Chapter 1 - Introduction€¦ · Web viewWHO World Health Organisation Introduction . In December 2007 the Ministerial Council on Energy committed to work with stakeholders and

NATIONAL SMART METER CONSUMER PROTECTION AND SAFETY REVIEW

OFFICIALS’ REPORT

Standing Council on Energy and Resources

Senior Committee Of Officials’

Energy Market Reform Working Group

November 2012

Introduction

Table of Contents

1 Introduction 61.1 The framework for consideration of smart meter consumer protections 6

1.2 General themes 6

1.3 Implementation of recommendations 6

1.4 Technology neutrality 6

1.5 Transitional arrangements 6

1.6 Relationship to the Victorian roll-out 6

1.7 Issues covered 6

2 New pricing arrangements 62.1 Overview 6

2.2 Maintaining effective choice of tariffs for small consumers 6

2.3 Transitional arrangements for new retail pricing arrangements 6

2.4 Network tariff arrangements 6

2.5 Designing tariffs to support informed choice 6

2.6 Arrangements for critical peak tariffs and rebates 6

2.7 Ensuring that vulnerable consumers are sufficiently protected 6

2.8 Improving overall energy literacy and the availability of consumption information 6

3 Third party service providers 63.1 Stakeholder views 6

3.2 Policy analysis 6

3.3 Policy recommendations 6

4 Supply capacity control (SCC) 64.1 Context of SCC 6

4.2 General stakeholder views 6

4.3 SCC for network emergencies 6

4.4 SCC as a discretionary distributor product 6

4.5 SCC as a discretionary retail product 6

4.6 SCC and third parties 6

4.7 SCC and embedded generation 6

5 Demand management: direct load control (DLC) 65.1 The context for DLC 6

5.2 Who can offer DLC? 6

5.3 Contractual arrangements for DLC 6

2

National smart meter consumer protection and safety review – officials’ report

5.4 Other consumer protections for DLC 6

5.5 Notification of load control activation 6

5.6 Ability for customers to override load control: 6

6 Customer billing 66.1 Outcomes for the first stage of the policy review 6

6.2 Enabling customers to check their bill 6

6.3 Billing on time based tariffs 6

6.4 Displaying estimations and substitutions on the bill 6

6.5 Notification to consumers of estimations 6

6.6 Impact of estimations methodology on critical peak pricing 6

6.7 AER monitoring of the use of estimated and substituted data 6

7 Consumer engagement 67.2 The objectives of consumer engagement 6

7.3 The role of government, industry and consumers in consumer education 6

7.4 Consumer engagement in a non-mandated rollout 6

8 Customer access to data and the home area network (HAN) 68.1 Registration of devices on the HAN and customer access to data 6

8.2 Consumers authorising data provision to third parties 6

8.3 Messaging through the HAN and IHD 6

9 Privacy 69.1 Policy positions and questions from paper two 6

9.2 General stakeholder views 6

9.3 General policy analysis 6

9.4 Conclusion 6

10 Independent dispute resolution for customers 610.1 Stakeholder views 6


10.3 Policy recommendation 6

11 Metering installations and customer impacts 611.1 Policy positions and questions from paper two 6

11.2 Stakeholder views 6

11.3 Evidence from Victoria and other states 6



3

Introduction

12 Radio-frequency emissions and smart meters 612.1 Stakeholder views 6



13 Remote energisation/re-energisation and customer safety 613.1 Policy positions and questions from draft policy paper two 6

13.2 General summary of stakeholder views 6


13.4 Recommendations 6

14 National minimum functionality and embedded generation 614.1 Consideration in draft policy paper one 6

14.2 Policy positions and questions from paper two 6

14.3 Stakeholder views 6

14.4 Analysis and recommendation 6

15 Appendix 1: List of stakeholder submissions 6

16 Appendix 2: Possible implementation of policy positions 6

4


List of Acronyms

ACCC Australian Competition and Consumer Commission

ACL Australian Consumer Law

ACMA Australian Communications and Media Authority

AEMC Australian Energy Market Commission

AEMO Australian Energy Market Operator

AER Australian Energy Regulator

AEST Australian Eastern Standard Time

AMI Advanced metering infrastructure

ARPANSA Australian Radiation Protection and Nuclear Safety Authority

ASP Accredited Service Provider

ESV Energy Safe Victoria

B2B Business to business

CPP Critical peak pricing

CPR Critical peak rebate

CUAC Consumer Utilities Advocacy Centre

DLC Direct load control

EMRWG Energy Market Reform Working Group

EMF Electromagnetic field

ERAA Energy Retailers Association of Australia

ESCV Essential Services Commission of Victoria

EWON Energy and Water Ombudsman of New South Wales

EWOV Energy and Water Ombudsman of Victoria

HAN Home area network

IHD In home display

MDP Metering Data Provider

NECF National Energy Customer Framework

NEL National Electricity Law

5

Introduction

NEM National Electricity Market

NERL National Energy Retail Law

NER National Electricity Rules

NERR National Energy Retail Rules

PIA Privacy Impact Assessment

RF Radio frequency

SCC Supply capacity control

SCER Standing Council on Energy and Resources

SCO Senior Committee of Officials

SWER Single wire earth return

TOU Time of use

UE United Energy Distribution

UK United Kingdom

WHO World Health Organisation

6


1 IntroductionIn December 2007 the Ministerial Council on Energy1 committed to work with stakeholders and the appropriate jurisdictional authorities to review the consumer protection and safety arrangements where consumers have a smart meter installed to ensure they remain appropriate.

This Review has been conducted in two stages. The first stage2 covered a range of customer protection issues with reference to the National Energy Customer Framework (NECF).

The second stage covered a broader range of products and consumer protection issues, mainly related to advanced smart meter services (e.g. pricing, direct load control and the home area network) and some issues carried over from policy paper one.

In December 2011 the Standing Council on Energy and Resources’ Energy Market Reform Working Group (EMRWG) released the Smart Meter Consumer Protection and Safety Review - Draft Policy Paper Two for consultation.

This paper provides a response to stakeholder comments on policy paper two and recommendations to Ministers on the appropriate consumer protections for smart meter enabled services and safety issues arising from both stages of the Review.

1.1 The framework for consideration of smart meter consumer protections

This Review has considered whether the current consumer protections are adequate to cover the new services enabled by smart meters and to strengthen the framework where necessary.

The Review has taken into account the considerable amount of work already undertaken in regard to smart meters, in particular:

the consumer protections developed in Victoria in association with their roll out;

experience gained from other pilots and trials, both in Australia and overseas;

draft reports and analysis from the Australian Energy Market Commission (AEMC) Power of Choice Review; and

work undertaken into issues around consumer access to their energy data and on privacy issues.

1 Now the Standing Council on Energy and Resources (SCER)2 Ministerial Council on Energy Standing Committee of Officials, August 2009. Smart Meter Consumer Protection and Safety Review-Draft Policy Paper One.

7

Introduction

1.2 General themes

The Review has taken into account the general context of smart meters and the electricity markets. In particular, whilst there is a distributor led mandated roll-out of smart meters in Victoria, other deployment scenarios also need to be considered. The recommendations aim to accommodate, where possible, a wide diversity of different scenarios and timeframes under which smart meters may be deployed.

To provide a comprehensive proposal for Ministers, the Review has considered many areas that are the primary responsibility of state and territory governments particularly retail pricing regulation, concession regimes and safety issues. Implementation in these areas remains a jurisdictional decision through jurisdictional processes.

Overall the recommendations reflect four broad themes:

Creating a framework that allows consumers to understand and benefit from the services enabled by smart meters;

Enabling consumers to make informed choices and better manage their energy use;

Ensuring that the needs of vulnerable consumers are sufficiently protected; and

Ensuring the development of new, beneficial services is not unduly constrained by inappropriate and unnecessary regulation

1.3 Implementation of recommendations

EMRWG recommends that the regulation of smart meter enabled services should be as flexible as possible as many of the services being developed are relatively new to Australia. Effective and robust consumer protections should not come at the expense of constraining the development of new products and services through inappropriate regulation.

The NECF provides the regulatory framework to protect the interests of consumers and has been taken as the starting point for most consumer protections. Recommendations should be implemented through a combination of changes to national instruments, changes to jurisdictional instruments, guidelines developed by the Australian Energy Regulator (AER) and changes to National Energy Market (NEM) procedures as appropriate.

The attached table at Appendix 2 indicates preliminary advice on how policy should be implemented. For those areas where jurisdictional instruments need to be amended, jurisdictions would make the appropriate amendments through their established change process for these instruments. For national instruments the Standing Council on Energy and Resources (SCER) would make or propose changed through the established change process for the relevant instrument.

8


1.4 Technology neutrality

Smart meters enable many products and services that could also be offered using other technology. EMRWG recommends implementation of the recommendations for new or revised consumer protections use a generic approach so that, where possible, the protections would apply regardless of the technology underpinning a particular product or service.

1.5 Transitional arrangements

Many of the policy changes being recommended by the Review will require a period of transition for their implementation. This is particularly the case for the introduction of new pricing arrangements. EMRWG considers that jurisdictions, consistent with their price regulation responsibility, may determine that a transitional period should apply following the widespread commencement of time varying pricing. During the transitional period, particular protections and information could provide an additional incentive for customers to test new pricing. A consumer engagement program should also be undertaken in parallel with the introduction of new pricing so that consumers are able to feel more confident about engaging with the new options available.

Adopting a single approach to transitional arrangements is problematic especially where there are different deployment models in different jurisdictions and where transitional arrangements might be required. Hence the EMRWG recommends that any transitional arrangements are developed in consultation, by the relevant jurisdiction.

1.6 Relationship to the Victorian roll-out

This Review has considered the work on consumer protections recently completed by the Essential Services Commission of Victoria (ESCV)3. Whilst existing Victorian roll-out arrangements do not drive the development of the national protection framework, they will inform it, as will evidence from pilots and trials in other jurisdictions. Work will continue to enable and encourage alignment between the Victorian project and the national framework. Where necessary, transitional arrangements will be developed in a manner that does not compromise consumer protections established in that State.

3 Essential Services Commission 2010, Regulatory Review – Smart Meters , September

9

Introduction

1.7 Issues covered

Draft policy papers one and two presented draft policy positions and consultation questions for stakeholder comment. The issues covered in each stage of the Review are shown in the table below.

Policy issue Raised and finalised in stage one

Carried over and finalised in stage two

Finalised in stage two

Adequacy of NECF hardship provisions √Customer choice of tariffs √Concession frameworks √Distributional impacts of Time of Use tariffs

√

Reconciliation of bill charges with smart meter reading

√ √

Overcharging and undercharging √Displaying estimations on the bill √Presentation of consumption information √Access to historical metering data √Direct load control services √Supply capacity control services √Distributor marketing √Marketing through the In –Home Display √Notification of remote disconnection √Use of prepayment metering √Disconnection of premises with embedded generation installed

√

Relationship of network and retail tariffs √Community service obligations √Access to dedicated off peak tariffs √Use of local time when applying time based tariffs

√

Appropriateness of estimations methodology for time based tariffs

√

Smart meter functionality supporting embedded generation

√

Data access, security and privacy √Access and use of the utility Home Area Network

√

Ombudsman schemes √Consumer engagement √Safety issues uncovered during installation

√

Safety of radiofrequency emissions √Safety of remote reconnection of supply √

10


2 New pricing arrangements

Recommendations

1. Small consumers should be given an effective choice of retail tariffs. This would be facilitated by requiring that retailers, where they are required to offer a standing offer tariff, to offer both a standing offer flat tariff and a standing offer TOU tariff to small customers.

2. Retailers should be required to offer a controlled load tariff as a standing offer to consumers who have qualifying controlled load4 Consumers who accept this standing offer would be able to choose whether they wish their general tariff to be the standing offer flat or TOU tariff

3. Existing customers should remain on a flat standing offer tariff unless they choose to move to a TOU standing offer or any market offer. Subject to the jurisdictional transitional arrangements, new customers, unless they request a flat tariff, should default to the retailer’s TOU standing offer.

4. Jurisdictions, consistent with their price regulation responsibility, may determine that a transitional period should apply following the widespread commencement of time varying pricing.

5. Transitional measures that could apply during this period include allowing customers to switch from a retail market contract, back to a standing offer contract with the same retailer without an early termination fee being applied.

6. Distributors should be required to provide a number of tariffs that are available for small customers with smart meters. The available network tariffs should include, at a minimum, at least one flat tariff, one time varying tariff and at least one dedicated controlled load tariff for customers whose meter will support it.

7. Distributors should be required to offer retailers the available network tariffs for each customer so that retailers can choose the network tariff that aligns with their customer’s retail tariff.

8. Distributors may establish reasonable conditions for the application of each tariff recognising the need for revenue certainty, that there are costs associated with changing a customer’s tariff and the potential for gaming. Such reasonable conditions could include that the tariff would apply for a fixed period.

9. Despite the above conditions, a retailer should be able to choose an

4 This could be defined as customers who previously had a separate meter supporting a dedicated off-peak controlled load or who have a two element smart meter

11

Introduction

alternative network tariff at any time when there is a customer move-in or new connection to align the network tariff with the retail tariff choice.

10. Despite the above conditions and at any time, the customer’s retailer should be able to choose an alternative network tariff where the retailer varies a hardship customer’s retail tariff to the most cost-effective tariff in accordance with regulation.

11. The powers of the AER should be strengthened to allow them to take into account, as part of the AER’s network tariff approval process, the overall effect of all the network tariffs on effective retailer choice.

12. Only retailers could offer critical peak price tariffs directly to customers.

13. Critical peak rebates could be offered by both retailers and, where it is a non tariff product, by distributors.

14. Critical peak pricing tariffs and critical peak rebates should be offered as a voluntary product and only established with a customer’s explicit informed consent.

15. Jurisdictions may apply appropriate transitional measures to CPP and CPR products. These measures could include allowing retailers to apply an exit fee during the first year of a CPP contract. The need for such transitional measure should be reviewed, the timing of this review to be set by the jurisdiction but not later than after 5 years of operation.

16. The AER should consider whether guidance on what is needed for explicit informed consent for a CPP tariff or rebate is required.

17. The AER should undertake monitoring and reporting in a number of areas. These are: The number of hardship consumers on any particular tariff type; the particular tariff choices of vulnerable consumers; and the number of consumers choosing a flat standing offer tariff.

18. State and territory governments should review, as appropriate, the structure of their energy concessions regimes and customer service obligations in the light of new pricing arrangements as they become available in each jurisdiction.

2.1 Overview

Some of the consumer benefits of smart meters can only be captured with the introduction of a wide variety of pricing arrangements5. These pricing

5 These may include Time of Use (TOU) pricing, seasonal pricing, prices which vary depending on the day of the week, Critical Peak Pricing (CPP), Critical Peak Rebates (CPR), and contracts incorporating load control.

12


arrangements provide an opportunity to tackle the problem of rising peak demand which leads to the need for new infrastructure expenditure and ultimately higher prices for consumers. More generally, these new pricing arrangements can, and should, be seen as an opportunity to improve the efficiency of price signals on energy consumption for consumers and provide opportunities for consumers to improve their understanding and decisions they make about their energy consumption.

However, the new pricing arrangements will represent a significant change for the majority of consumers. Some consumers remain unsure about the implementation of new tariff arrangements. Not all consumers will be able to benefit immediately from the change to new tariffs, and the introduction of new types of tariffs will add to the complexity of the energy market. Nevertheless, the introduction of new and innovative pricing arrangements can be managed so that it will be to the long term benefit of consumers.

Draft policy paper two outlined the potential impact of possible new pricing and tariff arrangements on consumers and discussed ways in which any potential adverse outcomes could be mitigated. Given the wide-ranging nature of the issues examined, this section of the paper attracted substantial stakeholder comment.

In navigating the change to this new paradigm the central theme should be to enable consumers to understand, and benefit from, the new arrangements. Four main principles emerged from stakeholder comments in regard to consumer protection in this context:

Maintaining effective choice of tariffs for small consumers when new retail pricing arrangements become available;

Ensuring that new tariffs and other products are designed and offered in a way that is simple for consumers to understand, give their explicit informed consent to, and respond effectively to price signals;

Ensuring that vulnerable consumers are sufficiently protected; and

Improving overall energy literacy and the availability of consumption information so that consumers can make good choices.

Ensuring these principles are met is at the core of this response.

There are a number of further contextual matters to take into account in developing a robust policy for consumer protection in relation to the introduction of new pricing. The policies must:

take into account the various scenarios under which smart meters may be deployed to consumers;

accommodate a wide variety of time frames associated with the introduction of new pricing; and

13

Introduction

recognise that state and territory governments retain primary responsibility for retail price regulation.6

2.2 Maintaining effective choice of tariffs for small consumers

2.2.1 Stakeholder views

The retail tariff is the most visible tariff for customers as that is what they see on their electricity bill. Draft policy paper two discussed retail pricing structures and asked how effective choice of tariffs for consumers can be facilitated given likely network pricing behaviour and retail pressures. The paper also asked a number of more specific questions around consumer choice of tariffs including whether retailers should be required to offer a range of tariffs to consumers including a flat tariff; and whether, if this occurs, distributors should also offer a range of network tariffs to retailers. The paper further asked how issues for consumers who lose access to dedicated off-peak could be addressed. Finally comments were sought on whether these arrangements should be transitional and what conditions would need to be satisfied before they could be removed.

Consumer groups

In their response to these sections of the paper, consumer groups stressed the importance of an appropriate choice of retail tariffs so that consumers have the ability to “pick and choose” the best offer for their particular situation. They were particularly concerned to avoid a mandatory re-assignment of consumers to particular network tariffs, which may constrain their choice of retail tariff.7

The joint consumer submission8 proposed that consumers should be able to choose between a basic (flat or simple consumption based tariffs) and more complex time variant tariffs. To facilitate this choice, energy retailers should be required to offer three standing offer or ‘default’ tariff designs. These would include a basic flat tariff, a controlled load tariff (e.g. for ‘off peak’ hot water) and a simple time of use tariff (TOU) and would reflect the current standing offer pricing arrangements in the various jurisdictions.

The standing offer TOU tariff should be structured in such a way that allows consumers to benefit from shifting loads from times of higher price to times of lower price (in addition to being broadly cost reflective). To this end consumer groups suggest that a week-day peak period be of no greater than four hours duration per day and that a nightly off-peak period is of at least 8 hours duration for this tariff.6 The Australian Energy Market Agreement 2004 as amended, sets out the arrangements and responsibilities of the various parties in the NEM. 7 Network tariffs are discussed in section 2.4 8 The joint consumer submission refers to the submission received from members of the National Consumer Roundtable on Energy collective who were the Australian Council of Social Service; Alternative Technology Association; Ethnic Communities’ Council of NSW; Credit, Commercial and Consumer Law Program, QUT; Queensland Council of Social Service; St Vincent de Paul Society Victoria; Uniting Care Wesley Adelaide; and the Victorian Council of Social Service. One other major consumer group, the Consumer Utilities Advocacy Centre (CUAC) put in a separate submission.

14


The Consumer Utilities Advocacy Centre (CUAC) also agrees that there should be a range of retail tariff offers offered to customers with customers able to choose a tariff (TOU or flat) which is most appropriate for their circumstances. CUAC believe that it is important that TOU prices are simple for consumers to understand and respond to.

CUAC does not support a mandatory reassignment of consumers to TOU tariffs. They argue that vulnerable consumers will be least able to shift load in response to TOU tariffs and so there are few, if any, network benefits from sending peak pricing signals to these consumers. Other consumers prefer simplicity and should have flat tariffs available to them.

CUAC believes that flat tariffs should be part of transitional arrangements, particularly as there is insufficient information available in Australia on the impacts of TOU pricing on vulnerable consumers. Further research and analysis needs to be undertaken.

In regards to existing off-peak tariffs, CUAC acknowledge the view that a general off-peak rate may be beneficial to consumers as it applies to the whole house rather than to specific appliances such as hot water or slab heating. However, the structure of the TOU tariff could leave some consumers worse off, especially if they are unable to load shift to a cheaper time period. CUAC believes that there needs to be an appropriate regulatory framework in place, to ensure that as far as possible, customers who have dedicated off-peak tariffs for loads that are hardwired and metered separately are not disadvantaged in a smart meter environment with time of use rates. This can be done through mandating a controlled load standing offer, replicating the existing dedicated off-peak tariffs.

Ombudsman

Both the Victorian Ombudsman (EWOV) and the New South Wales Ombudsman (EWON) considers that TOU pricing arrangements should be optional. EWON suggests that it is reasonable that there is an obligation to have a flat tariff option (possibly with eligibility requirements), as a suitable consumer protection. Given that under the National Energy Retail Law (NERL) every retailer will be required to have a standing offer then it appears reasonable that retailers be required to offer both a flat tariff and a TOU tariff. At the least such a requirement should exist for a transitional period.

