19 May 2011

Dear Mr Sarcich

Re: Victorian Licensing Arrangements - Issues Paper

Thank you for the opportunity to comment on the Department of Primary Industries' (DPI)'s Issues Paper - Victorian Licensing Arrangements.

The Energy and Water Ombudsman (Victoria) (EWOV) believes the proposed framework provides a comprehensive national approach for consumer protection and supports an approach that provides customers with:

  • minimal interruptions
  • minimal confusion
  • the same level of protection.

EWOV is an industry-based external dispute resolution scheme providing alternative dispute resolution services to Victorian energy and water consumers by receiving, investigating and facilitating the resolution of complaints. In making this submission, we provide comments based on our experience of customer issues.

EWOV will not comment on energy generation as customer complaints do not extend to this area of the market.

Distribution

Questions one, two and three:

  • What should the basis of any limitation on entry to the distribution sector be?
  • What kinds of network infrastructure should be exempted from such a limitation?
  • What measure of competence should be satisfied by a business choosing to build some form of distribution infrastructure?

EWOV believes that a new distribution business should be permitted to enter the market if it can demonstrate both the financial capacity and technical competency to provide best practice and quality services to its customers.

EWOV agrees with the imposition of regulatory obligations on small scale network operators and is confident that this will lead to customers of these operators receiving better business outcomes and services.

EWOV does not hold a firm view about the circumstances in which a network business (distribution company) should be required to cease operating, other than reinforcing that customers are entitled to a safe and reliable distribution system. All distribution businesses should have the financial capacity and technical competency to provide best practice and quality services to their customers.

As in a Retailer of Last Resort (RoLR) scenario, EWOV seeks that external administrators be formally obligated to engage in EWOV's processes to enable EWOV to effectively resolve customers' complaints.

Regulatory arrangements

Question 20:

  • What Victorian regulatory arrangements – that are not covered by the future national frameworks – require substantial regulatory oversight?

As stated previously, EWOV believes that the proposed national framework should provide the same level of consumer protection, that already exists in Victoria, with minimal interruptions and confusion for consumers.

EWOV believes that further regulation for embedded networks and exempt retailers would ensure all customers receive clearly defined minimum standards of service from their relevant service provider, whether it is a distribution, transmission, generation, or retail business. A customer should not be disadvantaged because they are not being supplied energy by a 'traditional' provider. 'Contracting out' may be permitted in limited circumstances where there is explicit informed customer consent, but these should be benchmarked against a no net detriment test. Wherever standards are reduced, there must be a countervailing benefit to offset the detriment.

Appropriate and effective enforcement regime

EWOV notes that DPI has referred to an ombudsman's office as an enforcement regime in the discussion paper (page 23). However, EWOV is an alternative dispute resolution body rather than an enforcement body. Although EWOV has broad jurisdiction to make binding decisions with respect to scheme participants, it is the ESC that bears responsibility for enforcing any decisions via the licence conditions of the relevant scheme participant.

Questions 21 and 23:

  • What is the most appropriate and effective enforcement regime for Victoria-specific regulatory arrangements?
  • Which body is best placed to oversee Victoria-specific regulatory arrangements?

EWOV believes that the Essential Services Commission (ESC) should continue as the Victorian Regulator of Victorian-specific regulatory arrangements. This would allow the AER to continue to enforce national regulatory arrangements and exist in conjunction with the ESC regarding Victorian-specific regulatory arrangements.

Historically, EWOV has found the ESC to be an effective regulator, however its scope for action against utility companies has been limited and requires lengthy processes not suitable for nimble regulation enforcement. EWOV believes that in order to increase the ESC's efficiency as an enforcer it requires additional resourcing and further enforcement tools at its disposal. This will enable the ESC to improve its ability to take action when needed against utility companies and undertake timely and effective enforcement (e.g. applying fines to companies that are non-compliant).

We trust the above comments are helpful. If you require further information or have any queries, please contact us.

Yours sincerely

Fiona McLeod
Energy and Water Ombudsman (Victoria)