesses refer to DPI's comments in the Jurisdictional Obligations Discussion Paper that the VERR will provide that the customer does not have proprietary interest in the metering equipment, and that ownership of metering data is limited to the customer, distributor and retailer.
  • The Businesses consider that clause 6.1(aa) of ECMC should be retained in the VERR. The clause is required to protect the integrity and investment in the AMI program.
  • The Businesses consider that clause 6.2 of the ECMC should be retained in the VERR. There are currently no provisions under the NECF which address the issue of installation of new interval metering equipment for parent metering points.
  • The Businesses consider that clause 7.2 of the ECMC should be removed. The Businesses consider the inclusion of clause 7.2 of the ECMC to be unnecessary in light of rule 7.10 of the NER which provides for confidentiality of metering data. The Businesses submit the following comments with respect to each of the provisions of the UoSA highlighted in the above table:
  • The Businesses consider that clause 7.1(c) of the UoSA should be retained in the VERR. This clause allows for distributors to recover those charges that were incurred in good faith and could not be completed due to a retailer's acts or omissions.
  • The Businesses consider that clause 9.9 of the UoSA should be retained in the VERR. This clause imposes a mutual obligation on retailers and distributors to notify each other of suspected theft of electricity from the distribution system. There are currently no provisions under the NECF which address theft.

16. Connecting, disconnecting and reconnecting customers

Provision Brief description Agree/disagree
Clauses 2.2, 2.4, 2.5 of EDC Timeframes for connecting customers. Agreed.
Clause 9.1.3A of EDC Written communications to owners of small embedded generators. Agreed.
Clauses 11.2 and 12.1 of EDC Notification to customers Agreed.
Clause 12.6.1 of EDC and 14(d) of ERC Timeframes for disconnecting customers Agreed.
Clause 13.1.2 of EDC Timeframe for remote reconnections Agreed.
Clause 6.2 of Deemed Distribution Contract DPI has not included provision that distributor's equipment on the customer's premises does not become part of the land and may be removed after disconnection. Disagree, see comments below.
Clause 6.4 of Deemed Distribution Contract DPI has not included provision imposing a maximum allocated capacity on consumers. Disagree, see comments below.
New obligation DPI proposes to include a provision requiring distributors to provide sufficient information in a timely manner to customers prior to issuing a disconnection warning for distribution-related reasons. Disagree, see comments below.

The Businesses submit the following comments with respect to provisions highlighted in the above table:

  • The Businesses consider that clause 6.2 of the Deemed Electricity Distribution Contract should be retained in the VERR. This clause has not been included in the NECF.
  • The Businesses consider that clause 6.4 of the Deemed Electricity Distribution Contract should be retained in the VERR. This clause
  • provides for a maximum allocated capacity on small consumers taking supply. The purpose of this provision is to facilitate cost effective network management whilst ensuring the safety, reliability and quality of supply. Capacity control is also governed by strict rules under the Service and Installation Rules. There are currently no provisions for the use of capacity control under the NECF and the Businesses are concerned that the absence of this provision will adversely impact on their ability to manage the network.
  • The Businesses consider that the inclusion of a new provision requiring distributors to issue notices prior to disconnection is not warranted and potentially dangerous. The Businesses reiterate that this is a policy issue which the Businesses are happy to discuss at a later date. The Businesses have respected DPI's instructions that policy issues will not be re-litigated, and request that DPI adhere to its own instructions.
  • The Businesses refer DPI to rule 110 National Energy Retail Rules which requires distributors and retailers to provide disconnection warnings. The Businesses consider that additional warnings are entirely unnecessary and a potential threat to public safety. It is not practical or safe to require distributors to issue disconnection warnings in circumstances where there is an immediate threat to safety, where theft of electricity is involved or where network management is required to ensure the ongoing reliability of the network.

17. Security, reliability and quality of electricity supply

Provision Brief description Agree/disagree
Clause 3.1A of EDC Obligations on CitiPower to strengthen the security of supply in the Melbourne CBD. Agreed.
Clauses 4.2 - 4.8 of EDC All obligations setting out acceptable standards for quality of supply. Currently being reviewed by DPI.
Clause 5.7 of EDC Obligations that electricity distributors notify Department for Human Services and Department for Health about sustained outages during widespread power outages. Agreed.
Clause 6 of EDC Guaranteed Service Levels (GSLs) to be retained until the end of the current regulatory period. AER will set national level GSLs under the NECF at the end of the current regulatory period. Agreed.
Clause 7 of EDC DPI has not included provisions relating to the connection of embedded generation. Disagree, see comments below.
Clause 8.2 of EDC Requirement on distributors to co-operate with AEMO in supporting a single industry spokesperson for significant supply events. Agreed.
Clause 9.1.2A of EDC Requirement on distributors to send a notice to customers yearly about the distributor's role in maintaining supply in emergencies and widespread outages. Agreed.
Electricity System Code System operation Currently being reviewed by DPI.
SIR Distributor technical requirements Currently being reviewed by DPI.
ESC Guideline 15 Connection of embedded generation Currently being reviewed by DPI.

The Businesses submit that clause 7 of the EDC should be retained in the VERR. The Businesses are concerned that the absence of provisions in the NECF and the VERR regulating fault levels, harmonics and minimum requirements for embedded generating units will adversely impact on the Businesses' ability to manage the network. In particular, the Businesses are concerned that no mechanism has been provided to attribute network augmentation costs to generators whose connections breach fault levels. The Businesses reiterate that the Businesses are available to discuss any areas of concern DPI may have with respect to the instruments currently under review.

18. Public lighting

Provision Brief description Agree/disagree
Public Lighting Code Setting minimum public lighting standards and other matters relating to the provision of public lighting. DPI intends to retain all provisions of the Code. Agreed.

The Businesses have no further comments.

19. Undergrounding of distribution fixed assets

Provision Brief description Agree/disagree
Clause 2 of Guideline 14 Process to be followed in assessing proposals for undergrounding of distribution fixed assets. Agreed.

The Businesses have no further comments.

20. Electrical safety regulations

Provision Brief description Agree/disagree
Electricity Safety Act 1998 (Vic) Legislation relating to the safety of electricity supply and use, the reliability and security of electricity supply, and the efficiency of electrical equipment. Agreed.

The Businesses have no further comments.

Closing comments

The Businesses appreciate the opportunity to make this submission to DPI and would welcome the opportunity to discuss any of the matters raised in this submission. In particular, the Businesses would be pleased to discuss with DPI areas that remain under review.

If you have any questions, please contact me on (03) 9683 4465 or by email at bcleeve@powercor.com.au.

Yours sincerely,

Brent Cleeve

MANAGER REGULATION

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