Retailers

Retailers generally argue in their submissions that effective choice of tariffs for consumers can be facilitated by consumer education and a competitive market. A fully contestable retail environment will force participants to offer efficient price structures, as evidenced by the telecommunications market.

The Energy Retailers Association of Australia (ERAA) argues that retail price regulation is inefficient, stifles product innovation, impedes price and service competition, and prevents the full range of benefits resulting from competition

15

Introduction

from being realised. The removal of this price regulation is essential to realising the full benefits of smart meters.

The ERAA further argue that once all states commit to the deregulation of retail prices then this will facilitate the transitioning of customers onto TOU tariffs that will to shift consumption to lower cost time periods. The ERAA suggest a transition period should apply so that customers will have the flexibility of moving from a TOU tariff, back to flat tariff arrangements, allowing for reversions in underlying network tariffs that support retail tariffs.

Retailers are universally opposed to being required to offer a range of tariffs including flat tariffs after a transitional period. The ERAA believes that this:

would continue current cross-subsidies and have very little effect on peak demand;

would enable adverse selection whereby customers with large peak loads avoid TOU pricing;

could result in the majority of customers seeking out a flat rate because of ease of use and cross-subsidisation, again resulting in the status quo being perpetuated; and

will be to the detriment of those who are prepared to shift their load because they will not receive the full benefit of their actions.

However, due to the competitive nature of the retail market, it might be a point of differentiation for retailers to offer a flat tariff in the market.

Origin believes that flat tariffs in particular undermine the premise of smart meters, as the necessary price signals are not transmitted. They believe that a flat tariff could be used as a transitional measure as long as the price levels are not regulated and they are also able to select a flat network tariff; a position also advocated by AGL with the addition of information provision to consumers to enable them to exercise choice in the market.

Origin further suggests that the idea of jurisdictions facilitating the offering of a range of tariffs to consumers is problematic in practice, as regulation in this area is likely to stifle the competitive innovation being sought in the first place.

Retailers also generally perceive that TOU prices will address the loss of controlled load off-peak tariffs and note that in Victoria “like for like” metering configurations, such as the installation a two-element advanced meter, have been maintained in some circumstances.

Distributors

Distributors were universally opposed to mandatory offering of flat tariffs by retailers, believing that a range of tariff options, including potentially flat retail tariffs, will arise from ensuring competitive markets. Ausgrid is of the opinion that “interventions that require a retailer to offer specific products would

16


represent an un-warranted regulatory intervention that could have unintended consequences”.

Distributors generally consider that that both retailers and distributors should each have the flexibility in determining tariffs and do not support proposals to align network tariffs and retail tariffs. CitiPower and Powercor suggested that the governance framework under the National Electricity Rules (NER) allows efficient and innovative tariff structures and proposals to mandate a particular tariff structure will complicate tariff pricing issues, and interfere with the AER’s regulatory powers and the electricity distribution price review process.

However, Ausgrid notes that “….if networks implement cost reflective pricing and the retailers do not pass through the price signal to customers, then the primary economic benefits of cost reflective network prices will not be realised.” This is supported by Ergon who suggest that the network tariff structure should influence the number and structure of retail tariffs in order to send price signals to customers.

Although distributors expect that retailers would pass on the network tariff they recognise that this not guaranteed, but they still believe that it is efficient for network businesses to implement cost reflective pricing as the tariff still has the benefit of alignment between the network’s primary cost driver and revenue.

United Energy (UE) notes that it is a retailer’s commercial decision whether retail tariffs structures reflect the underlying network costs or not. UE does not consider that there is any need to align or restrict network tariff structures or retailer tariffs to a few options as retailers manage this price risks today in a competitive market.

2.2.2 The situation in Victoria

A cost benefit analysis commissioned by the Victorian Government as part of its review of the smart meter program found there are potential benefits for Victorian consumers from the introduction of new pricing arrangements enabled by smart meters.9 This analysis assessed that flexible or TOU pricing (including critical peak incentives) could provide benefits of $228 million in avoided network and generation investment if consumers change their usage behaviour in response.

The Victorian Government is committed to maintaining the moratorium, under which distribution businesses have agreed not to automatically assign customers who have had a smart meter installed from a single rate network tariff to a time of use network tariff, until at least 2013 to allow customers to learn more about their options. Once the moratorium is lifted the government will ensure that consumers can choose to remain on ‘flat’ rates even when flexible pricing is introduced.

9 See Deloitte cost benefit analysis available on the DPI Smart Meter website:http://www.dpi.vic.gov.au/smart-meters/publications/reports-and-consultations

17

Introduction

2.2.3 The AEMC Power of Choice Review

The AEMC suggest a gradual phased approach to the transition to new pricing arrangements for small customers. They propose to focus only on introducing time varying prices for the network tariff component of consumer bills with retailers free to decide how to include the relevant network tariff into their retail offers.

The AEMC advocate segmenting residential and small business consumers into three bands based on their consumption:

for large consumers the relevant network tariff component of the retail price must be time varying;

medium to large consumers with an interval meter would transition to a retail price which includes a time varying network tariff component. These consumers would have the option of a flat network tariff;

small to medium consumers would remain on a flat network tariff. These consumers would have the option to select a retail offer which includes a time varying network tariff, if they so choose.

The AEMC have not defined the thresholds for each of the consumption bands and note that the thresholds could vary by jurisdiction and change over time. For large consumers they suggest that the consumption threshold should be substantially above the average consumption and capture those consumers with multiple heavy load appliances such as electric vehicles, or large air-conditioning systems. The transition to new pricing structures should focus on these consumers as their level of consumption is greater and this group is unlikely to include consumers on lower incomes, and other consumer groups who may not have the ability to respond to TOU prices.

For these large consumers the AEMC recommends that they are required to be charged a price which includes a TOU network tariff. This does not necessarily mean that these consumers will be required to change to a TOU retail tariff, as retailers may decide to package the network tariff into a flat retail rate. The AEMC suggest that large consumers may not be able to access the regulated standing offer, if that is expressed as a flat retail tariff.

For all consumers below the large consumer threshold, the AEMC considers that TOU network tariffs should be optional.

They recommend that medium to large consumers with interval meters should have a TOU network tariff as the default option but have the choice to opt-out to a flat retail tariff (based on a flat network tariff). A retailer would have the right to a flat network tariff if their consumer opts out to the flat retail tariff.

Small to medium load consumers with interval meters would remain on a flat network tariff – but have the choice to “opt-in” to a retail tariff which includes a TOU network tariff if they prefer.

18


The AEMC do not make any recommendations regarding the structure of retail pricing offers. They envisage that where the network business offers the choice of time varying tariff or a flat tariff for a class of consumer, retailers will reflect that choice in its range of pricing options.

The AEMC consider that, in a competitive market, the retailer should have the choice to decide how to recover their network costs from consumers and will offer products that reflect consumers’ preferences. Where competition is not effective, jurisdictional legislation provides arrangements for retail price regulation. The retailer will have the option to either package a time varying network tariff into a flat retail offer or decide to base its retail offer to the consumer on the structure of the network tariff.

2.2.4 Policy Analysis

Many consumers, who are currently on flat tariff arrangements and find these meet their needs in a simple and convenient way, are concerned that the transition to smart meters may mean that they will be forced onto a TOU tariff. There is also a risk that if all customers are required to move to TOU pricing immediately on having a smart meter installed some consumers may face an increase in bills, due to the fact that they consume a larger proportion of their electricity at peak times.

Availability of flat standing offer tariff

EMRWG believes that customers who wish to continue with a flat retail tariff should be able to do so.

The most appropriate way to facilitate this policy is by requiring that all retailers required to make standing offers to small customers be required to offer a standing offer flat tariff, effectively a default tariff for consumers. EMRWG notes that in Victoria around thirty percent of consumers continue on the standing offer tariff, despite a very large number of market offers and high switching rates. To allow for the gradual introduction of TOU pricing all retailers which make offers to small customers should also be required to offer a simple standing offer TOU tariff to small customers. Existing customers would remain on a flat standing offer tariff unless they choose to move to a TOU standing offer or any market offer. Subject to the jurisdictional transitional arrangements, new customers, unless they request a flat tariff, will default to the retailer’s TOU standing offer.10

These arrangements could have an impact on retailers and consumers over time. In particular it is likely that consumers who are able to benefit from TOU offers due to their individual consumption profile will switch to these offers while consumers who have a high proportion of their consumption at peak times will choose a flat tariff. This will have the effect of exposing retailers to higher wholesale costs to service these customers as the underlying profile becomes 10 Note that the AEMC has recommended that small to medium customers would remain on a flat network tariff.

19

Introduction

peakier. It is thus likely that the underlying cost of offering flat tariffs would rise over time and retailers will pass on these increased costs to all customers on this flat tariff in the form of a higher unit price. Jurisdictions would be expected to take these factors into account in any applicable retail price regulation.

This general underlying increase in the flat tariff and the widespread availability of a range of market pricing arrangements driven by competitive markets can be expected to lead to a gradual reduction in the number of customers remaining on the flat standing offer. This is an expected consequence of the availability of new tariffs that are more closely related to cost. EMRWG notes that Victoria intends that retailers will offer a flat tariff as well as a TOU tariff ensuring that customers retain a choice of tariff structures once new pricing arrangements are introduced. EMRWG also notes that only Victoria has a government mandated mass roll out of smart meters and proposes to introduce some new protections that take account of the accelerated rollout and the need for consumer education so that they can confidently adopt new flexible prices. Some of these new protections may be for a transitional period only. Other states may have different deployment models for smart meters with customers on a variety of different meter types over time – some of which may not be capable of supporting TOU pricing.

Combined retail tariffs (with both price and load control elements)

Some customers currently have a dedicated off-peak tariff for particular loads which are separately metered (such as hot water heaters which may be on a time switch and could therefore be set to activate at off-peak times). Generally these tariffs have non-price conditions (including hours of supply, the type and size of appliances that can be connected) and are complementary to the general supply. The appliances on these tariffs are hardwired; the load is consistent, predictable and can be managed by network operators. Once TOU pricing is introduced it is possible that many of these contracts may not be offered in their current form or may be offered as part of a TOU tariff. 11

Consistent with the principle of maintaining consumer choice EMRWG recommends that, where the customer has existing eligible load, a smart meter should be installed that provides for a controlled load tariff except by agreement with the customer, and retailers should be required to offer a controlled load tariff as a standing offer. Consumers who accept this standing offer would be able to choose whether they wish their general tariff to be the standing offer flat or TOU tariff. This will generally be for consumers who have previously had a dedicated off-peak controlled load or who have a two element smart meter capable of supporting a dedicated controlled load. The obligation would be on businesses installing new metering to ensure the new metering is capable of supporting existing tariff types, except by agreement with the customer.

11 Single element smart meters with a time switch can support controlled loads on an off peak rate only under a TOU tariff otherwise a 2 element meter is required

20


Having a standing offer available does not preclude retailers offering a variety of market contracts with dedicated controlled load activated through either a time switch, ripple control or similar.

2.2.5 Policy recommendations

Following consideration of stakeholder comments and how the AEMC’s proposed approach to network tariffs might affect retail tariffs, EMRWG proposes that there should be an ongoing effective choice of tariffs for customers and that jurisdictions should decide, taking into account the nature of the smart meter deployment, whether further transitional pricing protections are necessary.

In addition to their standing offer tariffs retailers will continue to have the flexibility to make market offers to customers, subject to the rules in the NECF including the explicit informed consent of consumers.

EMRWG is also of the view that the choice of retail tariff is not just a transitional measure and this choice of retail tariff should be made an ongoing customer protection provision, noting that this is a decision for jurisdictions.

EMRWG’s recommendations to ensure choice of retail tariffs for small customers with smart meters are:

Small consumers should be given an effective choice of retail tariffs. This would be facilitated by requiring that retailers, where they are required to offer a standing offer tariff, to offer both a standing offer flat tariff and a standing offer TOU tariff to small customers.

Retailers should be required to offer a controlled load tariff as a standing offer to consumers who have qualifying controlled load12 Consumers who accept this standing offer would be able to choose whether they wish their general tariff to be the standing offer flat or TOU tariff.13

Existing customers should remain on a flat standing offer tariff unless they choose to move to a TOU standing offer or any market offer. Subject to the jurisdictional transitional arrangements, new customers, unless they request a flat tariff, should default to the retailer’s TOU standing offer.

2.3 Transitional arrangements for new retail pricing arrangements

Whilst pricing arrangements should be designed to move over time to more accurately reflect the costs of supply at different times and help to reduce peak

12 This could be defined as customers who previously had a separate meter supporting a dedicated off-peak controlled load or who have a two element smart meter13 If the customer accepted the general tariff they would require a 2 element meter and if they accepted a TOU tariff then a single element meter would be sufficient.

21

Introduction

loads, the transition should be managed to allow consumers to freely accept new arrangements and adjust their consumption patterns to benefit.

2.3.1 Switching between standing and market offers without early termination fees: stakeholder views

Draft policy paper two discussed issues around moving between contracts without penalty during a transitional period to build confidence in the market.

The joint consumer submission and CUAC both supported the rights of consumers to switch tariffs without penalty, within the suite of offers made by that retailer - at least in the transition period. CUAC believes that this transitional period should continue until consumers are better informed about energy and are able to make informed decisions.

EWON and EWOV both believe customers should be free to exit TOU contracts and choose another retailer, or move from the TOU tariff to a standing offer with the same retailer without financial penalty. EWON considers that this should be a permanent option if a retailer does not offer a flat tariff and another retailer has such an offer.

Retailers were also generally supportive of this provision during a transitional period, although only provided the consumer remains with that retailer. Both Origin and AGL had concerns that some consumers may exploit such a provision by remaining with a contract during a time of cheaper pricing and then seek to leave the contract to avoid times when the pricing is higher. AGL suggested a limit on the number of times a consumer should able to switch tariffs.

Distributors generally considered that early termination fees were a matter for individual retailers. Energex noted that following the introduction of the voluntary residential TOU tariff in Queensland, customers will be able to revert back to an inclining block tariff once in the first 12 months without penalty 14. Ausgrid considered that there does not appear to be a significant need to introduce regulation for early termination fees and such regulatory intervention should only be considered if there is significant supporting evidence.

UE raised the issue of seasonal tariff arrangements as virtually all of their tariffs are structured based on summer and non-summer pricing to reflect that the augmentation of infrastructure is driven by summer peaks. UE do not support frequent tariff change which allow retailers or customers to move onto flatter pricing structures during summer and moving to more cost effective TOU tariffs in the non-summer months in order to enjoy lower rates without the summer price signals. UE suggest that retail tariff product swapping should not require network tariff swapping.

14 However, since their submission, Queensland has not adopted the inclining block tariff, preferring to maintain a flat tariff pending the outcome of a review of its electricity sector. The TOU tariff is available, and customers may switch and revert back to the prevailing flat tariff without penalty.

22


2.3.2 Policy analysis

EMRWG recognises that, with new types of offers available, it is inevitable that some consumers will make errors and sign up for market tariffs that are inappropriate for their circumstances or, on the other hand, be wary of signing up to any market offers due to fears of being locked into the wrong contract.

This concern will be mitigated by the policy position for choice of tariff that will be available to customers and by the tools (such as price comparators) that will be available to assist customers to make a choice that suits their circumstances.

Nevertheless EMRWG considers that there will be circumstances associated with accelerated rollouts, in particular, where additional protections may be required. Where this is the case EMRWG recommends that jurisdictions, consistent with their price regulation responsibility, may for a transitional period following the widespread availability of TOU pricing, allow customers to switch from a retail market contract, back to a standing offer contract with the same retailer without an early termination fee being applied.15 Such a policy could apply so that a customer could revert to a standing offer tariff once a year for the first two years after having a smart meter installed and new pricing becoming available. Termination fees cannot apply to standing offer tariffs and so there would be no mechanism to prevent customers effectively moving between standing offers of different retailers (where available) within this time period. Whilst prohibition of early termination fees is likely to slightly increase general prices, jurisdictions may consider it appropriate to improve consumer confidence in the early stages of this transition.


Jurisdictions, consistent with their price regulation responsibility, may determine that a transitional period should apply following the widespread commencement of time varying pricing.

Transitional measures that could apply during this period include allowing customers to switch from a retail market contract, back to a standing offer contract with the same retailer without an early termination fee being applied.

2.4 Network tariff arrangements

Network tariffs for most small customers are currently flat tariffs. Once a smart or interval meter is installed at a property there is a question of how customers would be assigned to a network tariff. This is because smart meters are able to accommodate many tariffs where basic accumulation meters could not. Without

15 Jurisdictions could decide how this policy would be implemented, e.g. it might not apply to critical peak pricing tariffs due to their strong seasonal incentives.

23

Introduction

some consideration given to this question there is the potential for a customer to be reassigned to a TOU network tariff by the distributor – regardless of any choice that the consumer or their retailer might make.


Given the importance of the network tariff structure in influencing the shape of retail tariff offerings it is important to consider whether there should there be a change to the network tariff arrangements to support the retail tariff arrangements. In particular, whether network tariffs should continue to be assigned by the distributor or whether retailers should be able to choose the network tariff that best reflects the customer’s choice of a retail tariff.

As distributors are monopoly businesses, the products that they offer to their customers (i.e. the retailers) are not subject to direct competitive pressures. The generally accepted purpose of regulation of monopoly businesses is to attempt broadly replicate the outcomes that could be expected under a competitive market. This would be expected to include responsiveness to consumer preferences.

In their response to draft policy paper two, distributors argued that the Rules do not currently prevent distributors from changing their network tariff structures and that that the pricing principles set out in Clause 6.18.5 of the National Electricity Rules (NER) are sufficiently flexible to accommodate potential new pricing arrangements such as TOU pricing. These require the distributor to take into account the long run marginal cost of service, have regard to the transaction costs associated with the tariff and whether customers are able or likely to respond to price signals. Therefore distributors consider that there is no need to impose any specific tariff structure arrangements on distributors.

The AEMC, in the Power of Choice Review, however, consider that the rules under which businesses set network tariffs may need to be strengthened. They propose that the distribution pricing principles in Chapter 6 of the NER should be reviewed to assess whether more guidance or prescription is needed as to how distribution businesses set their networks tariffs. One aspect of this review is to consider that, as networks move towards more cost reflective pricing, they have proper regard to the impacts on consumers and provide appropriate arrangements to help consumers manage those impacts. The AEMC suggest that the current pricing principles in Chapter 6 provide significant discretion for how tariff structures might be set to reflect these principles. Network businesses can use their own judgment in deciding how to recover their costs, taking in to account the level of complexity, transactions costs and how they think that consumers will respond to the price.

The AEMC propose that the distribution pricing principles should specify that the applicable network tariff should reflect their recommendations for the proposed transition to time varying rates where a consumer has an interval meter. This

24


includes appropriate guidance on calculating time varying network tariffs including:

the requirement for network tariffs to signal the time varying nature of network costs; and in particular how consumers’ demand drives network investment;

the possibility that drivers for network costs differ to those for wholesale costs and thus a different tariff structure might be appropriate; and

the range of possible different tariff options which provide a more efficient signal.

The AEMC also notes the potential effect of clauses which allow network businesses to shift costs from responsive to unresponsive consumers, which may cause fixed charges to increase and that this should be reviewed.

The AEMC also suggest that that retailers and consumer groups should have a more formal role in reviewing network tariffs. They note that network businesses are required to submit pricing proposals for annual review by the AER and consider this process should allow a period of consultation with external stakeholders on the structure of network tariffs. The AEMC also suggests that AER should monitor distribution network businesses so that they actively develop and improve their tariffs structures to meet the revised pricing principles as best as possible at all times. This will require changes to the current annual tariff setting process to give the AER sufficient time to undertake this role.

Consultation with consumer groups and retailers on network tariffs was also advocated by CUAC in their submission, including through the AER approval process. CUAC suggest that lack of consultation means there is no ability to examine the distributional impacts of any tariff changes and what this may mean for different consumer classes. A distributor could, for example, provide a tariff with a long duration peak period throughout the day and evening without considering the implications for consumers or the availability of retail products available to consumers. CUAC suggested that distributors be required to discuss and negotiate their tariff proposals in good faith with consumers and retailers in advance of them being provided to the AER for approval and also that network tariffs should be “reasonable” in the sense that they do not place disproportionate burdens on particular classes of consumers and that they are in a form that is likely to translate into a retail product that allows consumers to respond effectively to the price signals without significantly compromising their wellbeing.

Choice of network tariffs

Some distributors already offer the customer’s retailer a choice of a range of network tariffs although they are not required to do so under the Rules. However, not all distributors offer this choice, nor are there any particular

25

Introduction

incentives in the Rules for distributors to respond to the needs of their customers.

