Energy retailers warned about passing on new compliance costs

Energy retailers have been warned to absorb the costs of implementing new requirements demanded by the Prime Minister to help consumers find cheaper power deals rather than pass them on to households and businesses.

While retailers have agreed to write to consumers by Christmas to outline what discount plans are available, it was confirmed the push to monthly bills will be restricted to households with smart meters which is mostly in Victoria.

Retailers agreed to the new requirements in a meeting with Prime Minister Malcolm Turnbull and Energy Minister Josh Frydenberg on Wednesday, but they are concerned about the extra costs of the paperwork and bureaucratic burden which one industry leader likened to the same-sex marriage postal plebiscite which is due to cost $122 million.

“There’s always a cost. If retailers bear costs ultimately that cost comes back to consumers anyway. It’s imperative we do things in a smart way and contact the right customers and give them the right information,” Australian Energy Council chief executive Matthew Warren said.

Energy Consumers Australia chief executive Rosemary Sinclair said the new requirements were a move in the right direction, but energy retailers had the capacity to absorb the costs of the new requirements rather than pass them onto users.

“It is a concern of mine there is a compliance culture in this sector and that’s what the Prime Minister is actually trying to unlock,” she said.

“The fact we have to have a rule change to get retailers to write to customers at the end of the discount periods is a bare minimum in terms of good outcomes for consumers. The idea that some of them could be contemplating asking consumers to pay for the stamps and the envelopes they are going to use to honour their commitment to the Prime Minister is ridiculous.”

But EnergyAustralia chief executive Catherine Tanna warned the new requirements could add extra costs and complexity for customers if they weren’t implemented properly. At a minimum they would require changes to IT software and billing systems, she said.

“Delivering the proposed changes will mean reporting more frequently to regulators, it will mean upgrading systems and software and it will mean more active and frequent communication with customers,” Ms Tanna said.

“Customers want support today, so that doesn’t mean the initiatives can’t or shouldn’t be done within the government’s timeframe. But it does mean we have to take care to plan properly because the very worst outcome is adding more cost and complexity for customers at a time when electricity prices are already at record highs.”

A spokeswoman for Origin Energy, one of the big three energy retailers, said the costs of the mail-outs will not be significant and will be absorbed by the company.

“We’ll send out letters in our normal billing cycles between now and Christmas, supported by our existing systems and processes,” the spokeswoman said. “It’s also important to note we have an increasing number of customers billed electronically which is more cost efficient than traditional mail. We’re committed to the Prime Minister’s initiatives to help bring price relief to customers.”

Mr Turnbull and Mr Frydenberg hailed the decision to move to monthly bills, but this will only be for households with smart meters. The costs of monitoring older analogue meters more than four times a year would be too cost prohibitive.

There are 2.8 million smart meters in Victoria – where their use is mandatory – and only a few hundred thousand each in other states, mostly for households with roof-top solar systems.

Smart meters are owned by distributors but a rule change will make the roll-out of meters contestable by the end of the year and retailers will become actively involved.

Mr Warren said a push to monthly bills would help with the roll-out of smart meters across the country.

Ms Sinclair said monthly bills of a few hundred dollars would be more manageable for households to pay rather than a large quarterly bill.

The move to a legitimate comparison rate between retailers – which was also being pushed by the Turnbull government – could take up to 12 months to implement, according to industry sources.

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