United Energy Distribution and Multinet Group1 August 2011

Dear Erin

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

United Energy and Multinet (the businesses) appreciate the opportunity to comment on the Department of Primary Industries (DPI) Discussion Paper – Extending the jurisdiction of the Energy and Water Ombudsman (Victoria) (EWOV). The paper considers whether it is advantageous for customers of bodies which are exempt from holding an energy licence to have their complaints conciliated by EWOV.

The businesses understand that the consultation is seeking feedback on whether there is benefit for child customers or exempt customers to be able to make complaints about exempt on sellers or exempt networks for either gas or electricity exempt networks. The coverage of the extension of the Ombudsman jurisdiction could therefore include both on market (or 2nd tier customers) and off market customers and unmetered customers such as gas cooktops in high rise buildings. Our responses to the specific questions are in the Attachment, in summary the businesses support:

The regulatory environment for electricity and gas is complex, there may be benefit for exempt customers to have access to the EWOV scheme which enables easier access to dispute resolution than a VCAT hearing;

  • Given the increased cost of living, particularly fuel affordability, the businesses would be concerned with the extension of the EWOV powers if the costs to our customers increased as a consequence;
  • Exempt bodies should be responsible for the full additional EWOV costs attributable to providing this new service for exempt customers;
  • It is important for the EWOV Board to make an informed decision before extending the coverage of EWOV to exempt networks. It would be appropriate to establish a business case and funding models to see if the scheme was feasible;
  • Any legislation in this area could state that it is an offence to not comply with case handling procedures, conciliated outcomes and binding decisions; and
  • A properly structured offence/fine regime should deliver the desired benefit of enforcement for very little cost. Should you have any questions in relation to this submission please call (03) 8846 9856.

Yours sincerely

Verity Watson

Manager Regulatory Strategy

Attachment United Energy and Multinet response to the Discussion paper – Extending the jurisdiction of the Energy and Water Ombudsman (Victoria)

Dispute resolution for exempt bodies

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

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

The paper provides a reasonable comparison of the dispute resolution under Victorian Civil and Administrative Tribunal (VCAT) and the Energy and Water Ombudsman (Victoria) (EWOV), although we would like to mention that EWOV is not entirely free. Licensed retailers and licensed network businesses pay both annual fees and fees for enquires and complaints. Ultimately the costs of these arrangements are borne by end use customers on our networks via the retail tariffs and charges.

As a general principle the businesses support appropriate dispute resolution mechanisms for all customers and consider that customers within exempt networks should be afforded a similar opportunity.

Given the increased cost of living, particularly fuel affordability, the businesses would be concerned with such an approach if the costs to our customers increased as a consequence. Any EWOV setup and ongoing costs to cover the additional complexities of exempt parties for the exempt customers should be attributed to the exempt parties.

The regulatory environment for electricity and gas is complex; there may be benefit for exempt customers to have access to the EWOV scheme which enables easier access to dispute resolution and a less threatening or intimidating environment than a VCAT hearing.

Funding

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

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

The paper recognises that current EWOV participants pay an annual levy based on customer numbers and fees per registered complaint level.

The paper recognises that some exempt bodies may have difficulties affording the fee structure and hence EWOV may experience difficulties in collecting such fees. The paper also recognises that complaint numbers may be relatively low.

The EWOV scheme applies to both small and large customers; we see no reason why the scheme could not be extended to cover the same categories of exempt customers. The businesses recognise that care needs to be taken to provide an even footing for exempt customers of a caravan park and exempt customers within a shopping centre.

The businesses recognise that all exempt parties could be obliged to be a member of EWOV or only some.

It is important for the EWOV Board to make an informed decision before extending the coverage of EWOV to exempt networks. It would be appropriate to establish a business case and funding models to see if the scheme was feasible.

For example how many exempt networks and exempt onsellers are there in gas and electricity? How many exempt customers are there who may need coverage? What are the number of enquiries and complaints already dealt with by these exempt parties directly and by VCAT? If EWOV does cover exempt customers complaints how will customers find out about the scheme?

Without EWOV understanding the likely workload it may be difficult to establish reasonable estimates of start-up and ongoing costs.

The extension of the scheme could consider coverage of all or only some exempt parties. For example, the scheme could include:

  • Only exempt on sellers that fit the Australian Energy Regulator (AER) registration category, or
  • Exempt onsellers and exempt networks with customers over a certain number, or
  • Exempt onsellers and networks where the parent meter usages exceeds a set level, or
  • Exempt onsellers and networks where the exempt customer energy is metered and not unmetered.

The budget and funding model would depend on a number of the factors outlined above. However, the businesses would be concerned if licenced distributors and their customers were required to pick up the additional costs of any increase in EWOV scope. Exempt bodies should be responsible for the full additional EWOV costs attributable to providing this new service for exempt customers.

Exempt bodies could be provided with a similar fee structure to that of the licenced entities or they could pay a full fee for services which included a shared portion of the annual costs in the fee base. Including the annual levy in a fee for service for exempt parties may also leave EWOV in an awkward position where increased ongoing operating costs could be at risk of recovery.

Scope of jurisdiction

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

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

The EWOV scheme currently applies to both electricity and gas and all customers, small and large. These customer dispute processes are afforded to small business customers and to residential customers.

Given this model has been in place for over a decade, we see no reason why it would not also be equally applicable for all exempt customers.

Enforcement

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.

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?

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 understand that an exempt body needs to comply with a number of regulations but not all regulations that would apply to a licensed party. Whilst there is a compliance obligation, there is no real monitoring or enforcement regime. Consideration could be given to the application of penalties or fines.

Any legislation in this area could state that it is an offence to not comply with case handling procedures, conciliated outcomes and binding decisions. The amount of fine could be based on the seriousness of the offence and should be such that it deters the offence. There should be a further offence that passing on any part of the fine in charges to customers is a revocation of an exemption.

A properly structured offence/fine regime should deliver the desired benefit of enforcement for very little cost. The enforcement/collection of the fine could be through the civil penalties office structure already generally applicable.