Having a retailer choice of network tariff would enable retailers to align their tariff structures with underlying network tariffs enabling them to better manage risk. Indeed, retailers are likely to design a variety of retail tariffs for consumers which are linked to particular network tariffs offered by distributors. As an example where a customer is offered a flat retail tariff the retailer would choose a flat network tariff for that customer. Aligning tariffs in this way allows distributors to design innovative tariff structures which would need to be sufficiently attractive to retailers to enable them pass through similarly structured retail tariffs for their customers.

Distributors have a need for revenue certainty and there are costs associated with changing a customer’s tariff. Distributors may wish to include a variety of different conditions in each of their tariff offerings, including minimum contract periods. Whilst not opposed to reasonable conditions being applied to tariffs there is the potential that, although the conditions being attached to each tariff may be reasonable the totality of tariff offerings might collectively work to restrict retailer choices – for instance if all tariffs had a minimum contract length. To minimise this risk the powers of the AER should be strengthened to allow them to take into account the overall effect of all the network tariffs on effective retailer choice.


EMRWG recognises the draft recommendations in the Power of Choice Review and notes the proposals to strengthen the pricing principles and to increase consultation on network tariff proposals. EMRWG support both of these draft recommendations.

EMRWG also proposes the following ongoing recommendations:

Distributors should be required to provide a number of tariffs that are available for small customers with smart meters. The available network tariffs should include, at a minimum, at least one flat tariff, one time varying tariff and at least one dedicated controlled load tariff for customers whose meter will support it.

Distributors should be required to offer retailers the available network tariffs for each customer so that retailers can choose the network tariff that aligns with their customer’s retail tariff.

Distributors may establish reasonable conditions for the application of each tariff recognising the need for revenue certainty, that there are costs associated with changing a customer’s tariff and the potential for gaming. Such reasonable conditions could include that the tariff would apply for a

26


fixed period.

Despite the above conditions, a retailer should be able to choose an alternative network tariff at any time when there is a customer move-in or new connection to align the network tariff with the retail tariff choice.

Despite the above conditions and at any time, the customer’s retailer should be able to choose an alternative network tariff where the retailer varies a hardship customer’s retail tariff to the most cost-effective tariff in accordance with regulation.

The powers of the AER should be strengthened to allow them to take into account, as part of the AER’s network tariff approval process, the overall effect of all the network tariffs on effective retailer choice.

Recognising the role of jurisdictions in regard to retail price regulation, the EMRWG notes that individual jurisdictions may decide to make additional arrangements during transitional periods when new pricing is being introduced, to ensure an effective consumer engagement with the new pricing.

Summary of how retail choice of network tariffs could potentially work

1. Choice of network tariffs to be offered by each network to retailers. Retailers notified of these in advance

2. Retailers design variety of retail tariff offerings based around the available network tariffs. Each retail offering would be associated with a particular network tariff.

3. Consumers choose a retail tariff.

4. Retailers notify the network which network tariff they want to be assigned to that customer.

5. Distributors assign the network tariff based on the retailer’s choice.

2.5 Designing tariffs to support informed choice

It is important that new tariffs and other products are designed and offered in a way that is simple for consumers to understand, give their explicit informed consent to, and respond effectively.

27

Introduction


The issue of complexity of the energy market and the difficulties of consumers navigating their way through it was consistently raised during consultations with consumer groups.

Draft policy paper two discussed how consumers might be supported in making informed choices and asked how complexity might be reduced for consumers.

A study by Deloitte16 commissioned by the Victorian Government into the potential impact of new pricing arrangements in Victoria found that focus groups view simplicity in the tariff structure as important (consumers do not want to have to continually read their contract) and that seasonal tariff variations were unpopular. Peak and off peak periods were preferred and considered easy to remember by customers.

The joint consumer submission suggested that access to historical consumption information is essential for consumers to be able to choose the appropriate tariff. They say that:

“In the context of a mandated rollout of smart meters, no customer should be offered a time variant retail tariff product until they have been provided with at least three months of historical interval data to inform them of their time of day and day of week history and, where available, their seasonal or time of year history also to indicate how their energy costs may vary over the course of a year.”17

As part of their submission CUAC provided a research report Improving Energy Market Competition through Consumer Participation18

This report is based on consumer experience in the Victorian energy market and includes features of consumer behaviour that limits consumers’ ability to participate in the complex energy market. CUAC makes a number of recommendations to improve the simplicity of the market and the comparability of energy offers including:

Regulation on the number and expression of energy offers to improve comparability and simplicity;

A review of the role of discounts and bonuses along with the regulation of fixed charges, in some circumstances, to allow for comparison on the basis of variable charges alone;

Improving price comparison sites; and

16 Department of primary industries Advanced Metering Infrastructure Customer Impacts Study – Final Report: Volume 1 – 18 October 2011. Volume 1 and 2 of the study are available on the dpi website http://www.dpi.vic.gov.au/smart-meters/publications/reports-and-consultations17 Joint consumer submission page 518 Consumer Utilities Advocacy Centre (2011) Improving Energy Market Competition through consumer participation: A CUAC Research Report, CUAC: Melbourne.

28


Improving consumer education on energy literacy

Ombudsmen were also concerned about the potential complexity of new pricing arrangements. Both EWON and EWOV were concerned that this complexity will raise issues around explicit informed consent when customers don’t fully understand the contract. EWOV has observed a significant increase in complaints often involving contract terms and conditions (including exit fees).

EWON is concerned that consumers are able to compare new offers against their previous consumption and suggests the United Kingdom (UK) model where a contract offer has to include an actual comparison of the last 12 months consumption on the existing tariff structure and on the proposed offer. As an alternative approach there could be a transition period of two bills which remain on a flat rate before introduction of the TOU tariff, with the TOU tariff costs provided on the invoice so that customers can make a real comparative assessment of the value of the new tariff.

In contrast, retailers are of the view that ensuring a competitive market will reduce complexity as hard to use offers will increase complaints and won’t appeal to customers. Retailers would support a customer help-line being offered by the AER and other government led customer communications that assist consumers to better understand current market offers. The ERAA noted that the challenge is how to get customers “to progress along a spectrum from being uninformed to informed, to engaged, to empowered”.

Origin supports the establishment of the AER’s price comparator website. Broader consumer education and engagement combined with the retailers’ own marketing and regulated Price Fact Sheets would assist consumers to understand energy offers in the market. Origin would also like to see case studies with examples of moving to a TOU tariff via defined consumption examples.

Distributors were also of the opinion that it is in the interests of both retailers and network businesses to have offers that can be readily understood by customers. Ausgrid does not believe that there is any evidence of tariff complexity for customers to date. All distributors supported the AER’s price comparator website as a useful tool for consumers although they opposed a role for the AER in monitoring tariffs.

Ausgrid, CitiPower and Powercor believe that further regulation or monitoring of tariffs is not warranted. Distributors are also generally supportive of customer education to support informed choices by consumers.

Third parties suggest that consumer protections should be designed to allow for energy service providers to deliver tools that empower consumers to take advantage of complex tariffs. Opower believe that in order for consumers to benefit from new pricing arrangements they need to be able to assess new pricing options to determine the tariff most appropriate for their usage and once they have accepted a new tariff, they need information to adjust their energy usage to take full advantage of the tariff.

29

Introduction

eMeter believe that customers should have access to a price comparator tool that allows customers to load their individual usage data in a standard file format as well as access to their usage data online. They cite the example of the US Green button scheme.

eMeter identify a “tripod of tools” needed by consumers to benefit fully from smart meters. These are “pricing options, detailed energy information, and automation. Pricing provides motivation to manage loads and opportunity to realize (sic) savings. Information provides understanding needed to know how best to manage loads. Automation enables convenient “set-and-forget” response.”

Access to information is important and involves access to real time data via the Home Area Network (HAN), next day online data from the utility, and access to data analysis services from other independent sources including third parties.

2.5.2 Supporting informed choice: analysis and recommendations

A common theme of submissions by the consumer groups and Ombudsman was concern that new pricing arrangements enabled by smart meters would lead to an increase in complexity with consumers unable to make rational choices when confronted by a high number of complex tariff offerings.19 In this context EMRWG acknowledges the CUAC research report ‘Improving Energy Market Competition through Consumer Participation’ as a useful contribution to the debate on how consumers can effectively engage in the energy market. Some of the suggestions, whilst useful, apply to the energy market as a whole and are outside of the scope of this Review.

There are many challenges for consumers arising from the rapid change that may occur when new pricing arrangements enabled by smart meters are introduced. However, regulation to reduce complexity for consumers could be overly prescriptive and constrain the ability of market players, both new and existing, to develop and offer innovative tariffs, to the long term detriment of consumers. Our recommendations aim to balance the competing imperatives of complexity against innovation. This approach is applied to the sections below.

2.5.3 Ability to respond to price signals: network tariffs and peak periods

The joint consumer submission and CUAC expressed concern over the potential length of peak periods for network tariffs which may be imposed by distributors. They suggest that this does not provide opportunities for consumers to effectively respond to price signals. The joint consumer submission suggested limits on weekday peak periods and a minimum off-peak period to allow consumers to effectively respond to price signals.

19 This was also identified by the International Confederation of Energy Regulators in their report on Experiences on the Regulatory Approaches to the Implementation of Smart Meters, which analysed six case studies of implementation around the world.

30


There is a trade-off associated with the price differentials between the peak, shoulder and off-peak prices – the greater the price differential between peak and off peak, the greater the incentive to shift load, reducing the strain on the network, but the greater the risk for customers in managing costs. There is also an additional trade-off between the length of the peak period and the peak price - the shorter the peak period, the higher the price.

EMRWG is of the view that regulation of the length of the peak period is problematic. Network peaks vary greatly in timing and length between different geographic locations and at different times of year which makes a common framework difficult to implement. If networks wish to persuade consumers to move to a TOU price they will need to offer network tariffs that retailers will choose for their customers. Network tariffs that offer no opportunity for consumers to move load and leave consumers worse off will not be taken up for consumers and so not be chosen by retailers. Giving customers the choice of a flat or TOU retail tariff will give some incentives for retailers to design a TOU tariff that is attractive to customers.

EMRWG considers that regulating the lengths of the peak and/or off-peak period by specifying maximum and/or minimum lengths in the Rules is not necessary given that consumers and their retailers will have a choice of tariff structures and these are likely to vary between jurisdictions.

However, EMRWG notes the proposal by the AEMC to strengthen the network pricing principles. This proposed review would consider the impacts on consumers and provide appropriate arrangements to help consumers manage those impacts. EMRWG also notes the suggestion that the AER should monitor distribution network businesses so that they actively develop and improve their tariffs structures.

Both of these suggestions could address issues related to the length of peak periods and price differential between peak and off-peak.

2.5.4 Regulating number and content of market offers

Market tariffs may incorporate a wide range of different arrangements and structures, including TOU, seasonal variations, CPP and CPR. In their submission, CUAC suggested that there should be regulation on the number and expression of energy offers to improve comparability and simplicity and a review of the role of discounts and bonuses as well as the regulation of fixed charges.

Whilst regulating the number and expression of market offers in these ways will reduce complexity for consumers this could be at the expense of innovation in the retail market and reducing choice for other consumers. As noted above, requiring retailers to offer both a standing offer flat tariff and a standing offer TOU tariff will provide a simple tariff for those consumers who consider this their best option. In addition, the need for explicit informed consent is a fundamental protection for consumers, which is likely to encourage retailers to offer tariffs in a way that consumers can understand. Each market offer also

31

Introduction

needs to have a fact sheet approved by the AER which sets out the basic terms and conditions of the market offer.

For these reasons EMRWG does not see the need to constrain or regulate the number of market offers, nor regulate bonuses or discounts offered with them.

2.5.5 Comparing energy offers

EMWRG recognises the importance of consumers making informed choices appropriate to their circumstances based on their actual consumption profile.

Key to this informed choice is availability and access to consumption data and the ability to apply it to key decisions such as the choice of retail tariff. Access to consumption data is discussed in chapter 8.

EMRWG does not agree with the joint consumer submission that TOU tariffs should not be offered to consumers until they have at least three months of interval data. As consumers may switch from a standing offer tariff to a market tariff at a time of their choice during a transitional period, many consumers may wish to wait for sufficient data to properly compare offers; others may wish to switch immediately on having an interval or smart meter installed. The regulatory framework should not prevent consumers from switching tariffs if they wish to do so.

Consumers need to be able to compare offers by different retailers. The AER price comparator website (Energy Made Easy) provides an easy to use, independent, online tool for consumers to compare electricity offers including TOU prices. Over time it is expected that this website will be able to use a consumer’s historical consumption profile to compare energy offers.

There are already a number of privately operated and state regulator comparator websites providing a valuable service to consumers. Whilst the majority of these websites have high standards of integrity for consumers there are some that may not offer the service that consumers expect. In particular EMRWG is concerned that some comparator websites may not display offers from all retailers or have commercial agreements with retailers which may affect the plans presented and not disclose these adequately to consumers. EMRWG also notes research by CHOICE which indicates that estimated bill savings from different websites may differ greatly depending on which website they visit.20

EMRWG agrees with CUAC that there is a need to introduce a voluntary code of practice for price comparator websites, similar to a code already operating in the UK. Whilst this is not an issue specific to smart meters, the availability of a wider range of potentially more complex tariffs and services enabled by smart meters make it imperative that consumers can trust information provided by price comparator websites. EMRWG would encourage websites operating such a service develop this code of practice in consultation with consumer groups,

20 CHOICE, Between a door-knock and cyber-space: The problems with electricity switching sites Super-complaint to NSW Fair Trading, 8 March 2012

32


retailers, energy market regulators and other relevant stakeholders. If they are unable to come to a satisfactory agreement, further consideration should be given to regulate a compulsory code of practice. A code of practice would provide reassurance for consumers additional to the general competition and advertising laws enforced by the Australian Competition and Consumer Commission (ACCC) and other agencies.

2.6 Arrangements for critical peak tariffs and rebates

Draft policy paper two discussed critical peak pricing tariffs and critical peak rebates and concluded that:

Critical peak price (CPP) tariffs can be set by both distributors and retailers, but only offered by retailers;

Critical peak rebates (CPR) can be offered by retailers or distributors; and

Critical peak pricing tariffs and critical peak rebates must be offered as a voluntary product and only established with a consumer's explicit informed consent.


CUAC have significant concerns that CPP products may disadvantage vulnerable customers who may self-limit their demand to the detriment of their health during times of peak demand. Vulnerable customers include those who for medical reasons require cooling, the elderly, parents with young children etc.

CUAC believes that there needs to be strong customer protections for residential consumers including, improvements in energy literacy levels. CUAC suggest pilot trials on CPP, followed by an assessment of their outcomes, and addressing the health and welfare implications arising from CPP.

All stakeholders were supportive of the policy position that CPP and CPR must be voluntary products offered with the consumer’s explicit informed consent.

The issue of who can offer CPP and CPR drew mixed reactions from stakeholders. Retailers were generally supportive of CPP and CPR being offered by, or through retailers provided prices are de-regulated and consumer’s explicit informed consent is obtained. They generally opposed distributors being able to offer CPR directly to customers. Origin suggested that distributors do not have the capacity to address the consumer protections that are likely to be seen as required in the provision of rebates to consumers for these products. They believe that “it would seem reasonable that any rebate is passed through to the consumer via the retailer. It is then up to the distributor and retailer to contract behind this arrangement.”

The ERAA suggests distributors offering CPR contradicts the principles that there is a clear separation of distribution and retail functions. They believe that risks are created to the NERL when distributors provide direct information to

33

Introduction

customers about smart metering and/or specific products related to energy use as these functions are not consistent with the role of distributors as recognised in the NERL, and that they are regulated businesses. It is also unclear, according to the ERAA how distributors would ensure that customers experiencing hardship are on the most appropriate tariff for their circumstances if they offer rebates to consumers.

Distributors were in favour of being able to offer CPR to their customers, although Ausgrid noted that if networks move to cost reflective network pricing and this network price signal is passed through to customers, there would be a reduced need for CPR as maximum demand growth should be reduced. Ausgrid do, however, stress that they would want to maintain the option of being able to offer CPR to customers in network areas that are approaching the point where the maximum demand in that area is such that a network upgrade is required.

UE noted that whether the distributor was offering a CPP or CPR there is no guarantee that this price signal will be passed to the customer in a similar form. AGL state that distributors need to be confident that their price signals are being applied such that the incentives they imply are being delivered. They suggest that this is not a valid reason for distributors to bypass retailers. AGL strongly suggests that in order for distributors to guarantee price pass through, a more collaborative approach between distributors and retailers is required.

Draft policy paper two also asked a number of questions in relation to the practical arrangements and protections needed for CPP contracts. These included supporting arrangements to help consumers gain a better understanding of CPP, minimum terms and conditions for contracts and protocols on how different parties might offer CPP or CPR contracts to the same customer.

Retailers stressed the need for consumer education on CPP products as well as trials to test requirements of customers with different load shapes and help customers adjust to new pricing arrangements.

Retailers had mixed views on minimum terms and conditions. The ERAA supports high level contractual requirements that can be used as guidelines (rather than minimum terms and conditions). These guidelines could cover the length of the critical peak period, whether events may be called on consecutive days and customer notification.

Origin, while acknowledging some minimum terms and conditions may be required does not support prescription in this area. They note that it is not in the retailer’s interest to confuse consumers or sell them products to their detriment. They recognise that much more needs to be done to prepare consumers for the new arrangements such as CPP. On the other hand AGL supports the concept of there being minimum regulated terms and conditions as this would reflect the current situation with market contracts in NECF and existing jurisdictional regulations. AGL believes that this may provide customers with greater

34


confidence and will also make it easier to compare contracts. It is critical that customers are easily able to compare offers for there to be effective competition.

Distributors also broadly supported minimum terms and conditions. UE suggested that contracts should only be for 1 or 2 year term.

eMeter suggested a one-year minimum term to capture seasonal variations in prices and noted that in some states in the USA bill protection is provided in the first year to enable customers to try the programs at no risk for the first year after which the protection is removed.

AGL also suggested that a “joint Government, retailers and community sector customer engagement program, aimed at educating customers about dynamic pricing and the impacts and benefits of such products in the energy market, is a critical first step to any further arrangements being deployed.”

Distributors broadly agreed that consumer education is of critical importance as well as having easy to understand contracts. UE suggests that price fact sheets established under the AER guidelines could include the CPP price, number of CPP events per year, CPP maximum duration per event and number of consecutive CPP hours in a week, term of contract and any early termination penalty clause etc. UE believe that there is no need to amend the National Energy Retail Rules (NERR) for such contracts.

The Ombudsmen also focuses on ensuring that consumer understands the cost implications of CPP products and suggests that a follow up process is needed in addition to informed consent.

The draft policy paper also asked about protocols for use of CPP by different parties.

Retailers re-iterated their position that CPP and CPR should only be offered by retailers.

Distributors supported the need for protocols which must be transparent and easy for the customer to understand. Ergon energy notes that it may be inappropriate for a customer to receive a CPR from a distributor if it is registered for a CPP or CPR from a retailer and both are activated at the same time as this would result in the customer receiving a double benefit for the same reduction in consumption. They suggest no means of addressing this potential situation.


One of the benefits of smart meters is the ability for networks and retailers to introduce pricing arrangements that lead to a reduction in peak demand. One of these pricing arrangements is critical peak pricing or critical peak rebates.

A critical peak rebate (CPR) provides a direct payment to customers to reduce their consumption at pre-defined times. In contrast a critical peak price (CPP) sets a very high price for a short period, in return for lower prices at other times

35

Introduction

with the aim of reducing consumption at times of network stress or forecast high wholesale prices. For both of these products to be effective consumers need to be aware of the price signal and be able to respond.

Results from trials of various pricing options reveal that a well-designed CPP is very effective at reducing peak demand. A comprehensive study of trials by Vaasa ett Research covering more than 100 pilots and 450,000 customers around the world concluded that CPP and CPR produce the highest reductions in demand for critical peak periods.21 This research also examined the impact on low income consumers and concluded, based on the samples in their review, that low-income households shift an amount of load which is similar to the average overall impact of CPP pilots. This would indicate that low-income households are able to benefit from CPP pricing. Similar results for low income households have been reported for other studies such as the PowerCents DC Program in Washington DC, provided by eMeter as a submission to this Paper22

Based on these and other findings, the introduction of CPP and CPR would appear to potentially offer significant gains, with minimum risks for consumers, including many low income consumers.

However, not all consumers may be able to benefit from CPP and CPR and as such it cannot form part of a standing offer and should only be established with a consumer’s explicit informed consent. EMRWG does not believe that additional consent or follow up process is warranted.

Should there be additional protections for consumers?

EMRWG is aware that these products are relatively new and there may be period of time in which distributors and retailers trial different arrangements to find out which features work best for their customers. This product innovation should not be stifled by imposing onerous regulations given that international experience so far has indicated few, if any adverse consequences or risks for consumers and their success in reducing peak demand. However, EMRWG is also of the view that a CPP and CPR contracts should be easy for consumers to understand, and notes the nervousness with which consumers groups view these products. To address this issue EMRWG considered the factors which we would expect to see disclosed to consumers as part of an offer for CPP or CPR.

