AGL-logo2 August 2011

Dear Mr Raif

Discussion Paper: Victoria-specific regulatory arrangements under the NECF

AGL Energy Ltd (AGL) welcomes the opportunity to comment on the Department of Primary Industry's (the Department) recently released Discussion Paper (the Paper) on Victoria-specific regulations under the National Energy Customer Framework (NECF).

AGL has long advocated for the nationalisation of energy law to reduce regulatory inconsistencies across jurisdictions, which impose additional compliance costs on retailers with no commensurate benefit to consumers. While there may be certain aspects of a jurisdiction's regulatory arrangements that will necessarily continue to apply post transition to the NECF, AGL strongly considers that derogations should be kept to an absolute minimum. It is therefore disappointing that the Department has approached the task of determining which Victoria specific regulations should be retained on the basis that ' it would be unacceptable for Victorian consumers to be materially disadvantaged by the move to a national framework'.

As part of the Ministerial Council of Energy processes, all of the participating jurisdictions agreed to the NECF, in the knowledge that the NECF did not necessarily reflect their jurisdictional preferences. For the Department now to propose that a number of 'customer protections' be retained in Victoria, when those protections were specifically rejected in the development of the NECF, renders pointless the lengthy consultation process that proceeded the finalisation of the NECF. Furthermore, to base the decision to keep certain Victorian regulations on the assumption that some Victorian customers might otherwise be worse off under the NECF – particularly when the Paper provides no compelling evidence that this will indeed be the case – cannot be justified.

Having said this, AGL supports the Department's proposal to consolidate (to the extent possible) Victoria- specific regulation in the Victorian Energy Regulatory Rules (the VERR), acknowledging that the form of the VERR may be legislation, regulations, orders or rules.

AGL's response to specific issues discussed in the Paper is in Attachment A. We have chosen not to comment on those matters where we support the Department's proposal or where the matter is more relevant to distributors.

Please contact Anna Stewart, Manager Energy Policy and Strategy on 03 8633 6830 should you wish to discuss.

Yours sincerely

Beth Griggs

Head of Energy Market Regulation

Attachment A

Retail fees and charges

AGL strongly opposes the Department's proposal to disallow retailers from charging customers credit card fees (standing contracts) and late payment fees (both standing and market contracts). The Paper provides no analysis on the level of fees charged or the level of supposed 'material disadvantage'.  Retailers face real and quantifiable costs each time a customer pays by a credit card, or pays late. If retailers cannot pass these costs directly back to the customer, then ultimately the costs will be spread across the entire customer base, resulting in inefficient and inequitable cross-subsidies.

The late payment fee debate has been running in Victoria since at least 2004 and we do not propose to go over it in any detail in this submission. However, we do ask that the Department recognise that the regulatory framework, especially with respect to vulnerable customers, has moved on. There are now far greater protections for vulnerable customers and the industry has accepted it has a role to play in the area of hardship. The NECF does not allow retailers to charge hardship customers late payment fees – therefore, to the extent to which the Department is concerned that if it does not continue the late payment fee ban in Victoria, hardship customers will be disadvantaged, this is not a valid concern.

In the event that the Department is determined to include this in the VERR, AGL submits that there be a sunset provision – 1 July 2013 would be reasonable, given that this is twelve months from the introduction of NECF.

Gas billing cycle for customers on standing offer contracts

AGL recognises that for Victorian gas customers currently on standing contracts, it may take some time for them to get used to a quarterly gas bill rather than a bill every two months. However, in the interests of national consistency, our preferred position is for Victoria to move towards the NECF quarterly billing requirement. If the Department is not willing to move to this as of 1 July 2012, AGL recommends that the relevant VERR provision be sunsetted as at 31december 2013. This should enable sufficient time for customers to get used to the change or to make alternative contract arrangements.

Energy efficiency assistance to vulnerable customers

AGL is fully aware of the need to assist customers experiencing hardship through a range of measures, including home energy audits. While we are currently offering free audits and appliances to many of our hardship customers across various jurisdictions (not just Victoria), we do not consider that this should be a regulatory requirement specific to Victoria.
The Department has failed to provide the historical context for the fact that Victorian legislation currently imposes a requirement on retailers to offer free/subsidised home energy audits and flexible options for the purchase/supply of appliances as part of their hardship policies. AGL considers that if the historical context is taken into consideration, as well as the fact that retailers' hardship policies will be heavily regulated under the NECF, the decision to impose this additional regulatory requirement in Victoria beyond the introduction of NECF, cannot be justified. Again, if this requirement is contained within the VERR, there should be a sunset clause – 1 July 2013 would seem to be a reasonable sunset date.

Compensation for wrongful disconnection

AGL is extremely disappointed that Victoria intends to retain the wrongful disconnection payment scheme (the WDP scheme). When introduced, the WDP scheme was principally intended to guard against retailers disconnecting customers who were willing, but did not have the capacity, to pay their energy bills. AGL does not believe the WDP scheme is appropriate or effective in reaching this original goal. AGL acknowledges that customers should be compensated where they have been inconvenienced due to a wrongful disconnection. However, we have never endorsed the mandatory payment of $250 per day in all circumstances. The WDP scheme in its current form has led to some extremely inequitable outcomes, for example, in situations where holiday homes have been left disconnected for extended periods of time. Even if legislation is passed in coming months to place a cap on the number of days for which a customer can be compensated, AGL is strongly opposed to Victoria retaining the WDP scheme. It was considered as part of the NECF and ultimately rejected given the perverse outcomes that have arisen as a result of the scheme.

Timeframes for disconnecting customers

AGL does not consider that the Department has sufficiently justified its proposal to retain Victorian's current disconnection timeframes (ie. 2pm, as opposed to the NECF requirement of 3pm). We fail to understand how customers will be disadvantaged by moving to the NECF position and request that the Department provide robust evidence as to the extent to which Victorian customers will be materially disadvantaged. As noted earlier in this submission, one of the advantages of the NECF is the efficiencies gained through having national processes. If the national position is to be deviated from, there should be robust analysis behind such a decision.