AGL-logo2 August 2011

Dear Ms Dempsey

Discussion Paper – Extending the jurisdiction of the Energy and Water Ombudsman (Victoria)

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 extending the jurisdiction of the Energy and Water Ombudsman (Victoria) (EWOV) to cover exempt bodies.

Earlier this year, AGL made a submission to the AER in response to its consultation on retail exemptions.1 In that submission, we stated that 'small customers of exempt sellers should be afforded, wherever possible, the same protections as small customers of authorised retailers.' AGL maintains this view and therefore supports, in principle, the ability of small customers of exempt sellers to take their dispute to EWOV. We understand that, from a customer perspective, there are clear advantages in being able to go to EWOV, rather than having to go to the Victorian Civil and Administrative Tribunal (VCAT). However, AGL notes that there are presently some financial, practical and legal barriers which may make EWOV scheme membership difficult. Importantly, AGL would not support a situation in which existing EWOV members are cross-subsidising exempt sellers.

Before any decision is made to extend EWOV's jurisdiction, AGL recommends that an independent feasibility study be undertaken. In AGL's view, there is little merit in deciding to extend EWOV's jurisdiction, without first gaining a far greater understanding of all of the relevant issues. Matters which need addressing include the size of the problem (ie. how many exempt body complaints are there likely to be on an annual basis?); the costs involved; the most effective method of enforcing EWOV decisions against exempt bodies; and any potential impacts there may be with respect to the ongoing viability of EWOV in the event there are large numbers of these types of complaints. While many of these issues are raised in the Paper, AGL does not consider it is in a position to provide a definitive answer without more information.

Our views in response to some of the specific questions raised in the Paper are in Attachment A.

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

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

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

AGL does not consider the answer to this question to be straightforward. While membership may be preferable in terms of making sure costs are spread evenly between users of the scheme, it may actually be impractical given the number of exempt bodies operating in the market. There is also the issue of the variety of exempt bodies – from small owner-operated caravan parks, to shopping centres owned by large corporations. AGL agrees that it may not be equitable to charge these different classes of members the same membership fees. As such, a fee for service charge per complaint may be more attractive.

However, the problem with charging only on a fee for service basis is that not only may it be difficult on an administrative level for EWOV to collect the fees, such a fee structure is unlikely to cover the ongoing (fixed) and, presumably, increasing operating costs of EWOV. Such costs would no doubt ultimately be covered through existing member fees. This would be a totally unacceptable outcome for AGL. Whatever arrangement is introduced for cost recovery, existing EWOV members should in no way subsidise the activities resulting from the creation of a new membership category or resolution of complaints raised by customers of exempt bodies.

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

AGL would support only small customers (as defined within the NECF) having access to EWOV. In particular, those customers who are vulnerable and disadvantaged, such as those living in caravan parks, would benefit from being able to take their dispute to EWOV. Having said this, there may be some practical difficulties in breaking down the category of small customer further, especially in terms of defining customers as 'vulnerable'.

While AGL does not necessarily support small business customers accessing EWOV, we do consider that large customers are sufficiently resourced to have their complaints heard through VCAT or the courts and should not be permitted to make use of EWOV's resources.

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?

There is very little point in extending EWOV's jurisdiction to cover exempt bodies if, ultimately, the conciliated resolution or binding decision cannot be enforced against the entity. Going through the dispute resolution process would be an exercise in futility and a waste of EWOV's resources. It would also provide little incentive for customers to take their dispute to EWOV, or for the exempt bodies to take EWOV seriously.

AGL considers that the Paper does not go into enough detail on the various enforcement options that might be possible and, what are the pros and cons of the options. We consider that more information regarding the options needs to be provided to stakeholders before we can comment further. At this stage, however, we do agree that an 'appropriate compliance regime' would need to be put in place to enable EWOV to enforce its decisions/conciliated outcomes, and its policies and procedures. While it would seem most logical to have the AER enforce such a compliance regime, given the jurisdictional nature of Ombudsman schemes, it may be more appropriate for enforcement to rest with the Essential Services Commission.
Again, whatever option is preferred, the costs of compliance and enforcement with respect to exempt bodies, should not be a cost ultimately borne by authorised retailers and their customers.

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1 See http://www.aer.gov.au/content/item.phtml?itemId=743015&nodeId=e46dfc6e67b54363ba67a54cfa98674a&fn=Submission%20-%20Draft%20guideline%20-%20AGL.pdf