These might include as a minimum:

The critical peak price or amount of the critical peak rebate, if these are fixed;

How the price or rebate for a critical event will be set and communicated, if the price or rebate is variable;

21 VaasaETT, Global Energy Think Tank, The potential of smart meter enabled programs to increase energy and systems efficiency: a mass pilot comparison, 22 Available at www.scer.gov.au/workstreams/energy-market-reform/demand-side-participation/smart-meters/ This reported that peak demand reduction for low income households was only slightly below of other customers on a CPR plan.

36


For a rebate how the customer’s CPR baseline is determined for measuring the extent of reductions;

The maximum length of the critical peak period;

The number of CPP events per year, how often CPP events can be called and whether these can be called on consecutive days;

Minimum customer notification period and how notification will be provided;

What happens in the event of a meter failure, or loss of data during a CPP event including the right of appeal against the estimates applied;23

The procedures for resolution of disputes and complaints; and

Any termination fees which may apply.

The NECF requirement for explicit informed consent requires that the terms and conditions of a contract are fully disclosed. EMRWG consider that the matters set out above are key aspects of a CPP or CPR contract and as such retailers are already obliged to inform consumers of these matters.

Having this information clearly laid out in the contract would prove useful in providing reassurance for consumers in taking up these contracts and would assist consumers in comparing contracts.

The AER is able to take enforcement action where explicit informed consent is not obtained, including where key aspects of contracts are not fully disclosed. EMRWG considers the terms and conditions of CPP and CPR contracts are essential elements of explicit informed consent, and the AER may seek to enforce this using their existing powers. This may include the issuing of guidance to industry as to what information must be provided for a presumption of explicit informed consent to apply to a critical peak pricing contract. To this end EMRWG recommends that the AER consider whether guidelines on what is needed for explicit informed consent for a CPP tariff or rebate are required.

EMRWG notes the concerns that some consumers may enter into CPP contracts with the intention of withdrawing before the critical peak prices are reached (usually in summer) and as such EMRWG recommends that, where a jurisdictional transitional restriction on exit fees applies, retailers should nevertheless be allowed to apply an exit fee during the first year of a CPP contract. The need for this transitional measure should be reviewed, the timing of this review to be set by the jurisdiction but not later than after 5 years of operation.

Finally EMRWG notes, and shares, the concern of stakeholders that these contracts require greater consumer knowledge and understanding of their

23 This issue is discussed further in chapter 6 on customer billing

37

Introduction

energy use. Improvements to energy market literacy will be essential to the take up of these contracts as well as access to their detailed energy consumption data.

Who should be allowed to offer CPP or CPR?

The draft paper concluded that:

only retailers could offer critical peak price tariffs directly to customers; and

critical peak rebates could be offered by both retailers and distributors.

Issues around who can offer different services to customers are generally beyond the scope of this review. However, who offers the service influences consumer protection concerns, in particular around how these products might be sold to consumers.

Under the NECF only retailers may offer tariffs directly to small customers. Where a rebate is included as part of, or linked to, a network tariff it is clear that it can only be offered through a retailer. However, if a CPR could also be offered as a standalone unregulated product it would not be considered a tariff. Given that a direct payment for reducing consumption over a specific time period does not affect the price that a consumer pay for electricity at any other time it’s hard to see how this could damage consumers financially. In these circumstances there appears to be no compelling reason why CPR could not be offered by distributors directly to customers – although for reasons of simplicity distributors may wish to offer the rebate via the retailer.

EMRWG agrees that this is likely to be the most efficient market arrangement but does not consider it should be required by regulation. There are potential network benefits in distributors being able to provide direct payments to customers in return for demand reduction at specific times. There may be considerable uncertainty and inefficiencies for distributors in being required to offer such products only through a retailer, particularly given that not all retailers may want to administer such arrangements. These factors will need to be weighed up against the costs for distributors in dealing directly with customers such as billing systems or customer support services.

EMRWG notes that the some distributors have already engaged directly with customers during trials of rebates for the installation of energy management devices for load control as part of their regulated network services.24 These services are regulated by the AER.

The AEMC, in its Power of Choice Review draft report, suggest that it would be appropriate for network businesses to directly engage with small consumers to deliver network management services/programs, such as direct load control, to address specific and localised constraints on the network. They consider that the existing rules and guidelines applied by the AER could be enhanced to clearly 24 Futura Consulting, Investigation of demand side participation in the electricity market, report for the Australian Energy Market Commission, 8 December 2011, p. 16-17.

38


outline the circumstances when distribution businesses are able to deliver DSP network management services/programs, and what NECF provisions should apply to network businesses (ie marketing code).

EMRWG agrees with this position and notes that a CPR as a standalone product, not linked to a tariff may fit these circumstances.


Only retailers could offer critical peak price tariffs directly to customers.

Critical peak rebates could be offered by both retailers and, where it is a non tariff product, by distributors.

Critical peak pricing tariffs and critical peak rebates should be offered as a voluntary product and only established with a customer’s explicit informed consent.

Jurisdictions may apply appropriate transitional measures to CPP and CPR products. These measures could include allowing retailers to apply an exit fee during the first year of a CPP contract. The need for such transitional measure should be reviewed, the timing of this review to be set by the jurisdiction but not later than after 5 years of operation.

The AER should consider whether guidance on what is needed for explicit informed consent for a CPP tariff or rebate are required.

2.7 Ensuring that vulnerable consumers are sufficiently protected

A number of studies have assessed the impact of new tariff structures on different types of consumers. As part of its Power of Choice review, Frontier Economics25 was engaged by the AEMC to create a simplified and transparent model that can be used to investigate the likely impact of alternate tariff structures and consumption patterns on final electricity bills.

This modelling concluded that demand response provides customers with the ability to reduce annual bills via reduced and/or altered patterns of consumption. However, the magnitude of the reduction is relatively small compared to total annual bills unless significant reductions in consumption occur (greater than 10% usage reductions).

25 Frontier Economics , August 2012, Retail Tariff Model, a report prepared for the AEMC. Available at: www.aemc.gov.au/Media/docs/Frontier-Economics--Retail-Tariff-Model-final-report-1eaac298-2dd8-4663-a2b3-11ae1d42b910-0.pdf

39

Introduction

More dynamic tariff structures provide more opportunity for customers to avoid high electricity prices. CPP tariffs provide the greatest incentives for customers to alter patterns of consumption.

A study for the Victorian government by Deloitte has also shown that the distribution of price impacts within vulnerable consumer groups is quite wide and that no one option will meet the exact needs of each consumer group.26

Perhaps more importantly, the study suggests that vulnerable consumer segments would not be systemically disadvantaged by accepting a TOU or CPP tariff compared to a flat tariff. Additionally while the study found it was possible that some vulnerable customers would see increases in bills, it also found that many vulnerable consumers would see decreases in their bills and that they would have the same opportunity to benefit by shifting load.

2.7.1 Monitoring of impacts on vulnerable consumers

Draft policy paper two discussed hardship provisions in the NECF and concluded that the AER should monitor whether hardship consumers are over represented on any particular tariff type. It also asked whether retailers should be obliged to recommend the most appropriate tariff for consumers in their hardship programs.

Consumer groups and Ombudsmen were generally in support of the AER monitoring whether hardship customers are over represented on any particular tariff type. Consumer groups would like the introduction of TOU pricing to be accompanied by transitional arrangements for consumers in order to buffer against adverse impacts, particularly for vulnerable consumers. This includes a range of tariff offerings that provide for choice by vulnerable consumers. Over time, experience should inform policy development and hardship program design so that responses to vulnerability and hardship reflect the real impacts of time variant pricing. Consumer groups were also in favour of monitoring by the AER of new pricing arrangements to identify whether pricing arrangements were proving too complex for consumers to understand and make good choices.

Monitoring of whether vulnerable groups are overrepresented on particular tariff types is not supported by retailers who consider it unnecessary given the requirements that the NECF places on retailers to have an approved and readily available hardship policy which assesses the suitability of the available tariffs for a hardship consumer. The ERAA suggests that this effectively ensures that hardship consumers will be overrepresented on the most suitable tariff.

During the transition to new pricing arrangements it is important that policy makers are able to understand the development of different offers within the market and make informed decisions as to the appropriate provisions needed to

26 “Flexible Pricing Customer Impact Study - Stage 2, Deloitte, July 2012. Available on the DPI website: http://www.dpi.vic.gov.au/smart-meters/publications/reports-and-consultations

40


protect the interests of both hardship and vulnerable27 consumers. Whilst modelling and the results of trials suggest that vulnerable consumers are able to benefit from TOU and CPP pricing, consumer experience with these arrangements needs to be monitored and confirmed over time so that action can be taken if necessary, such as adjustments to better target concession regimes.

The AER should undertake monitoring and reporting in a number of areas. These are:

The number of hardship consumers on any particular tariff type;

the particular tariff choices of vulnerable consumers; and

the number of consumers choosing a flat standing offer tariff.

2.7.2 Concessions regimes and community service obligations

Draft policy paper two discussed ways to assist vulnerable consumers in a transition to new pricing arrangements, particularly state-based concessional regimes and community service obligations, and concluded that states and territories may wish to review these in the light of the services supported by smart meters.

All stakeholders who addressed this issue were supportive of a review of state based concessions regimes in the light of new services enabled by smart meters – particularly time-variant pricing. The AEMC, in the Power of Choice Review draft report also recommended that state governments review their concessions regimes so that they are appropriately targeted.

States and territories provide a wide variety of concessional regimes, appropriate to the circumstances of each jurisdiction. EMRWG does not propose a national approach to this issue due to wide variety of different circumstances and timeframes for the availability of time varying prices in different jurisdictions. However, it is important that the structure of concessions regimes remain appropriate once new pricing arrangements are introduced so that the available resources are targeted in the most effective and efficient manner.

State and territory governments should review, as appropriate, the structure of their energy concessions regimes and customer service obligations in the light of new pricing arrangements as they become available in each jurisdiction.

27 Note that vulnerable consumers is not specifically defined, but it is considered a much wider group than hardship customers

41

Introduction

2.8 Improving overall energy literacy and the availability of consumption information

2.8.1 Energy information to support informed choices

All stakeholders stressed the importance of consumers having a better understanding of their energy consumption in order to make informed choices over how much and when they consume energy.

EMRWG strongly supports this principle and recommends there should be a national plan to improve consumer energy literacy, involving all relevant stakeholders. The nature and principles of this consumer engagement is discussed in chapter seven.

There is a considerable amount of recent work on access to energy data: in particular the case made by the Commonwealth scoping study into access and exchange of mass market energy consumption data and the number of energy market participants making data available through their own websites. This is discussed further in chapter eight.

There are also a number of third parties who would like to provide energy management services to consumers. These services may range from simple analysis of consumption information and advice on energy efficiency through to the sale of new products and services and home energy management services. The issues around these services are considered in chapter three.

42


3 Third party service providers

Recommendations

19. EMRWG proposes that the AER clarify the application of the NECF to the provision of energy management services to small customers where bundled with or associated with energy supply, including where services are offered by third parties.

20. EMRWG proposes that a form of authorisation or registration (including customer consent and privacy obligations) should be a prerequisite to enable third-party access to consumer data via market systems, but should not be a condition of operating in the energy information market generally.

21. Rules and processes should be established to clarify the obligations of energy supply market participants to provide access to third parties operating in energy information and energy management markets and any conditions of such access.

Third party service providers currently sit outside the regulatory framework of the energy market. This framework regulates the supply and sale of energy to consumers. Draft policy paper two supported, in principle, a role for third parties in some aspects of the energy market and recognised that this will benefit consumers. However it was also recognised that consideration is needed on how they interact with consumers and on how the services they could potentially offer can be accommodated by the regulatory framework. The paper raised issues around the potential regulatory arrangements for third party service providers who are providing energy services, (including smart meter enabled services) directly to customers and the range of services that third parties can offer. Related issues around data access are addressed in chapter 8 and privacy is considered in chapter 9.

Draft policy position 5 proposed that, “except for the case of provision of customer’s data, there are important issues to be resolved in providing for third parties in the market framework and systematic consideration should be given to these issues in the overall development of smart meter services to consumers.”

Feedback was also sought on what issues stakeholders believed need to be considered for third parties who are not agents of retailers and distributors, and on what services could be offered by third parties.

43

Introduction

3.1 Stakeholder views

Stakeholders generally considered that the regulatory framework should accommodate and appropriately regulate third party service provision, giving consumers equivalent protections regardless of who is providing the service, and agreed that systematic consideration should be given to the appropriate role that third parties can play in the energy market. The joint consumer submission proposed some principles to address third party service provision, covering consent, access and contractual arrangements. This submission suggested that the lack of clarity on access and contestability arrangements is the biggest barrier to third party service providers providing services to customers.

The joint consumer submission also suggested that third parties could provide services that include: aggregation of generation, aggregation of dispatchable stored energy, sale of end use energy services such as heating, cooling and transport, and load control services.

CUAC believed that there is a regulatory gap, and the entire authorisation and exemption framework needs to be re-examined in light of smart meters and smart meter enabled services. They suggested that a new regulatory framework (including licensing) may be appropriate so that consumers are entitled to equivalent consumer protections from retailers, distributors and third parties providing the same service.

The retailers generally favour a consistent approach to dealing with third parties (and distributors) engaging in the market. TRUenergy suggested that some third parties currently offer, or propose to offer, services in a way that excludes them from market entry obligations although they may be effectively acting as a participant.

The ERAA suggested that there is a need for a comprehensive review of third party responsibilities to consumers and an examination of how they could be brought under the NECF. They also suggested that ‘sale of electricity’ is no longer an adequate test of whether retail licensing or authorisation is needed, and the concept should shift to sale of energy services. They proposed a framework for determining what level of authorisation is needed for particular services, with criteria based on the core aspects of why retail contracts are currently regulated. They suggested that third party service offerings should be judged on four criteria, it being assumed that the third party will have access to a consumer’s consumption information:

1. If the product or service is marketed in competition with other services, and specific information needs to be provided at the point of sale to ensure informed consent.

2. If the consumer receives ongoing services under contract.

3. If supply to the property/appliance can be controlled or disconnected, including by charging technology.

44


4. If the consumer is billed or compensated directly from the service provider.

The ERAA suggested that if any of these activities occur, then some sort of retail licence or NECF authorisation would be needed.

Origin Energy also suggested that accessing metering data would require at the least the national privacy principles to apply, and retailers have suggested that some form of regulatory authorisation should apply to third parties accessing metering data to provide energy efficiency or energy management advice.

Retailers argued that all parties offering a similar service should face the same regulatory obligations. Under the proposed model distributors would also need the same authorisation to offer direct load control products. Retailers agreed a comprehensive review of third party responsibilities to customers is needed.

Retailers also suggested that ring fencing should apply between retail activities and any monopoly service provision with regulated revenue streams.

EWON noted that “Given the integration of these potential new services with the current providers (both in retail and distribution) it would appear to EWON that regulation for third party service providers is correctly placed within the context of current energy regulation.” They suggest that one possible regulatory model is provided by the NECF approach to exempt sellers. The AER could be authorised to establish Guidelines, with a registration process for third party service providers. The level of detail required and the level of regulation could then be varied in proportion to the impact and complexity of the service being offered which allows for innovation and ensures that the regulatory parameters are set in such a way that new services are not discouraged. Equally it also ensures that for retailers, networks and most importantly consumers, similar protections are provided with the aim of ensuring a safe and stable energy market.

Distributors generally supported third parties being able to offer services, subject to the same regulations for the service as retailers and distributors, and appropriate access arrangements.

Distributors also suggested that the operations of third parties should not interfere with or take precedence over the operations of retailers and distributors.

Ergon suggested that third parties who are agents of retailers or distributors would need to be contractually bound to the privacy principles and restrictions on the use of information and customers would need to provide explicit informed consent for disclosure of their information to third parties.

eMeter and Opower (both potential third parties) submitted that third parties should be regulated by general government privacy laws and regulations and consumers protections, no differently from other service providers. They also suggested that there should be no special limitations on services offered by third parties. Opower also noted that the regulatory framework should continue to

45

Introduction

distinguish between third parties who are agents of distributors and retailers and those who are not, and allow both models to operate in the market.

Opower also states that access to household energy usage data is important for third parties to assist households in improving energy efficiency, either as agents of retailers or distributors or contracted directly to the consumer.

The AEMC Power of Choice review has considered the role of third parties, with the draft recommendation that the “NECF is clarified to make it clear what arrangements apply to third parties providing “Demand Side Participation energy services”. This should involve establishing criteria in either the NECF or the AER guidelines on retail exemptions. The criteria could include the circumstances where accreditation (or exemptions) of parties is required and the relevant provisions of the NECF that would apply (i.e. marketing rules, and the relevant enforcement and monitoring provisions).28

3.2 Policy analysis

Two main areas of agreement are apparent from submissions.

Firstly, there is a general agreement that parties, other than retailers or distributors, should be allowed to offer services in the energy market. This could be as agents of market participants or directly to consumers.

Secondly, that the consumer protections relating to these services should be similar regardless of which party is offering them.

However, there are major differences in stakeholders’ views on the appropriate regulatory framework for third parties and the issues to be addressed. The major concern for retailers is that third parties should be subject to some form of retail licence or NECF authorisation. According to the retailers general protections under the Australian Consumer Law (ACL) are not sufficient. Retailers believe that the “sale of electricity” is no longer an adequate test of whether energy retail licensing or authorisation is required. They argue that concept should instead shift to sale of energy services, which includes retailing energy and energy management services such as interruptions to energy supply, ongoing use of a consumer’s meter data, as well as direct billing the consumer under contract.

Consumers, on the other hand, have suggested that access and contestability arrangements are likely to continue to prevent consumers being able to access services by third parties and suggest the most significant barrier to resolution of these issues is the reluctance of retailers and distribution companies to co-operate to facilitate progress in this area. This would suggest that the main issue is the interaction of energy management service providers with energy supply participants. The Commonwealth’s scoping study into improving access to data for consumers and third parties with the consumers consent also identified this as a key issue.

28 AEMC, September 2012 Draft Report: Power of Choice – giving consumers options on the way they use electricity.

46


EMRWG notes in this context that the AEMC, in its Power of Choice Review, addresses many of the issues surrounding access and contestability. They are considering an approach similar to NECF approach to exempt sellers with the AER authorised to issue Guidelines and an accreditation process for third party service providers. The nature of this accreditation could be linked to the type of service provided. This would ensure appropriate levels of consumer protection and avoid discouraging the offering of innovative products or the entry of new businesses into the energy service market.

Notwithstanding these developments, while understanding the concerns of retailers, EMWRG is not supportive of the retailers contention that the , “sale of electricity [or energy more broadly] is no longer an adequate test of whether retail licensing or authorisation is required” and does not propose to extend the regulatory framework to incorporate the sale of energy services in this way.

This is also a view supported by the AEMC in its Power of Choice Review as the objective of NECF relates to the sale and supply of energy.

EMRWG is of the view that the energy market should be thought of as four interconnected, but distinct markets serving the consumer:

An energy delivery market concerned with the direct supply of energy;

An energy information market providing services to assist energy consumers to select products and manage their energy consumption;

A demand side response (DSR) and energy efficiency (EE) market delivering products and services to manage the consumption of energy; and

A distributed (or embedded) generation (DG) market delivering products such as solar photovoltaic systems for local generation of energy.

Different parties may operate in one or more of these markets. The interactions between participants operating in the energy delivery market (i.e. retailers, distributors and generators), which is by far the largest and most developed of these markets and the traditional focus of regulatory interest, and participants offering or wishing to offer services in the other related markets goes to the crux of the debate over the role of third parties.

Third parties may offer a wide variety of products and services to consumers. Some of these products, such as load control, may also be provided by retailers and distributors and in the words of Origin “interact directly with the consumer’s electricity supply”. Where different parties could potentially offer the same service to consumers, (i.e. operating in the same market) EMRWG supports the view that the regulation should relate to the provision of the service rather than the party supplying it.

However, there is an important distinction: a retailer or distributor may seek to include load control or energy management terms as a condition of the sale of

47

Introduction

energy.29 By definition a third party cannot do this, meaning that the concerns and risks for the fair supply of energy do not arise.

A clear distinction should also be made between services that affect the consumer’s supply of electricity (i.e. services that include potential for disconnection) and other services, with stronger protections for the former.

Many services potentially offered by third parties are in the nature of information and advice services such as bill analysis and comparison, or energy efficiency advice and are not directly linked to the sale of electricity. The proposal by the ERAA would require that a third party accessing a consumer’s meter data to provide analysis of their bill would need to first be approved by the AER under the NECF, with ensuing obligations. EMRWG believes that this would discourage the offering of information services in the energy market, to the long term detriment of consumers. We therefore do not recommend an extension of the energy regulatory framework to directly cover third parties operating in these markets.

