Dear Mr Sarcich,
RE: Discussion Paper - Extending the Jurisdiction of the Energy and Water Ombudsman (Victoria)
Lumo Energy, (Lumo), thanks the Department for the opportunity to provide comment on the proposal to expand the jurisdiction of the Energy and Water Ombudsman of Victoria, (EWOV), to incorporate small scale networks and on selling arrangements, commonly known as Embedded Networks in conjunction with the move to the National Energy Customer Framework, (NECF).
In principle, Lumo agrees that all consumers have the right to a free and impartial dispute resolution scheme. However, is hesitant to support the move to expand on the jurisdiction of EWOV to incorporate embedded networks on the basis of, their considerable inefficiency through excessive procedural overheads for complaint handling procedures, testing and evidentiary information, and the inability to enforce any decision on an embedded network and most importantly the credit risk that members would need to support.
Currently, members are bound by the licensing scheme through clauses 16 and 18, electricity and gas licenses respectively, to be members of an approved ombudsman scheme of which they are bound by only through the condition existing within the member's license. Meaning that EWOV have no Constituted right, as a corporation limited by guarantee, to bind a member to a decision where there is no License issued under the respective Electricity and Gas acts.
In contrast embedded networks are exempted from holding a license, therefore are not bound to the Ombudsman scheme and or its decisions without the equivalent approach being introduced within the general Order in Council (OIC).
With the transition to national retailer and distribution authorisations under the Australian Energy Regulatory (AER) and the conditions of the National Energy Retail Law (NERL) that require retailers and distributors alike to comply with these schemes, exempt sellers, which are not defined within the NERL, would require an additional instrument to enforce compliance with EWOV's Constitution and membership with the scheme.
It is difficult to assess whether the inclusion of embedded and small scale on-selling networks is beneficial when there is such a wide variety of forms, ranging from caravan parks to shopping centres, that may or may not have energy on-supply arrangements as their primary business operation or even as a secondary consideration, such as caravan parks and retirement villages.
In these instances the cost of the complaint is likely cause increases to housing costs assuming that the costs, like with current members, is essentially funded through fees and charges to the end consumer as a cost of doing business. These are potentially the most vulnerable parts of the community who would fund complaints.
The alternative is that there is a cross subsidy from members for capital and reduced case costs to allow the consumers the access and not financially burden the business and subsequently the consumer.
One suggestion is to scale the investigation or complaint receipt fees based on the size and or number of customers much like the current membership fees however, a single caravan park with thirty residents potentially has more consumers than a small or medium shopping centre however the ability to fund those charges is disproportionate.
This imbalance must be addressed otherwise those that are most likely to require the assistance are likely to be more impacted by the cost of the raising complaint.
Balancing the benefits between the Victorian Civil and Administrative Tribunal (VCAT) and EWOV is considerably difficult. The comparison provided with the consultation paper suggests that the benefits of EWOV outweigh that of VCAT, however has failed to factor in the other party to the dispute, their costs and resources.
The perceived effectiveness of EWOV is reported on the basis that cases were conciliated verses decisions being made, however the effectiveness of those outcomes is not questioned. Because no binding decisions are made, it is not indicative of effectiveness in resolution and often members accept the proposed resolution as a decision because the cost associated with provision of evidence or further costs associated through escalation and or investigation is inefficient from a business perspective.
This inefficiency generates a significant increase in costs. The procedures for registration of a complaint with EWOV consist of, initial registration (which depending on case type could be an Assisted Referral or Stage One or Two Investigated Complaint) which could cost between $114.00 and $1,151.00 to register a complaint.
Customer hardship, disconnection and high billing complaints are generally automatically raised as Stage 2 complaints instantly costing $1,151.00 which also contain costs that are assumed to be incurred for meter testing and other aspects during the investigation because EWOV expect that a member would undertake these tasks as part of their investigation whether or not justified.
There are also default positions and timeframes for the responses required by the member to the customer which if not adhered to generate further costs such as for an Assisted Referral, the member is required to have contacted the customer within 24 hours by telephone, unless contact is not made in which case within 7 days in writing, or if a Stage 2 investigation respond to EWOV within 14 business days.
Because the potential scale of these complaints is unknown, it is impossible to forecast the budget that would be required for the business and the capital expansion that would be required for EWOV to support those complaints.
The cost benefit analysis needs to consider whether the business', proposed to become party to the to the Ombudsman scheme, have the financial capacity to support the charges that would be imposed as a member, the resources that would be required to handle these complaints or would they be forced to increase the cost to the consumer to fund handling these complaints.
We recognise that it is difficult not to support the inclusion of embedded networks and allow all consumers equal access to the Ombudsman scheme, however to provide a subsidised scheme for these networks would simply increase costs on current members, and/or increase costs to consumers to fund handling their complaints which is difficult to agree with. This makes VCAT the more viable option for a consumer as this could increase individual costs well in excess of the $37.00 to have a hearing and impose stress on potentially high risk consumers both emotionally and financially.
If there are any questions regarding this matter please contact Ross Evans on 03 8680 6426 or via email at Ross.Evans@lumoenergy.com.au
Regulatory Compliance Analyst