The Commonwealth scoping study for an energy information hub or system, which would enable third parties to access consumer’s data with their consent, suggests the possible creation of a new class of market participant in the NEM to support the interaction of participants in the energy information market with participants in the energy supply market. Participants in this class would be required to register with the Australian Energy Market Operator (AEMO) and would be bound to uphold privacy and security requirements and be subject to proportionate penalties in the event they fail to meet their obligations. However, these would apply as conditions of data access via any central system rather than as conditions of operating in the energy information market per se.

EMWRG notes the submission from Opower that there should be an appropriate distinction between third parties that operate independently and those that operate as agents of distributers and retailers. EMRWG recognises this distinction and considers that it is not appropriate that all third parties are treated as if they are agents of the utilities. However, where a third party does act as an agent of a utility then it is the responsibility of the retailer or distributor to contractually ensure compliance and no changes are required to current regulations.

3.3 Policy recommendations

Our recommendations are in two parts: firstly covering the definition of what circumstances the NECF should apply to energy management services, (which would be implemented through better defining the energy supply market) and secondly covering conditions that might be applied by energy supply market participants in facilitating third party activities.

29 For example, existing off-peak hot water arrangements fall into this category: a customer receives a discounted tariff in return for assigning control of the times of water heating to the energy supplier.

48


Depending on the nature of the service being supplied the appropriate consumer protections for many of the services offered by third parties may be those provided for under the ACL as they do not involve the sale of electricity.

Where energy management, energy information and other services outside the energy delivery market are provided to small customers as a condition of, or bundled with, the sale of energy, then the NECF may apply. Arguably companies offering such services may not be considered “third parties”, or may be considered agents or associates of a retailer or distributor, placing the onus on the retailer or distributor to pass on its NECF obligations through agency contract. We are not recommending the general extension of the NECF to directly cover third parties that are not agents of retailers and distributors. However EMRWG proposes that the AER clarify the application of the NECF to the provision of energy management services to small customers where bundled with or associated with energy supply, including where services are offered by third parties. This may be along the lines suggested by the AEMC in the Power of Choice Review, which would allow to the AER to use the exemption framework to clarify whether and how such bundled services would be regulated under the energy laws. EMRWG notes that if the service is not regulated under the energy consumer law, as it is not related to the supply and sale of energy, the ACL and general legal protections would continue to apply.

The effective operation of some types of energy information or energy management markets may benefit from facilitating third-party access to energy supply market data or infrastructure. In these circumstances, such as around some mechanisms for data access, it may be appropriate for aspects of the NECF to be applied in addition to the ACL.

Where third parties require direct access to consumer’s data from a party other than the consumer themselves they would need to comply with the appropriate privacy provisions and well as obtaining the consumer’s explicit informed consent.

EMRWG proposes that a form of authorisation or registration should be prerequisite to enable access to consumer data via market systems and to ensure compliance with privacy obligations, but should not be a condition of operating in the energy information market generally.

Some third parties may offer energy management services such as automated control of appliances on a fee-for-service basis. In and of itself, we do not consider there to be a need for registration or authorisation for offering such services, or for the NECF to be directly applied. Such services could be offered using various technology pathways. Where these services are operationalised through a smart meter, this would have to be facilitated by one or other of the energy supply market participants. Contractual terms and conditions would apply to enable meter access, which we consider would need to include extension of the energy supply market participants’ obligations around privacy and explicit informed consent. While it is outside the scope of this paper to

49

Introduction

consider how this meter access may take place, it may be that this access will take place through business-to-business procedures managed by AEMO and that some reasonable conditions, including some form of registration, should apply to that access. However to make it clear that access on fair and reasonable terms is expected, EMRWG recommends that rules and processes be established to clarify the obligations to provide access and any conditions of such access.

EMRWG proposes that the AER clarify the application of the NECF to the provision of energy management services to small customers where bundled with or associated with energy supply, including where services are offered by third parties.

EMRWG proposes that a form of authorisation or registration (including customer consent and privacy obligations) should be a prerequisite to enable third-party access to consumer data via market systems, but should not be a condition of operating in the energy information market generally.

Rules and processes should be established to clarify the obligations of energy supply market participants to provide access to third parties operating in energy information and energy management markets, and any conditions of such access.

50


4 Supply capacity control (SCC)

Recommendations

22. Emergency supply capacity control (SCC) should be an option available to networks in responding to or managing emergencies, including the management of the restoration of power.

23. Where distributors offer SCC as a separate condition to a network tariff, the preference is for this to be through a retailer.

24. Supply capacity control offered by distributors may be part of the connection agreement.

25. EMRWG notes that to the extent that these products are marketed, the same marketing rules as would apply directly to retailers offering this product should be applied to distributors.

26. EMRWG recommends that retailers should not offer SCC until such a time as there is a clear understanding of the potential nature and structure of these contracts and a fuller analysis of the risks, especially in regards to vulnerable consumers.

27. To facilitate this understanding EMRWG would support targeted trials of voluntary SCC.

28. For avoidance of doubt, SCC may not be used as an alternative to disconnection (credit management) and may not be offered to any customers entering or participating in a hardship program.

29. Consistent with the recommendations in Chapter 3 – Third Party Service Providers - that as third parties cannot offer products relating to the sale of energy, by definition they would not be able to offer an SCC product.

30. EMRWG recommends that the supply capacity limit for an embedded generator exporting to the grid be set to the capacity as agreed in the connection agreement. For solar PV generators, this should correspond to the capacity of the inverter.

4.1 Context of SCC

Discussion in the draft policy paper particularly focussed on whether the SCC feature of smart meters may be offered as a discretionary product by retailers, distributors or third parties and whether there are any particular conditions needed around its use by any of these parties.

51

Introduction

There are a number of divergent views relating to this issue. However, before discussing these it is worth understanding the technical capabilities of the meter which allow SCC to operate.

4.1.1 Technical potential

The supply capacity control function of a meter provides the capability to set a maximum capacity limit on a customer’s rate of energy usage. The SCC operates when the capacity limit is reached by disconnecting the supply to the premises for short period. Draft policy paper two outlined three broad contexts for the use of SCC supported by smart meters.

The first context for the use of SCC, that has universal support, mirrors an existing network management capability. This existing capability provides each customer on very constrained supply lines, usually single-wire-earth-return (SWER) lines in rural areas, with a supply capacity limiting switch that cuts off supply if they exceed their limit and must be manually switched to re-establish supply.

Secondly, the distribution businesses may use SCC in times of a supply emergency or network stress. SCC would allow a distribution business to place capacity limits on supply points in a broad area and still allow a limited supply, rather than cut power supply to the area completely in an emergency. SCC functionality could also allow the distributor to restore power to an area gradually and securely once the emergency has abated.

SCC also may potentially be offered as a discretionary product by distributors, retailers or third parties to consumers. The consumer might agree to limit supply to their premises when certain conditions prevail in return for a financial incentive. The particular limit would be agreed with the consumer in advance.

The national minimum functional specification (FS) for smart meters provides for both import and export (to and from the grid) supply capacity limits that could be initiated by retailers or third parties (called “time of day” supply capacity limit) and by distributors (called “distributor” supply capacity limit). It also provides an emergency supply capacity limit that takes priority over all other export supply capacity limits and can be disabled for customers on life support or similar. Both “time of day” and “emergency” limits provide for randomised start times within 60 seconds of the time the command must be enacted, meaning both switch-off and subsequent switch-on are randomised to avoid system stress.

4.2 General stakeholder views

CUAC recognised that some customers may benefit from taking up supply capacity control products which align with their needs and energy consumption objective. They were concerned that there are significant potential risks for consumers generally, in particular for vulnerable or low income customers.

52


Neither the joint consumer submission nor CUAC support the use of SCC products for credit management purposes (as a complement or alternative to hardship programs).

Prior to offering SCC to residential customers for non-credit management purposes, they suggest that the government review the risks associated with SCC, incorporating tests of consumer acceptance and the development of an appropriate regulatory framework.

They suggest a number of customer protections be incorporated into the design of the regulatory framework (discussed further in the response section below).

The joint consumer submission suggested that SCC products should pass the standards tests of fair trading as set out in existing legal frameworks for consumer protection including the ACL, NERL and NERR, especially with regard to explicit informed consent. They state that

“If smart meters and related infrastructure enable the development of new products and services that are not contemplated by existing frameworks then the frameworks should be reviewed before the products and services are sold into the market.” 30

The ESAA suggest that overly prescriptive regulation could hinder innovation and the EMRWG should not be restrictive about which products can be offered to consumers with smart meters.

Origin is sceptical of the notion that SCC should be offered through a distributor. Origin argues:

"The language in questions 4.3a and 4.2b also highlight a problem with existing distributors forming direct contracts with consumers on discretionary supply capacity control: the key issue being marketing products. The notion of distributors (as pure distributors) directly marketing energy supply products and benefits to consumers conflicts with the entire premise of the National Competition Policy and the distributor-retailer split. If the sale of energy is the sole province of a retailer it is not clear why the sale‟ of energy-limitations such as supply capacity control 'products' are also not sole province of a retailer."31

EWOV believes that direct load control (DLC) and SCC are effective methods to manage network supply and are an equitable way to get around the current cross-subsidising by the general community of high energy users during peak times. This method of network management is preferred to total supply control and mass disconnection. Customers need to have a broad understanding of how and when they use energy in their homes to receive the associated benefits.

TRUenergy believes that, once the product is understood, consumers may find benefits in its use for budgeting or load limiting purposes. However, they feel

30 Joint Consumer Submission, Smart Meter Consumer Protection and Safety Review Draft Policy Paper 2 Response. 31 Origin Energy Submission page 14

53

Introduction

that this level of understanding required is a long way off. They argue that if the ability of industry in developing or trialling these products is inhibited, consumers understanding and faith will be significantly hindered, delaying future development and innovation and the potential benefits of the technology.

4.2.1 General comments and context for evaluation

EMRWG notes the strong concerns of consumer groups regarding SCC products. In particular, EMRWG notes the consumer view that there is a significant risk for consumers from these products. This risk stems from both the nature of SCC and the fact that these are new and untested products. Consumer groups are of the view that these risks require significant protections being put in place, particularly to protect the interests of vulnerable or low income customers.

CUAC has suggested that prior to any use of SCC products for non-debt management purposes, the governments need to comprehensively review and assess all the risks associated with their use; undertake or commission pilot trials of SCC products, test consumer acceptability of SCC products and ensure that an appropriate regulatory framework is in place if these products are to be offered.

In this context, EMRWG notes that in December 2011 the ESCV released its Smart meters regulatory review – capacity control and meter reads final decision , which discussed regulatory issues associated with energy supply contracts that include capacity or load control conditions. EMWRG notes the ESCV prohibition of SCC products used primarily for credit management purposes until 1 January 2014. It also notes the decision not to prohibit or further regulate the use of load/capacity control products for non-credit management purposes.

Although the NECF contains no specific provisions relating to SCC, it does includes general consumer protections that will apply to any contracts, including those with SCC. This includes explicit informed consent for all residential supply contracts, including those with non-standard terms.

In addition, standard retailer and distributor contracts, available to any customer via their designated retailer and local distributor do not include supply constraint terms and conditions. This means that in order to access DLC or SCC products customers must do so under a market contract.

Stakeholder responses indicate that neither distributors nor retailers intend to offer SCC in the near future. The lack of clarity on the nature and structure of potential product offerings makes assessment of the risks for consumers difficult to assess at this time. In particular EMRWG needs to weigh up whether regulating now to minimise potential risks may unduly stifle the development of innovative products that may be of benefit to some consumers, or may be an undue use of regulatory resources given the relatively remote risk at the present time.

54


4.3 SCC for network emergencies

Draft policy paper two discussed the role of SCC as a mandatory function for network emergencies and concluded that distributor initiated SCC could be allowed for emergencies to manage network demand.


This draft policy position was broadly supported by all stakeholders. Some stakeholders had concerns over the definition of an emergency. The support of the ERAA for this policy position is conditional on an industry wide agreement being reached on an appropriate definition. AGL suggests that the distinction between an “emergency” and a time of very high network loading needs to be very clear. UE also notes that it important that SCC is well understood by all stakeholders before it is used on any large scale in an emergency.


It is clear that there is broad support from all stakeholders for distribution businesses to potentially use SCC in emergencies, however, EMRWG notes the suggestion that there is a need for need for an appropriate definition of emergency and a better understanding of how it could be used to restore power following power outages.

As the system operator for the NEM, AEMO has responsibility for the maintenance of system security for the bulk supply system and has extensive powers under the National Electricity Law (NEL) and Rules to intervene in the operation of the market including the initiation of load shedding. That is, if there is a major supply shortfall in the NEM, AEMO must under clause 4.8.9(i) implement any necessary involuntary load shedding in an equitable manner, in accordance with guidelines established by the Reliability Panel as part of the power system security and reliability standards.

EMRWG notes that there is already a well-established definition and use of ‘emergency’, which is generally consistent across different jurisdictions including in the NERR and in the jurisdictional codes. The distributors have well established practices and experience in this regard, including emergency response plans and the ability to co-ordinate with AEMO. EMRWG does not believe it is necessary to re-examine this issue.

EMRG does however, recognise that it is important that SCC is well understood by all stakeholders before it is used on any large scale in an emergency and suggests that before distributors use SCC in this context that they consider how consumers could be engaged.

4.3.3 Policy recommendation

Emergency supply capacity control should be an option available to networks in responding to or managing emergencies, including the

55

Introduction

management of the restoration of power

4.4 SCC as a discretionary distributor product

Draft policy paper two discussed whether SCC should be allowed as a discretionary distribution product and concluded that distributors should be allowed to offer SCC as a discretionary product to manage network demand, subject to the appropriate consumer protections being in place. The paper also asked a number of related questions including whether the existing rules on planned interruption to supply are sufficient, how ready distributors are to offer SCC products, what additional consumer protections are needed and what information should be provided to consumers.


The joint consumer submission was broadly supportive of the draft policy position, although they expressed a general concern regarding potential confusion caused by the potential range of product offerings.

CUAC had general concerns over the offering of SCC contracts (discussed above). For any party offering SCC as a discretionary product, similar customer protections should apply.

Distributors were supportive of being able to offer SCC although Ausgrid did note that their preferred solutions for managing network demand is through cost reflective network tariffs and controlled load services.

Retailers in contrast were strongly opposed to distributors being allowed to offer SCC as a discretionary product, even with appropriate protections in place. The ERAA is firmly of the view that allowing distributors to offer SCC is not consistent with the role of distributors as recognised in the NERL. They believe that there is “increased risk that they will subsidise their activities in the retail market with regulated revenue (irrespective of current ring fencing provisions). The ERAA notes that the AER “has advised that distributors’ using regulated revenue to fund unregulated activities is unlawful”.

The position of retailers is supported by EWON who prefer that SCC offers should be made through retailers for small retail customers. They state that

“EWON has concerns over marketing to vulnerable customers. This is an area where retailers have experience and have a regulated role (for example hardship programs). At present, distributors have neither the experience nor the infrastructure to deal with small retail customers. We believe they would need to develop the appropriate systems and

56


arrangements, consistent with the relevant consumer protections before products could be offered to consumers.”32

The draft policy paper asked whether existing planned interruptions of supply rules are sufficient to protect customers if SCC was offered as a product by distributors.

Generally, Distributors believe that the existing rules are adequate to protect consumers. Energex suggests that applying capacity limits in place of total disconnection is a better outcome for customers. They opposed any option of consumer override of capacity limits because of the uncertainty it creates which is detrimental to the management of the network.

Citipower and Powercor are supportive of measures to ensure customers understand SCC, and state that they have made efforts to develop a Network Security and Load Management Protocol with retailers and consumer groups under the National Smart Metering Program, and the current National Energy Industry and Consumer Forum. They believe that as distributors have historically had exclusive control of supply capacity offerings, there are difficulties in allowing retailers direct use of such mechanisms. This is because the purposes for which distributors and retailers would use supply capacity and load control are different and may, at times, be conflicting.

The ERAA reiterated its broad concern that the consultation paper refers to distributors offering “products” to end-consumers and “marketing” such products to end-consumers. The ERAA suggest that the regulatory framework needs to ensure an open competitive environment where all participants can ensure that consumers have choice; ensure suppliers are able to offer choice; and develop tools to allow participants to innovate and develop effective ways to manage energy consumption. This regulatory framework should not undermine the defined roles of distributors and retailers in communicating with customers. Origin suggest that if SCC is seen as a product that requires marketing, (as distinct from being applied in an emergency situation) then it should be a retail function with retail authorisation including appropriate ring fencing arrangements.

The draft policy paper also asked how ready distributors were to offer these products and what additional consumer protections and information provision for consumers is needed.

None of the distributors indicated any plans to offer SCC products.

The Ombudsmen were concerned to ensure that that consumers need to give explicit informed consent to an SCC contract. EWON suggested that a follow up process, such as a verification call to the customer that focuses on ensuring that the customer understands the implications of the product could be made a requirement. EWOV state that customer decision making is improved when

32 Energy and Water Ombudsman NSW submission pg 11

57

Introduction

customers are provided with an ‘offer summary’ in plain English at the time of sale including additional SCC related information.

EWOV also suggested that customers should be notified prior to SCC being activated so they can adjust their usage. The period of reduction in supply should be as short as possible.

EWON had some concerns over marketing of SCC to consumers and suggested that Energy Assurance Limited membership with stringent enforcement and oversight be applied as well as disallowing marketing where agents are paid on commission.

Distribution businesses were generally of the opinion that additional regulation on distributors is unnecessary as customers are protected under general consumer law. Information on SCC would be provided by distributors.


EMRWG notes that this issue is defined against a broad discussion over the relative roles of distributors, retailers and third parties in dealing with consumers within the NEM.

EMRWG is broadly of the view that voluntary SCC can have direct benefits for distributors in managing consumption during times of network constraint and there is merit for distributors in offering SCC as a discretionary product solely for the purposes of network management. This, for instance, could occur if it were offered as part of a connection agreement to customers on a constrained line to avoid the additional cost of upgrading infrastructure. Discretionary SCC implemented by distributors with consumer consent is supported by the joint consumer submission, subject to appropriate consumer protections.

Allowing SCC as a voluntary distribution product solely for network management would require distributors to have either a direct contract with the customer; or alternatively offer a contract to the customer through their retailer. This would require retailers and distributors to agree arrangements to pass through contracts to customers and is EMRWG’s preferred outcome as it minimises complexity for consumers. However, if distributors and retailers cannot come to agreement then distributors would be able to contract directly with consumers to offer SCC as a voluntary product. It should be noted that if SCC was linked to a tariff arrangement – rather than being offered as a standalone product, then distributors would not be able to contract directly with consumers. Where SCC is offered as a part of network management then it would be subject to the appropriate regulation by the AER.

Under the NECF, customers will have contracts with both their retailer and their distributor. The standard distribution contract includes connection arrangements, energisation and de-energisation, and interruptions to supply, among other things. This contract does not presently have terms and conditions

58


relating to SCC and means that consumers cannot be compelled to enter into an SCC contract.

EMWRG notes that the NECF requires information provision and explicit informed consent for all residential supply contracts, including those with non-standard terms.


Where distributors offer SCC as a separate condition to a network tariff, the preference is for this to be through a retailer.

Supply capacity control offered by distributors may be part of the connection agreement.

EMRWG notes that to the extent that these products are marketed, the same marketing rules as would apply directly to retailers offering this product should be applied to distributors.

4.5 SCC as a discretionary retail product

Draft policy paper two discussed SCC as a discretionary retail product and asked a number of questions including how consumers might benefit from SCC products, what consumer protections should apply, how ready is the market to offer these products and how can the risks of SCC being offered to customers for whom it is inappropriate be managed. Draft Policy position 8 reiterated that SCC may not be used as an alternative to disconnection action and may not be offered to any customers entering or participating in a hardship program.


Consumers and Ombudsmen are in general agreement that SCC should not be used as an alternative to disconnection and should not be used for credit management purposes. CUAC believes that the policy position does not go far enough and describes SCC as “an automated disconnection product” and that

“It will potentially expose consumers to constant and repeated self-disconnection arising from consumption over the agreed threshold. This would be equivalent to self-disconnection from prepayment meters in jurisdictions which allow them.” 33

CUAC argues for a comprehensive government review of the risks associated with SCC, incorporating tests of consumer acceptance and the development of an appropriate regulatory framework, prior to any introduction.

33 CUAC Submission Appendix A, pg 22

59

Introduction

Retailers are split on the merits of the draft policy. The ERAA provides conditional support to this position provided that it is reviewed as potential issues associated with the use of this product as an alternative to disconnection action are resolved. AGL opposes the policy as it stands, suggesting that as SCC is relatively new and untested it is too early to preclude any activities or services that consumers might wish to take up. They also argue that retailers should not deny a hardship customer a product that is available to other consumers as this may enable that customer to better control their energy use. AGL suggests that consideration of all impacts of SCC must be addressed in a rational and structured debate of wider perspectives.

Other retailers believe that SCC offers should be driven by the market and it is too early to tell what opportunities consumers might want to take up. Origin argues that, provided customers give their explicit informed consent they should have the opportunity to obtain these types of contracts, although they believe that they are unlikely to be offered in the short term.

Retailers believe that the risks of SCC can be managed although the ERAA notes that they cannot differentiate between those who receive these products other than in a broad way, such as not providing SCC to customers on life support.


Draft policy paper two reiterated that SCC may not be used for retail credit management purposes (associated with non-payment of bills) and may not be offered to any customers entering or participating in a hardship program.

EMRWG notes the strong support for this policy from consumer groups and the Ombudsman, noting CUAC’s contention that it doesn’t go far enough. CUAC is of the view that vulnerable consumers may take up these products as a self disconnection product and argues that some vulnerable consumers may limit their consumption to levels that pose a risk to their welfare. The consequences of this may be particularly significant for customers with special needs, such as those with life support equipment.

EMRWG has previously proposed that SCC should not be used for retail credit management purposes. SCC products primarily for credit management purposes have also been specifically prohibited in Victoria until 2014 by the ESCV.

EMWRG notes the risks associated with retailers offering SCC products. Retailers do not have a role in system management, so their use of the functionality would relate to developing contractual arrangements with customers where customers agree to use electricity below a maximum threshold. In order to prevent inappropriately low thresholds being set some definition of minimum energy use for households would need to be formulated. This is highly problematic to define and the EMRWG notes that the National Stakeholder Steering Committee was unable to come up with an agreed threshold figure.

60


The consequences of vulnerable consumers taking up these products are potentially high. It is most likely that where these products are marketed to low income households with high electricity bills, it would be effectively as a means of reducing their electricity bills by restricting their supply. Additionally, the newness and potential complexity of these products may make it difficult for consumers to fully understand them with the potential for detrimental consequences for some vulnerable consumers.

The likelihood of these products being offered also appears low, as there appears little understanding of how they could work in industry.

Whilst EMRWG acknowledges that there are consumers who may wish for and benefit from SCC, EMRWG believes that there is insufficient information on the potential risks of retailers offering these products at this time.


EMRWG recommends that retailers should not offer SCC until such a time as there is a clear understanding of the potential nature and structure of these contracts and a fuller analysis of the risks, especially in regards to vulnerable consumers.34

To facilitate this understanding EMRWG would support targeted trials of voluntary SCC.

For avoidance of doubt, SCC may not be used as an alternative to disconnection (credit management) and may not be offered to any customers entering or participating in a hardship program.

4.6 SCC and third parties

The draft policy paper discussed the offering of SCC by third parties and concluded that at least the same controls as apply to retailers and distributors should apply to third parties regarding any offer of SCC to consumers as a discretionary product.


The joint consumer submission urged that caution should be used in permitting third-party discretionary supply capacity control.

Some distributors, Energex and Ergon, agreed with the policy position, while Ausgrid and United Energy suggested that arrangements and procedures for third parties would need to be agreed first.

34 Note this would not apply where they are simply passing through a distributor network management contract without any amendment.

61

Introduction

Retailers were also in broad agreement with this policy.


SCC could potentially be offered by third parties35 aggregating SCC contracts to sell to distributors or retailers. EMRWG understands that there are no third parties proposing to offer SCC contracts at this time. EMRWG also notes the multiple issues relating to third parties in the NEM and the risks for consumers around SCC (see chapter 3 for discussion of some of these issues in relation to consumer protection). In particular, EMRWG recognises that consumer protections around the supply and sale of electricity are more robust than for many other products and services due to its essential nature. A product such as SCC is different to other load control products as it affects the entire supply to a premises rather than individual appliances, effectively allowing the premises to be disconnected for a short period. As such the protections around its use need to be stronger – especially in relation to the potential effects on vulnerable consumers. Allowing third parties to offer such a product would require them to be authorised in similar way to retailers and perhaps become registered participants in the NEM and subject to the same controls as apply to retailers and distributors. This would require the consideration of the appropriate rules and procedures before this could occur as well as a comprehensive analysis of the potential nature and structure of these products. Given the low level of interest in this product by thirds parties EMRWG does not believe this is a priority.

4.6.3 SCC and third parties: recommendation

Consistent with the recommendations in Chapter 3 – Third Party Service Providers - that as third parties cannot offer products relating to the sale of energy, by definition they would not be able to offer an SCC product.

4.7 SCC and embedded generation

Draft policy paper two discussed the use of SCC with embedded generation, and asked about the circumstances of its potential usage, whether energy exported should be subject to a SCC limit and how such a limit would be set.

EMRWG expects that a contract for the connection of an embedded generator will include the maximum rate of energy export to the grid. Given this, EMRG considers that should supply capacity control be used for embedded generation, the limit should reflect the limit agreed in the connection agreement. Solar PV has an effective supply capacity limit in the inverter, and EMRWG recommends for solar PV, the supply capacity limit be no less than the capacity of the inverter.

35 It should be noted that the term third party does not apply to agents or associates working for distributors or retailers.

62



EMRWG recommends that the supply capacity limit for an embedded generator exporting to the grid be set to the capacity as agreed in the connection agreement. For solar PV generators, this should correspond to the capacity of the inverter.

63

Introduction

5 Demand management: direct load control (DLC)

Recommendations

31. Only retailers may offer DLC directly to consumers where it is part of, or a condition of, a tariff for the sale of electricity.

32. Distributors, retailers or third parties may offer DLC products and services to consumers where it is a standalone product not connected to a tariff for the sale of electricity, subject to general consumer law.

33. Any ambiguity regarding when a product is, or is not, part of a tariff for the sale of electricity should be resolved through appropriate action by the AER.

34. EMRWG recommends that contracts containing DLC should be voluntary and entered into with the customer’s explicit informed consent.

35. The AER should be requested to develop guidelines where possible and appropriate, for explicit informed consent for DLC contacts. Jurisdictions may apply appropriate transitional arrangements for the DLC contracts, including terms and conditions.

36. Subject to any jurisdictional transitional arrangements, DLC providers may include a fee for early termination of their contracts which must be clearly stated and reflect the cost to the business.

37. DLC contracts should terminate when a customer moves house (unless agreed otherwise with that customer), and the terms must be clearly stated in the DLC contract. Termination fees should not apply in these circumstances.

38. EMRWG recommends that customers with life support equipment should not be excluded from entering into DLC contacts. However, EMRWG also recommends that any guidelines for explicit informed consent for DLC contracts include provision for life support customers to place non-essential equipment on DLC, and consideration of the needs of customers with medical cooling needs.

39. Consistent with existing regulatory requirements no customer should be required to involuntarily place any appliance on DLC, including as a condition of participation in a hardship program.

40. Retailers must demonstrate that, if a customer on a hardship program has agreed to a DLC service, this service is part of the overall assistance package provided to the customer and is appropriate to that customer’s individual circumstances.

64


41. It is not proposed to mandate that notification of whether the controlled appliance is on or off be provided to consumers with DLC contracts.

42. EMRWG does not recommend that a manual consumer over-ride be mandated as a feature of DLC

This chapter discusses Direct Load Control (DLC) as a product that may be further enabled by the introduction of smart metering and which is expected to feature more heavily in the competitive product mix offered to consumers by energy providers.

EMRWG acknowledges some stakeholder concerns around DLC implementation and the need for possible consumer protections for this product. All parties offering DLC should understand these sensitivities.

5.1 The context for DLC

DLC for small consumers is typically operated through a contract which allows the distributor, retailer or third party to control the timing or use of certain appliances.

The most common appliances currently under load control are hot water, air conditioners, pool pumps and slab heaters, with much of this existing load under control directly activated by distributors through connections to dedicated tariffs. Hot water for households, for instance, has been controlled in some jurisdictions since the 1960’s and shifts around 4-6 per cent of peak demand to off peak periods36. More recently in Queensland DLC tariffs have been extended to appliances such as pool pumps and air conditioners.

Load control can be activated in a number of ways - via a smart meter, home area network, through timers on appliances, via the internet or even through smart phones. The multiple channels by which load control may operate make framing appropriate regulation difficult.

In recent years there have been a number of trials to test ways of delivering DLC using a variety of different products, technologies and contractual arrangements. Results of these trials have generally been positive. The AEMC Power of Choice review also recognises the potential for smart meters to enable greater DLC.

Issues around the consumer protections for DLC were initially raised in policy paper one. In its response SCO acknowledged the need for adequate customer protections for DLC and undertook to consider the issue further in the second policy paper.

Draft policy paper two examined a number of issues around who could offer DLC and the appropriate contractual arrangements. Stakeholder’s responses and final policy recommendations are discussed below.

36 Futura consulting Investigation of Demand side participation on the National electricity market, report for the AEMC, 8 December 2011

65

Introduction

5.1.1 General stakeholder views

The joint consumer submission and CUAC both recognised the potential for consumers to benefit from DLC while noting the risks for consumers, particularly for vulnerable customers.

The joint consumer submission offered 24 principles to guide policy development for DLC. These guiding principles address some aspects of consumer protection for DLC which are beyond the scope of this Review but are useful to consider.

In general, EWOV acknowledged that DLC is an effective and equitable way to manage network supply, but noted the need for customers to be informed and educated as to the terms of their DLC offer to receive the benefits.

Retailers indicated broad support for the draft policy positions with some caveats, discussed below.

ESAA claimed that regulation may hinder innovation and argued retailers should be able to develop a range of products to offer to consumers without regulation as a limiting factor.

5.1.2 General comments and context for analysis

Although DLC has been available to electricity customers in a number of jurisdictions for some time, the prospect of a wider penetration of smart meter infrastructure creates a new environment with opportunities for more applications for DLC and with a different relationship between the pricing of energy use and the appliance under control.

Future control of DLC devices may vary significantly from existing mechanisms as will the way DLC offers are packaged for customers.

Similar to the treatment of SCC, there are no specific provisions in the NECF which relate to DLC contracts per se, although DLC products (such as off peak hot water) are often packaged with electricity tariffs and are therefore covered by any general provisions in the NECF. The NECF establishes the basic arrangements for energy contracts. However, EMRWG acknowledges that these may present some challenges on the basis that the arrangements are a departure from past practices, particularly the relationships between consumers, retailers and distributors.

Additional arrangements to govern DLC contracts may be necessary and some transitional arrangements may be appropriate.

Responses from retailers and third parties indicate that both are keen to offer DLC products in the future, but wish to avoid a restrictive approach which may limit product innovation. In this response EMRWG has considered whether there is any potential for regulation to stifle the development of innovative products which may benefit many consumers.

66


5.2 Who can offer DLC?

Draft policy paper two recommended that that distributors, retailers and, in principle, third parties may offer DLC products and services to consumers. However, EMRWG sought responses in relation to the management of third parties relationships with consumers.

At present only distributors offer DLC to small customers. However, with some reform, more parties may develop DLC offerings. Draft policy paper two outlined a number of reasons for each party to develop DLC offerings.

EMRWG recognised that all parties have their own incentives to offer DLC into the market and that such access should be supported, including for third parties. However, EMRWG noted that third party participation raises issues which warrant further consideration.


Both the joint consumer submission and CUAC indicated support for the draft policy positions and acknowledged that third parties are likely to have a role in the future while noting the need for regulatory coverage for consumers to be appropriately protected. The joint consumer submission also noted the barriers for third parties participation in the NEM and the interests of distributors and retailers to limit access. Consumer groups were also concerned to ensure that retailers could not use DLC to manage customer’s debt.

Retailers suggested that the NECF and ACL are sufficient to protect consumers. They maintained that, for this coverage to be complete, all DLC providers should be authorised under the NECF and subject to the same regulatory obligations that currently apply to retailers. AGL suggested that retailers will be subject to additional risk if third parties fail to follow prescribed rules for DLC.

Both ombudsmen were amenable to third party participation as long as existing NECF customer protections which apply to retailers also apply to third parties. However, EWON stated a preference for DLC not be offered by distributors to small customers.

All distributors supported participation by retailers, distributors and third parties in DLC, on the condition that all parties must be bound by the same requirements. However, most distributors identified potential issues for network security and power quality if retailers or third parties were afforded full control of controlled load and suggested that distributors should retain ultimate control over the implementation of DLC to maintain the integrity of the network. Citipower/Powercor also suggested that this control could have an additional consumer benefit in the form of an additional level of consumer protection against non-network interruptions linked to retail market price activity.

Ausgrid suggested the need to develop a robust business-to-business (B2B) communications mechanism between DLC providers and distributors to support

67

Introduction

DLC that is actioned through smart meters. However, Jemena noted that there are many prescriptive rules for third parties operating in the market that risk stifling product innovation. UE noted that third parties can already offer DLC products directly and can access appliances without using the meter as the interface.

All distributors argued that customers are sufficiently protected by the general consumer law with respect to DLC and further regulation of distributors is not required.

Electric vehicle proponent Better Place argued against additional electricity market regulation of EV service providers.


It is evident from the responses there is broad support from all stakeholders for an expansion of DLC. All agree that there is potential for mutual benefits to accrue to all parties, however, the challenge lies in ensuring that the risks, particularly those to consumers, are minimised.

EMRWG notes the concerns of distributors relating to network security where parties have divergent interests and acknowledges the need to manage these risks. EMRWG also notes the considerable discussions around frameworks for access to the functionality of the smart meter and the progress in developing industry wide solutions. With this in mind EMRWG believes that industry agreement to enable distributors, retailers and third parties to offer DLC through the smart meter to small consumers is the preferred approach. It is important to note that DLC could be offered as part of a tariff arrangement, or as a standalone contract. Where it is part of, or linked to, a tariff arrangement it is clear that this must be offered through retailers who would incorporate the network tariff into their retail tariff offering.

Where DLC is offered as a standalone contract, not connected to the sale of electricity (for example to provide for the cycling of air conditioners in return for a cash payment) then there is no compelling policy reason why this could not be offered by distributors or third parties (such as load aggregators) directly to the consumer, although commercial considerations may favour bundling with the energy supply contract. Where load control is used for management of network peak demand, offered by distributors, it would be subject to regulatory oversight by the AER.


In light of the above, EMRWG is of the view that there should be competition for DLC where it is a standalone product, with multiple parties able to offer DLC subject to broad oversight by the AER and that appropriate protections are in place. Consistent with our general recommendations on third parties, we consider that specific regulation of DLC through energy retail laws should only apply where DLC is bundled with, or associated with, the sale and supply of

68


energy, and not, for example, to separate arrangements that provide consumers an appliance automation service. The Australian Consumer Law and general legal protections would continue to apply to such arrangements. The remainder of the discussion of DLC in this paper should therefore be read as referring to DLC where bundled with or associated with the sale and supply of energy.

Therefore EMRWG recommends that:

Only retailers may offer DLC directly to consumers where it is part of, or a condition of, a tariff for the sale of electricity.

Distributors, retailers or third parties may offer DLC products and services to consumers where it is a standalone product not connected to a tariff for the sale of electricity, subject to the conditions of general consumer law.

Any ambiguity regarding when a product is, or is not, part of a tariff for the sale of electricity should be resolved through appropriate action by the AER.

5.3 Contractual arrangements for DLC

The Ministerial Council on Energy Senior Committee of Officials (SCO) has previously acknowledged the need for adequate customer protections for DLC. EMRWG acknowledges the significant consumer protection provisions which are included in the NECF and the ACL. However, despite this coverage, there may be gaps which present risks for consumers.

Draft policy paper two sought comments on a number of minimum contract requirements for DLC, including the need to obtain explicit informed consent for all parties offering DLC, rights to contract with multiple parties, a transitional period during which customers may exit without penalty, the marketing of DLC products, and for the arrangements for contracts when customers change residences.


Consumer groups agreed that DLC products should require the explicit informed consent of consumers. They propose that DLC should be an “opt-in” service with the onus on DLC providers to ensure that the consumer is capable of informed consent. DLC products should not be part of a standing offer.

Consumer groups also noted that the NECF provides for explicit informed consent but that third parties are not covered by the NECF, although they are covered under the ACL. Both support the development of guidelines by the AER and the ACCC to examine whether these provisions are sufficient for DLC

69

Introduction

contracts. CUAC also noted the need for stronger enforcement and monitoring under the existing regulatory framework.

Consumer groups supported the proposal for a transitional period with no penalties for early termination. CUAC also proposed that DLC contracts should be limited to not more than a year and any early termination fees should reflect the true cost to the business and must be clearly communicated before they enter into a DLC contract.

CUAC also suggested that direct marketing of DLC products to consumers raises the risk of entering into contracts which are not appropriate for their circumstances and if distributors intend to market products to customers then NECF marketing provisions should apply. Consumer groups accepted the possibility for customers to enter into contracts with multiple parties for DLC but not for the same device. However, CUAC noted that contracting with multiple parties risks greater consumer confusion, thereby making consumers less likely able to make an informed choice.

DLC contracts should terminate when consumers move house and also when consent is given to another authorised party to operate that device.

Retailers expressed concern over contracting with multiple parties. AGL noted that contracting with multiple parties may result in reduced benefits, contractual risks, and customer confusion, which may lead to adverse outcomes for customers and DLC providers.

AGL suggested that the explicit informed consent provisions in the NERL are unlikely to adequately cover the consent required for DLC services, and distributors or third parties offering DLC services would need additional requirements under NERL to obtain explicit informed consent from customers. AGL also proposed that only one party should hold customer consent and be responsible for managing load control appliances at any one time. Origin questioned if it is appropriate to allow unregulated parties to participate in a market for essential services such as electricity.

In relation to marketing, TRUenergy suggested that all marketing activities for DLC should conform to the rules prescribed in the NECF.

EWON noted the contractual nature of DLC has implications for small customers and stressed the need for greater stringency on explicit informed consent. EWON also agreed to the development of guidelines by the AER to assist DLC providers to obtain explicit informed consent.

EWON agreed to the need for consensual contracts for DLC which should terminate when a customer moves house. EWON also agreed that penalties may apply outside a transitional period, but suggested that vulnerable customers whose circumstances dramatically change need protection from such a penalty. EWOV noted the potential for customer confusion with newer and more sophisticated energy products and proposed that customers be provided with an

70


‘offer summary’ written in plain English at the time of sale. This was also proposed for discretionary SCC (Chapter 4).

Distributors argued that existing provisions in the NECF and ACL are sufficient to ensure that explicit informed consent is obtained from customers, and Jemena and Citipower/Powercor supported the development of guidelines or protocols.

All distributors agreed to clear contracts for DLC; however Ausgrid suggested there is no need to specify a maximum contract period. United noted the need for an early termination penalty to strengthen the reliability of DLC for demand management.

All distributors noted the potential for conflict if entering into DLC contracts with multiple parties and UE noted the difficulty if a customer contracts with several parties for the same appliance. Ausgrid also noted that greater penetration of DLC may lead to unpredictable consumer usage with implications for network management. Most agree that a two year transitional period with some conditions and for DLC contracts to terminate when a customer moves house is appropriate. All distributors opposed further consumer protection rules on distributors, including marketing requirements.


EMRWG notes the importance of obtaining explicit informed consent from customers before entering into contracts for DLC, and the risks for customers entering into arrangements which they do not understand. EMRWG agrees that all parties providing DLC should have a consumer’s explicit informed consent.

The NECF has defined explicit informed consent and outlines the procedures to obtain it. While electricity retailers have experience in obtaining explicit informed consent, distributors and third parties will need to adjust to this requirement.

EMRWG acknowledges the broad support from stakeholders for the development of guidelines to assist DLC providers to obtain explicit informed consent by AER or ACCC and agrees this would be helpful for both providers and consumers.

In their submission CUAC suggested that DLC products should not be part of a standing offer (excluding tariff-based offerings) and that contracts be limited to one year in length.

In this context EMRWG notes that, subject to jurisdictional decisions, a flat tariff and a TOU tariff will be available as a standing offer, both of which do not include load control. However, some consumers already have a load control standing offer tariffs, mostly for hot water, and it is proposed that retailers should be required to offer a controlled load tariff as a standing offer to consumers who have qualifying controlled load, although they would be free not to accept this

71

Introduction

standing offer. It should be noted that the standing offer load control tariff would not include control of air conditioning.

EMRWG also anticipates that market offers without load control are likely to be developed.

EMRWG is also of the view that DLC contracts should be easy for consumers to understand, and notes the nervousness with which some consumers view these products. To address this issue we consider that key factors would need to be disclosed to consumers as part of an offer for DLC to obtain explicit informed consent and the AER may take enforcement action where explicit informed consent is not obtained, including where key aspects of contracts are not fully disclosed. EMRWG recommends that the AER be requested to develop guidelines, where possible and appropriate, for explicit informed consent for DLC contracts.

In addition to these Guidelines, jurisdictions may determine that a transitional period should apply based on the nature of a smart meter deployment where there are additional consumer protections. For instance, DLC contracts could be subject to a transitional period during which customers may withdraw their consent without penalty. This should provide consumers with sufficient time to determine the appropriateness of the DLC product for their circumstances and, if necessary, opt-out without incurring penalty. However, EMRWG also agrees that outside of any jurisdictionally determined transitional period, DLC providers may charge a fee for early termination of their contracts which must be clearly stated in the contract and reflect the cost to the business.

In relation to contracting with multiple parties, including third parties, EMRWG notes the general support for this approach but acknowledges that this may have negative consequences, creating confusion for consumers, and inefficient outcomes for DLC providers. EMRWG agrees that contracts should terminate when consent is given to another authorised party.

EMRWG recognises the potential for customers to give consent for the automation of the same device to multiple parties and believes that it is important that only one party should hold customer consent for each individual device. Industry protocols will need to be developed to ensure that this occurs. Consumers should be able, if they wish, to have different devices controlled by different parties.

In relation to marketing for DLC, EMRWG notes where it is offered as part of an electricity tariff the energy marketing rules will already apply. However, where DLC is offered as a standalone product it is not part of the sale of electricity. marketing rules which are designed to protect consumers from energy supplier practices which could lead to disconnection may not be necessary. General consumer protections including the ACL, Telecommunications Act 1997, and the Do Not Call Register Act 2006 may apply As per our previous recommendation, any ambiguity regarding when a product is, or is not, part of a tariff for the sale of electricity should be resolved through appropriate action by the AER.

72


EMRWG acknowledges the suggestion by EWON that customers be provided with an ‘offer summary’ written in plain English at the time of sale as a means to minimise customer confusion. The guidelines for this could also be developed by the AER.

EMRWG notes that there is a high level of support from stakeholders for DLC contracts to naturally terminate when a customer changes residences. In most cases this is the status quo and there was no evidence presented to change this.

However, EMRWG notes that there was no discussion from respondents regarding whether an early termination under these circumstances would attract an early termination fee. EMRWG considers it unlikely that a customer would seek to break a DLC contract by moving house and considers that termination fees should not apply in these circumstances. There may be opportunity to enable DLC providers to renegotiate DLC contracts with the same customer at their new residence.


EMRWG recommends that contracts containing DLC should be voluntary and entered into with the customer’s explicit informed consent.

The AER should be requested to develop guidelines where possible and appropriate, for explicit informed consent for DLC contacts. Jurisdictions may apply appropriate transitional arrangements for the DLC contracts, including terms and conditions.

Subject to any transitional arrangements, DLC providers may include a fee for early termination of their contracts which must be clearly stated and reflect the cost to the business.

DLC contracts should terminate when a customer moves house (unless agreed otherwise with that customer), and the terms must be clearly stated in the DLC contract. Termination fees should not apply in these circumstances.

5.4 Other consumer protections for DLC

In draft policy paper one, SCO acknowledged the need for adequate customer protections for DLC. Subsequently, in draft policy paper two, EMRWG noted that the NECF and the ACL provide significant protections for consumers in their contractual arrangements with energy providers. However, DLC may be a new product for some consumers with expanding application to more appliances. Consumer groups have expressed concerns that vulnerable consumers could be disadvantaged by DLC products.

73

Introduction

EMWRG has proposed that customers with medical life support equipment should not be approached for DLC products. Noting earlier concerns, it is also proposed that DLC should not be used for managing customer accounts.

EMRWG sought specific comment on whether other consumers should not be offered DLC services; the appropriateness of load control notification; and manual override for some DLC services.

5.4.1 Should some customer groups be excluded from being offered DLC

Under the NECF retailers and distributors are obligated to ensure supply of electricity to customers with life support equipment. As such, any life support equipment is already implicitly excluded from being directly controlled. However, there may be opportunities for DLC contracts to be applied to non-essential equipment.


Consumer groups argued that DLC services should not be used as a means for retailers to manage customer accounts and that DLC should not be a pre-requisite for customers in a hardship program. CUAC noted the need for consumers to consider the appropriateness of DLC for their circumstances, particularly for consumers with life support equipment.

All retailers noted the special needs of customers with life support equipment. AGL questioned the need for a blanket exclusion for DLC to apply to all appliances these customers might have, for example non-life support equipment such as pool pumps. In relation to hardship customers, retailers agreed that DLC should not form a condition of a hardship program. However AGL suggested that under the NECF retailers are obliged to advise the customer of the most appropriate tariff, which could be a DLC tariff. AGL also questioned how limitations for dealing with hardship customers which apply to retailers would be applied to distributors.

EWON agreed that customers with life support equipment should be excluded from DLC offers but stated that customers should not be excluded if the product meets specific individual circumstances. Ombudsmen objected to DLC as a condition for hardship customers and EWON agreed that retailers should be required to demonstrate that customers on a hardship program have agreed to DLC.

All distributors indicated support for the proposed exclusions for customers with life support equipment and hardship customers; however some argued that this exclusion should only apply to the life support equipment leaving other non-essential appliances available for DLC, such as pool pumps.

In relation to exclusion provisions, eMeter proposed that DLC should be optional for all consumers drawing on experience from their PowerCentsDC program operated in Washington DC, USA.

74



As a general principle, DLC should be optional for all consumers, noting however that life support customers and customers in hardship are groups which require specific attention.

There is broad agreement from all stakeholders to exclude customers with life support equipment from DLC, but some stakeholders consider that this exclusion need only apply to life support equipment itself. Air conditioners are not generally considered life support equipment, although there are some customers with medical cooling needs for whom air-conditioning may be considered essential.

EMRWG acknowledges the potential risk for customers with medical cooling needs to place some equipment such as air conditioners on DLC, either mistakenly or as a means to manage their electricity bill. However, noting the requirement for explicit informed consent for DLC contracts, this risk could be minimised through the development of guidelines which include some consideration for life support customers and customers with medical cooling needs. As such, there are likely to be opportunities for other non-essential equipment to be placed on DLC if the customer wishes to do so.

In light of this, EMRWG has revised the draft policy position so that customers with life support equipment not be excluded from DLC contracts and that the development of guidelines for explicit informed consent for DLC contracts includes provision for life support customers to place non-essential equipment on DLC.

EMRWG also acknowledges the agreement from all stakeholders that DLC services should not be used as a means to manage customer accounts, particularly for hardship customers, and that DLC should not be used as a pre-condition for customers seeking or participating in a hardship program. However, EMRWG acknowledges the point raised by AGL that the NECF obligates retailers to place hardship customers on the most appropriate tariff which could be a DLC tariff.

EMRWG notes that distributors are unable to offer tariffs directly to consumers. Where they offer DLC directly it must be as a voluntary standalone contract and as such cannot be part of a hardship program.


EMRWG recommends that customers with life support equipment should not be excluded from entering into DLC contacts. However, EMRWG also recommends that any guidelines for explicit informed consent for DLC contracts include provision for life support customers to place non-essential equipment on DLC, and consideration of the needs of customers with medical cooling needs.

75

Introduction

Consistent with existing regulatory requirements no customer should be required to involuntarily place any appliance on DLC, including as a condition of participation in a hardship program.

Retailers must demonstrate that, if a customer on a hardship program has agreed to a DLC service, this service is part of the overall assistance package provided to the customer and is appropriate to that customer’s individual circumstances.

5.5 Notification of load control activation

It is possible that customers could be notified when their controlled appliances are under control. While this may improve customer acceptance of DLC, it is possible that such a feature may incur extra costs for DLC providers which may be passed onto customers.


Consumer groups agreed that customers should be informed when load control is activated, but did not indicate a preference for the method of notification.

However, retailers argued that notification of when DLC is activated may not be necessary. Some suggested that notification could be provided as an opt-in service, possibly for a fee. However, Origin noted that notification may not always be appropriate and may lead to some confusion for customers where different devices are controlled in different ways.

Both respondents agree to some form of notification for customers but did not specify a preferred method.

Distributors were split on the needs for notification of activation. Jemena strongly supports notification of load control for safety and to avoid consumers mistakenly thinking that a device is faulty, whereas Energex and United suggested that times for the device to be under control should be specified in the terms of a DLC contract. Ausgrid questioned the value of notification and Energex noted the additional burden for the service, but Ergon suggested customers could request notification for a fee which reflects the cost of the service. Ausgrid noted that providers could offer this feature if it is valued by customers and could be used to incentivise customers to take up DLC offers.

For notification of DLC and manual override, eMeter argued that whether or not to offer notification is a decision for the providers relative to the needs of their consumers.

Better Place claimed that regulated notification to the customer would impose unreasonable costs with limited benefit to the customer. Instead, Better Place

76


prefers full disclosure of the terms and conditions to their customer of the way their charging service operates at the commencement of the service.


EMRWG notes the mixed responses from stakeholders on notification and understands that this feature may present an additional cost to DLC providers, may not always be appropriate, and may lead to some confusion for customers. Although a form of notification for some appliances could be specified in DLC contracts, without notification, there is potential for consumers to mistakenly think that an appliance is faulty.

With the DLC products currently available, such as hot water, there may be limited value to consumers for notification. Trials of load control of air-conditioning indicate that most consumers are not aware when their air-conditioner is being cycled and don’t notice and difference in comfort. However, with greater penetration of smart meters and wider application of DLC to more devices, notification may be a desirable feature for some consumers. It is possible that such a feature could be developed in response to consumer requests without the need for policy direction.


It is not proposed to mandate that notification of whether the controlled appliance is on or off be provided to consumers with DLC contracts.

5.6 Ability for customers to override load control:


Consumer groups have argued for customers to have the ability to override DLC signals for their controlled devices. While this may provide customers with more discretion whether to participate at times when load reductions are required, this could also reduce the benefits to the provider, and consequently limit the benefits to consumers.

CUAC noted that customers must understand the implications of having a manual override service for load controlled devices, for example, the loss of financial benefit if the device is manually overridden.

Retailers were somewhat ambivalent on the issue of making manual override available for DLC. While only AGL agreed that manual override should be available to customers, all suggested that it could be subject to the contractual terms of a DLC agreement.

EWON suggested that manual override should be an option for small customers.

The responses from distributors were mixed on this issue. Jemena supports the availability of the function, but others were more reserved noting that if

77

Introduction

available, it would likely reduce the benefits available from DLC and, as a consequence, any additional costs would ultimately be borne by consumers through a higher tariffs (through higher network charges). UE noted that opportunities for override may differ between appliances, however Ergon suggested that there may be limited legitimate reasons for short-term override, such as a pool cleaner.


EMRWG notes there may be conflicting interests between consumer utility and network management and notes the mixed responses from stakeholders. Some stakeholders argued that manual override for DLC could be subject to the contractual terms of a DLC agreement noting that such a feature may not be appropriate for all types of devices.

EMRWG notes that a manual over-ride will reduce the certainty around the amount of load control available at any particular time and that this reduces the value of this to providers of this service. However, it acknowledges that some consumers may wish this feature and as a consequence it may be offered by some providers with a consequent reduction in the price that they are willing to offer for the ability to control the customer load.


EMRWG does not recommend that a manual consumer over-ride be mandated as a feature of DLC.

78


6 Customer billing 43. Retailers should provide customers with consumption data for each tariff

segment on their bill to assist them to reconcile their bill charges.

44. Where a customer requests a copy of their historical billing data in relation to a bill, retailers must be able to provide the full set of metering data on which the bill was based, and a summary of the metering data on which the bill was based.

45. No changes to the overcharging and undercharging provisions are recommended.

46. Bills based on interval data will be required to show the accumulated total at the beginning and end of the billing period.

47. Supporting metrology processes to ensure that accumulated readings are collected and passed on to the relevant parties need to be developed.

48. All small retail customer time-varying tariffs should be expressed in local time.

49. It is not proposed to change the requirement for the meter clock to be in

Australian Eastern Standard Time.

50. It is not proposed to require network tariffs to be billed solely in local time, as this transaction is primarily managed by retailers.

51. Where retailers are required to inform customers that the bill contains estimated data, "estimated" should refer to any data that has been estimated or substituted in accordance with the Metrology Procedure.

52. Retailers should be required to inform customers that a customer’s bill is estimated and the extent of any estimations/substitutions if the total number of estimated/substituted intervals exceeds 96 intervals of a quarterly bill, or 32 intervals of a monthly bill. Retailers would have the discretion to inform customers of any estimation below this threshold, if they wished.

53. Retailers should inform customers of the existence of the materiality threshold in the retail contract.

54. If any estimation or substitution of data occurs during a CPP event, the

customer should be charged at tariff rate that would have applied if a CPP event was not called.

55. Ongoing monitoring of estimated and substituted data used for billing

retail customers by the AER should take into account estimation and substitution of data during CPP events. This ongoing monitoring may

79

Introduction

inform future Metrology Procedure amendments if it is deemed necessary.

56. The CPR contract should stipulate how estimated/substituted data will affect eligibility for the rebate, and includes a right of appeal against denial of the rebate due to estimated data.

57. Customers will have the right to challenge the basis of the estimation or substitution used for billing.

58. EMRWG recommends the AER should monitor the use of estimated and substituted interval metering data used for in small retail customer billing.

This chapter focuses on a small number of billing issues that need to be considered when consumers have smart meters. The central policy themes relate to enabling consumers to check their bill, the description, display and disclosure of estimations and substitutions on the bill, the interaction of estimations on critical peak pricing and finally whether the AER should monitor the extent of estimations and substitutions used in the billing process.

6.1 Outcomes for the first stage of the policy review

Draft policy paper one considered several billing issues, in terms of the NECF requirements for customer billing.

Bill reconciliation against a smart meter

To enable customer to reconcile their bill against the meter, SCO recommended that bills should include the accumulated reading corresponding to the end of the billing period. Draft policy paper two further considered whether the bill should also show the accumulated total for the beginning of the billing period.

Presentation of consumption information and reconciliation of bill charges

SCO recommended that retailers should provide customers with consumption data for each tariff segment on their bill to assist them to reconcile their bill charges.

Estimations

In the absence of a suitable alternative estimation and substitution method, estimated consumption during a critical peak period should be charged at the non-critical peak price. Further options were considered in draft policy paper two, including the possibility of changes to the Metrology Procedure, to provide a suitable alternative method.

Access to historical billing data

80


SCO recommended where a customer requests a copy of their historical billing data, retailers must be able to provide the full set of metering data on which the bill was based, and a summary of the metering data on which the bill was based.

This right to request the billing data is separate from any arrangements to access consumption data directly from the smart meter via a device on the HAN. Access to metering data via the HAN is considered further in Section 8 which extends the analysis relating to data access rights generally.

Undercharging and overcharging

SCO recognised the timeframes for overcharging and undercharging contained in the NECF are appropriate and did not recommended any changes to the overcharging and undercharging.

6.2 Enabling customers to check their bill

Draft policy paper two discussed whether retailers should be required to include a start and end meter read on customer bills. It was concluded that this will provide added reassurance to customers that their bill is correct and based on data from the meter as customers would be able to compare the accumulated total from the meter readings against the accumulated total on the bill.

Policy Position 19 concluded that “In accordance with the requirements of the National Energy Retail Rules, the bill should contain an accumulated total for the start and end reads derived from the smart meter.”


Consumer groups and EWON expressed support for this policy. CUAC believe that customers should have a means to verify their consumption against their bill when they have a smart meter and that this policy would continue the existing practise. They also noted that this has been extensively discussed and agreed by the ESCV37 in December 2011. EWON also commented that this issue is a significant source of customer complaints.

Retailers oppose the draft policy position and consider that the substitution and estimation that occurs when intervals of data are lost will render reconciling customer bills with the meter reading inaccurate. Although worthwhile for customers with accumulation meters, it will prove inconsistent, confusing and inaccurate for customers with smart meters. Origin argued that “embedding this approach when smart meters allow far more granular and accurate forms of information for consumers is short-sighted at best and misleading at worst.” Origin believes the challenge for industry is to work with consumers to develop “a consumer-friendly and secure view of how they can best access and digest” the new information and data enabled by smart meters. AGL believes the requirement should be reviewed so as to avoid further customer confusion.

37 Essential Services Commission of Victoria 2011, Smart meters regulatory review – Capacity control and meter reads final decision December.

81

Introduction

In contrast distributors were generally supportive, noting some practical policy implications need to be addressed. UE believes that current systems and processes will cause difficulties for retailers in calculating final reads when customers change retailers and believe that a potential solution would be for retailers to use an end of day index read as a proxy start read. UE also notes that “The current drafting of the NERR was never intended to apply for smart meters until the policy positions were considered and decided through consultation processes and implemented via AEMC rule change processes”. They suggested that this issue should be considered further in order to reach a consistent, national solution.

6.2.2 Evidence from Victoria

The ESCV considered this issue at length in their regulatory review of smart meters. In submissions during this process, distributors, consumer groups and policy departments noted that start and end meter reads may be useful and valuable to customers. The ESCV noted that retailer submissions argued that “the total accumulation consumption reading on the meter might become increasingly remote from the figure used for billing purposes because of the effects of estimations and substitutions.” However the ESCV also noted that most stakeholders believed the difference between the accumulated total on the meter and the bill would be minimal, and concluded that customers would benefit from the provision.


Consumers should be able reconcile their bill to a reasonable degree of accuracy. Requiring retailers to provide the start and end meter reads enables customers to check that their bill corresponds to their meter. The Rule 25.1.j of the National Energy Retail Rules requires that a retailer include on a customer bill “the values of meter readings (or, if applicable, estimations) at the start and end of the billing period”. EMRWG agrees with the conclusion of the ESCV that this provision would be of value to consumers, even in the smart meter context.

The minimum functional specification for smart meters requires the meter to display the accumulated consumption. Because the accumulated consumption is shown on the meter, the bill should contain the corresponding figure. It is this figure the consumer will compare to check that the bill has been based on data from the meter. Although the two figures will not match exactly due to the time lag between the meter being read and the bill being received by the customer, the difference between the two figures should be small and consistent with the customer’s usage patterns as shown on the bill.

Distributors and retailers have argued that the rate of substitution and estimation on customer bills is expected to be low and in most cases immaterial to the customer. A summary of Victorian metering data provider performance, as measured by the cumulative rate of interval data delivery, provided by AEMO supports the conclusion that the incidence of lost intervals of data requiring

82


estimation or substitution is very low. Given this, continuing the practise of allowing customers to compare their start and end meter reads to their smart meter will allow greater customer confidence and provide a basic mechanism for customers to ascertain the accuracy of their bills.

EMRWG also notes the issues raised by UE concerning customer churn, and notes that by definition, the end read of one billing period is the start read of the next. Under the existing retailer transfer rules, a customer transfer is generally effective following the next scheduled actual meter read, and expects this to continue to be the case. A smart meter will reduce the time between agreeing to switch and the transfer occurring at the next meter reading.

Current business to business processes may not support the provision of an accumulation read, and procedures will need to be developed to support this requirement.

EMRWG agrees the challenge for industry is to work with consumers to develop “a consumer-friendly and secure view of how they can best access and digest” 38

the new information and data enabled by smart meters. This should start with giving customers a convenient method of satisfying themselves that the metering data they are billed on comes from the meter installed at their property.


Bills based on interval data will be required to show the accumulated total at the beginning and end of the billing period.

Supporting metrology processes to ensure that accumulated readings are collected and passed on to the relevant parties need to be developed.

6.3 Billing on time based tariffs

Draft policy paper two discussed whether all TOU retail tariffs should apply in local time rather than Australian Eastern Standard Time (AEST) and concluded that this would minimise confusion for consumers.

Draft policy position 20 stated that “All TOU retail tariffs should be published as applying on the local time, rather than AEST and this should be clearly specified in the tariff information”.


Consumer groups support the draft policy position. CUAC states that “this approach would help customers better understand what rate they would be charged at the location they are residing.”

38 Origin Energy Submission on Smart Meter Consumer Protection and Pricing Draft Policy Paper Two pg 20.

83

Introduction

Most retailers opposed this policy position due to the perceived complication and difficulty of implementation. ERAA argues that “meters are regulated to be fixed at AEST and there is no obligation to set tariffs against daylight saving”. TRUenergy believes that the complexity and cost involved in enacting this policy outweighs any possible consumer benefit. Origin supports the policy position, but also notes that some distributors do not differentiate their network tariffs according to local time. Origin states that retailers will either have to “bear the burden of consumer queries and dissatisfaction” or “absorb the difference in cost (that is, pay networks for AEST but bill consumers on daylight savings time” – two outcomes that Origin does not believe are equitable for retailers. Origin believes that requiring networks to charge only in local time for TOU network tariffs would resolve this issue.

EWON supported this policy, citing this issue as a significant source of complaints to ombudsmen.

Most distributors also supported the policy. Ausgrid notes that its small customer TOU network tariffs already use local time. Ausgrid also concludes that they do not believe there is any need for this issue to be regulated for network businesses. UE supports tariff arrangements that are applied in local time as this is more meaningful to customers. They also believe it is critical that customers understand what time their tariff is in if CPP tariffs are adopted throughout the industry.


The draft policy position requires retailers to publish and apply time varying retail tariffs on the local time. EMRWG does not propose any change to the NER requirement that the meter clock be set to AEST.

A customer’s consumption patterns will most likely reflect local time. It is clear that customers must know the time basis of their tariff where charges vary by time, which includes CPP contracts and TOU contracts. This could be achieved by requiring the disclosure of the time basis of tariffs, and allowing the use of local or AEST to be determined in a customer’s contract. It is preferable for a small number of retailers to systematically account for daylight saving than for millions of customers attempt adjustment whenever they try to work out what price applies at a particular time. The most appropriate way to achieve this outcome is to require small retail customer tariffs that vary by time to be expressed in local time.

EMRWG acknowledges that retailers may see difficulties in implementing this policy position, especially in regards to network billing practises, but considers that this requirement could be easily met. For example the requirement would be met by publishing the time periods as they apply in AEST and daylight savings time in the tariff information, which could avoid any complex changes to data management, billing systems or reprogramming of time switches. For example, if the underlying network tariff peak period is 2pm - 8pm AEST all year, a retailer

84


offering this tariff in a jurisdiction with daylight savings would be required to publish the peak period as applying in winter (April –October) from 2pm – 8pm and in summer (November to March)1pm – 7pm with exact dates matching the change to or from daylight savings.

Although this may give the appearance of seasonal tariffs, it may be less confusing to customers than simply stating time varying tariffs are applied on AEST, and requiring customers to make the adjustment, to work out what tariff rate applies at given time.


All small retail customer time-varying tariffs should be expressed in local time.

It is not proposed to change the requirement for the meter clock to be in Australian Eastern Standard Time.

It is not proposed to require network tariffs to be billed solely in local time, as this transaction is primarily managed by retailers.

6.4 Displaying estimations and substitutions on the bill

Draft policy paper two discussed how retailers should describe estimations on customer bills and concluded that, to avoid consumer confusion, both estimated and substituted data should be referred to as ‘estimated’.

Policy Position 21 stated that “In advising customers that a bill contains estimated and/or substituted data, retailers are to describe the data as ‘estimated’ in all circumstances.”


Neither the joint consumer submission nor CUAC supports this position. CUAC believes that customers are entitled to accurate information regarding their bill. They state that “Describing the data as ‘estimated’ in all circumstances is not accurate.” The joint consumer submission argued that the customer should only be charged for immaterial amounts of estimated data, and that “Where the uncharged data loss is within the range allowed by business to business service levels, the cost of this additional energy will need to be recovered from additional costs passed through to all consumers.” Where levels of estimated or substituted data exceed business to business service levels, the joint consumer submission believes the costs should be recovered from the responsible business and not passed on to consumers. There would then be no need to inform customers about estimated and substituted data.

85

Introduction

Retailers also opposed the policy, and questioned the appropriateness of using the term ‘estimation’ in the smart meter context. ERAA and AGL believe that ‘substitution’ is a more appropriate term. ERAA believes that the term ‘estimation’ implies that a ‘guess’ has occurred which will be corrected at a later date. ERAA points out that not all lost intervals can be replaced with actual interval data as sometimes the data is permanently lost and a final substitution occurs. ERAA stated: “Customers with a smart meter should never really have an ‘estimated’ bill, just a bill with lost and substituted data.” Origin did not agree that ‘estimation’ is an appropriate term, but stated that “in the absence of a better term, and the opportunity for retailers to manage communications with consumers to explain terminology, it is probably adequate.”

ERAA expressed concern that if substituted data is treated as estimated, a retailer may breach the NECF obligation to provide consumers with a bill based on an actual meter read at least once in a twelve month period.

TRUenergy submitted that bills or invoices are financial transactions that are designed to inform the recipient of their liability for supply or services and as such are entitled to information that is material to the calculation of an invoice, which does include substituted readings. However they also believe that there is a materiality component that must be considered.

Ombudsmen supported the use of the term ‘estimated’, believing that this term will help avoid customer confusion.

Most distributors broadly supported this policy position. UE noted that energy portal data must be presented in a consistent manner with retail bills to avoid customer confusion. Ausgrid noted that there is a material difference between the estimation of a consumer’s total bill and the estimation of a single lost interval.


EMRWG recognises that there will be some circumstances where actual metering data can not be obtained, and so billing on estimated or substituted data will occur in accordance with the appropriate regulation. Where this occurs, the customer should be informed that all or part of the bill is not based on actual data.

For the purposes of billing small retail customers, the term “estimated” should be used to flag that the bill is based on some data that is not actual data, and the possibility that the bill may be revised, if and when actual data becomes available. For all other purposes, including market settlement, estimated or substituted data should continue to be used in accordance with the Metrology Procedure.

EMRWG considers that the majority of consumers would take the meaning of “estimated” to be the plain English meaning, that is data that has not been recorded by the meter and subsequently estimated, rather than the technical

86


definition used in the energy industry to describe data that is expected to be replaced when a reading is obtained. Under the plain English meaning, substituted data could also be correctly called estimated, as it is not the actual data recorded by the meter. There is very little difference in the way the value of estimated and substituted data is calculated, the distinction between estimated and substituted data is a technical distinction used for settlement in the wholesale market, which is largely irrelevant to a small retail customer. EMRWG believes that it is unreasonable to expect customers to understand the difference between estimated and substituted data.

To reduce confusion for consumers it is preferable that one term only is used when referring to estimated and substituted data. Retailers and consumer groups have discussed whether ‘estimated’ is the most accurate and appropriate terminology in this context, and have in general disagreed with the position proposed in policy paper two without proposing an alternative. However, consumers are already familiar with the term ‘estimated’ on their electricity bills and it is preferable to continue the use of the term with which customers are familiar. Referring to the data as ‘substituted’ will only add the levels of complexity customers face when transitioning to smart meter enabled systems. This approach is also consistent with the ruling of the ESCV.

EMRWG notes the concerns of retailers regarding potential retailer breaches of the NERR that may occur if substituted data is treated as estimated. This concern reflects a misunderstanding of the draft policy position, which is limited to designating the terminology that should be used by retailers to inform customers about the basis of their bill. It would not change a retailer’s obligations under the NECF to “use its best endeavours to ensure that actual readings of the meter are carried out as frequently as is required to prepare its bills consistently with the metering rules and in any event at least once every 12 months.”


Where retailers are required to inform customers that the bill contains estimated data, "estimated" should refer to any data that has been estimated or substituted in accordance with the Metrology Procedure.

6.5 Notification to consumers of estimations

Draft policy paper two discussed the circumstances in which consumers should be informed of the extent of any estimation on their bill. In particular it discussed whether there should be a threshold below which consumers would not need to be informed of estimations.

NECF provisions require retailers to inform customers on the bill when a bill is based on an estimation. For accumulation meters a bill can only be based on an entire estimate, or an actual meter reading. Draft policy paper one proposed that

87

Introduction

the scope of any estimation should be shown on a consumer’s bill in the smart meter context. This position was based on a desire to inform customers of the basis of their bill and to ensure customers maintain confidence in smart meter enabled billing systems. Stakeholder feedback received during the submissions process and the ESCV decision to implement a materiality threshold led EMRWG to consider this issue further in draft policy paper two. Stakeholders were asked what the costs and benefits of applying a threshold might be, as well as how a potential threshold could be determined and implemented.

Feedback was sought on the following questions:

What are the costs and benefits of using a threshold approach?

What are the costs and benefits of showing the scope of any estimation on the bill?

Should a threshold be applied to the reporting of the scope of estimations on the bill?

If a threshold is used, how should this threshold be determined?

How should customers be informed of the threshold if implemented?


The joint consumer submission and CUAC argued that a threshold approach should be unnecessary as customers should not be billed for consumption based on estimated data and thus they saw no need for a threshold. The risk of lost data should fall with the distributor or meter data provider.

However, if estimation is to occur CUAC believes customers should be informed of the extent of any estimation on their bill. CUAC was also concerned about the difficulties in determining an appropriate threshold, the lack of incentive for industry to improve its service delivery standards, and the fact that customers would only be informed that their bill contained estimates in certain circumstances. This would lead to potential confusion and complaints if future adjustments were made.

Retailers argue that disclosing immaterial amounts of estimated data on customer bills would impose significant costs on retailers for no material benefit to customers. ERAA states that the benefits of a threshold would be that “retailers will not be required to advise customers based on very minor and/or infrequent instances where data is required to be estimated/substituted” which would result in the avoidance of “increased customer enquiries to retailers and customer confusion.” AGL added that a threshold would be both easier for retailers to implement and would allow for greater transparency for customers. Arguing for a threshold, Origin states that “it is absolutely inappropriate to show every estimated reading: this will overtax retailers billing systems (and potentially call centres) for potentially insignificant amounts.” It is the unanimous opinion of retailers that the implementation of a threshold provides

88


the best outcome to these problems. AGL states that this threshold must not be complex, citing the need to explain the threshold to customers.

While a threshold was strongly supported, retailers did not have a clear preference as to how this threshold should be determined. Origin was supportive of the threshold applied by the ESCV, which requires that retailers inform customers on the scope of estimation on their bill if an allowable number of estimated or substituted intervals were breached. TRUenergy recommended that a materiality threshold be created balancing the need to substitute data against the material impact on consumers. This could be based on a percentage of the bill, dollar amount, or period of time affected. ERAA supported further stakeholder consultation in developing the threshold.

Ombudsmen opinion was divided on the issue of a threshold. EWON supported a threshold that included appropriate consumer protections. However, EWOV argued for full disclosure of estimated and substituted data on customer bills.

All distributors support a threshold, noting that this would be an appropriate way to deal with the expected small amounts of estimated data. UE was supportive of a higher threshold than the one proposed by the ESCV or a values based approach whereby “the financial impact of the contribution to the value in the bill is considered the threshold”. They believe that this approach may be more meaningful to customers. Ergon stated that the retail contract or customer bill would be the appropriate avenue to inform customers of the threshold.

eMeter, a third party, believes that a small percentage of data will always be estimated during the remote collection of interval data. eMeter supports a threshold of 96 – 98 per cent, which they believe will ensure unnecessary costs are not incurred by industry.


The ESCV considered the issue of a materiality threshold in detail and originally proposed a threshold equal to five per cent of the total number of intervals contained on the bill. During consultation consumers argued that a five percent threshold did not place enough incentive on industry to ensure appropriately high standards. The ESCV also took into consideration the arguments of retailers, who believed that they would face additional costs without a threshold. The ESCV ruled that a threshold equal to two days of lost interval data (96 intervals) per billing period (4,320) would apply. This is just over two per cent of total intervals over a three month (90 day) period.

To assist their analysis data performance data on Victorian Advanced Metering Infrastructure (AMI) systems was sought from AEMO to gauge the scope of estimation and substitution on consumer bills. This detailed data that indicated that current AMI systems in Victoria provide a high level of accuracy and that estimation and substitution of customer data occurs infrequently and in extremely small quantities that are well within accepted industry standards. AEMO did caution that they had no knowledge of the data set used for retail

89

Introduction

billing. As EMRWG expects the same data provided to AEMO for market settlement is also used for retail billing, it is reasonable to expect a very small proportion of estimated and substituted data would be used for retail billing.

The submission of eMeter, which explained that a small amount of estimated data is expected in all interval data billing systems internationally, was also taken into account.

While initially sceptical of the necessity and validity of a materiality threshold for estimated data, strong consideration has been given to arguments concerning the implementation of a materiality threshold. EMRWG notes consumer concerns about the use of estimated data, but does not believe that preventing customers from being billed for estimates is a practical solution. If the individual consumer is not charged a reasonable estimate based on the relevant industry accepted Metrology Procedure for lost intervals of data, the cost of the energy consumed will be passed on to all consumers.

Given the data presented by AEMO, which indicates that it is possible to have just a few intervals missing, but is extremely rare, and most cases of substitution would involve substitution for a full day, EMRWG believes that applying a materiality threshold on the reporting of estimated and substituted data is appropriate. In light of the ESCV decision, EMRWG believes that a threshold of around two percent is appropriate, being similar to the allowable error (accuracy) of the metering installation of 1.5 percent prescribed in the Rules.

Stakeholders proposed several options regarding how a threshold should be expressed. However, EMRWG agrees that the ESCV decision to base the threshold on the number of estimated or substituted intervals is reasonable. Using the number of intervals gives a threshold that is not dependent on the customer’s tariff, nor requires identification of which intervals are not actual data.

Retailers should be required to advise customers on the scope of any estimation or substitution when the number of estimations or substitutions on a bill is equal or greater than 96 half hour intervals in a 90 day (quarterly) billing period. Where a customer is billed monthly this would be reduced to 32 half hour intervals. EMRWG proposes not to specify the form in which that information should be provided to customers, but leave this to retailers. Retailers would have the discretion to inform customers of any estimation below this threshold if they wished.

As customers have a right to know the basis for the bill, customers should be informed of this threshold in the retail contract.


Retailers should be required to inform customers that a customer’s bill is estimated and the extent of any estimations/substitutions if the total number of estimated/substituted intervals exceeds 96 intervals of a

90


quarterly bill, or 32 intervals of a monthly bill. Retailers would have the discretion to inform customers of any estimation below this threshold if they wished.

Retailers should inform customers of the existence of the materiality threshold in the retail contract.

6.6 Impact of estimations methodology on critical peak pricing

The current Metrology Procedure has a number of methods of estimating metering data for the market when actual data is lost. However, these methods were not been designed to deal with estimates for innovative tariffs such a critical peak pricing as most customers had single rate tariffs. Such an estimation method would need to take into account past customer behaviour during critical peak periods and any change in behaviour that may occur during these events. It is likely that the current estimation types in the Metrology Procedure may overestimate consumption during a critical peak event which may have a material effect on an affected customer’s bill.

Draft policy paper two proposed that “A customer’s past behaviour during the previous CPP event (if available) should be used in estimating their consumption in the event of a meter failure during a CPP event. “

Stakeholders were asked for comment on whether there should be changes to the Metrology Procedure to more accurately establish an estimation methodology in critical peak pricing and, if so, how should these changes can be progressed.

EMRWG also stated that “All customers should have the right to challenge estimated readings on the bill if they believe that the estimate is not a reasonable estimate of their likely energy use.” This policy position is not limited to customers on a CPP contract, but may be of particular relevance to consumers who dispute any estimation that occurred during a CPP event.


Consumer groups did not support the proposal on estimation and substitution during a CPP event. CUAC has strong reservations regarding CPP and rejects customer billing based on estimated data. CUAC also considers that the proposed right for customers to challenge any estimated readings, does not “confer any additional safeguards for customers on CPP”. The joint consumer submission states that under no circumstance should customers be charged based on estimated or substituted data during a critical peak.

Most retailers have given cautious support for the draft policy positions. The ERAA questioned what would happen if retailers do not have access to the customer’s previous consumption data. Origin also places a caveat on their

91

Introduction

support for this position by noting that the NSMP Business Process and Procedures Work Steam concluded that “that (a) retailers do not create data for substitutes, meter data providers do; and (b) Metering Data Providers (MDP) activity is independent of the product a customer is on and there are currently no provisions for MDPs for to be advised of retail pricing products”. AGL states that “in the event of a failed meter during a CPP event then any usage recorded should be assumed to have occurred outside the CPP event by both the retailer and the distributor to ensure any loss is incurred by the party responsible for the meter.” Origin also notes that further development of this policy is needed and that they are “not convinced that the rare cases of CPP periods coinciding with data substitutes warrants this approach”.

EWON supports the draft policy positions.

Most distributors were also in favour of a right to challenge estimations and substitutions. Distributors were, however, divided on how to proceed in regards to estimations and substitutions during CPP events, and whether changes to the Metrology Procedure provided a solution. UE noted that the meter data provider is not aware of the customer’s contract or tariff arrangement with the retailer. Retailers would need to specifically request the customer’s data for previous CPP periods. Ausgrid suggested that in the event of estimation during a CPP event, the simplest solution would be to ‘ignore the event for the customer from a CPP point of view’ and only charge the customer for the estimated data at a standard tariff rate.

Citipower and Powercor expressed concerns that proposals to change the Metrology Procedure process may raise data privacy concerns, although the submission did not state what these were. Ergon suggested that any changes to the Metrology Procedures would be premature until a complete assessment of whether changes would adversely affect consumers is undertaken. UE agreed with this assessment, recommending that EMRWG “request the AEMO metrology reference group to develop a more formalised view of possible metrology improvements, the likely level of use of any improvements, and an industry cost/benefit so that a more informed decision can be made on any cost effective possible metrology improvements.”


There are complicated issues surrounding the estimation and substitution of data during CPP events. In order for tariff arrangements such as CPP to succeed, consumers must be assured that the approach to charging is fair. Retailers also need the assurance that they will not suffer undue losses due to circumstances outside of their control such as meter failure.

Although, noting the strong reservations by consumer groups, EMRWG believes that there are considerable benefits for consumers in the development of innovative tariff products such as CPP. EMRWG also believes that the joint consumer position, which would ensure customers were not billed for any usage

92


if an interval of data was lost during a CPP event, would result in undue risks to retailers.

While retailers gave cautious support to using a consumer’s previous consumption data during CPP events to calculate estimations and substitutions, retailers raise valid points about the difficulty of such changes to the Metrology Procedure. Changes to the Metrology Procedure to accommodate CPP could involve substantial costs in system changes for retailers, meter data providers and AEMO, in order to identify and keep track of critical peak event days called by different retailers in different areas, so the appropriate basis for the estimation could be determined. EMRWG agrees that any changes to the Metrology Procedure should be made by the existing change process. Given it is unclear how widespread CPP tariffs will be and the likelihood that the use of estimates will be small it may be premature to develop changes to the Metrology Procedure at this time.

It is also unclear if changes to the Metrology Procedure will solve the potential problems faced by customers relating to lost data during critical peak events. In particular, changing the Metrology Procedure may not be a solution for customers for whom no previous consumption data during critical peak events existed. Furthermore estimating data based on previous consumption during a critical peak event will not necessarily produce a more accurate estimate of actual usage, as consumer’s responses to a critical peak event may differ. Consumers could respond to pricing signals during one CPP event but not another. The difficulty of implementation, coupled with the fact that the proposed policy does not adequately resolve the issue for consumers, has led EMRWG to reconsider its position on this matter.

EMRWG notes Origin’s suggestion that the incidence of estimations during critical peak periods is expected to be minimal. This is backed up by data provided by AEMO on the rate of estimation and substitution. Given estimation and/or substitution of data during a critical peak period is expected to be a rare event, making changes to the Metrology Procedure is not likely to be cost effective or a proportionate response to the problem. The solution proposed by Ausgrid – that the critical price event is ignored for that consumer – presents a solution that EMRWG feels is equitable for both consumers and retailers.

EMRWG recommends that, where estimations or substitutions are required during a CPP event, customers are billed at the rate that would have otherwise applied had the CPP event not been called. Retailers should identify any estimated data in this circumstance, regardless of whether or not the volume of estimated data falls under the threshold (discussed in section 6.5.3 above).

This policy was originally proposed in draft policy paper one. In their response to this retailers argued that this would be unfair to retailers as they would continue to be liable for the wholesale electricity price but would have no control over the lost data. However, requiring retailers to charge at the tariff rate that

93

Introduction

otherwise would have applied is more equitable for retailers than allowing them to not charge customers at all, as proposed by consumer groups.

As noted above, loss of data during a CPP event is expected to be rare and CPP is expected to be a niche product. EMRWG therefore considers this would not materially affect a retailer’s viability or revenue. However, for consumers a small change in the volume consumed can have a large impact on the total amount payable during a CPP event.

The approach advocated has the additional benefit of a MDP not having to know the tariff arrangements and what estimation method to apply under different tariff circumstances, such as when a critical event occurs.

The concern that retailers will face financial risk for this loss of data, an event outside of the retailer’s control, is acknowledged. EMRWG therefore recommends that ongoing monitoring of estimated and substituted data used for billing retail customers by the AER take into account estimation and substitution of data during CPP events. This ongoing monitoring may inform future Metrology Procedure amendments if it is deemed necessary.

Unlike a critical peak tariff, a rebate program can be designed in different ways, and estimation or substitution during the critical peak period may have different impacts on a particular customer’s eligibility for a rebate. EMRWG considers that a customer should not be disadvantaged by a data failure. In developing a rebate program, businesses should consider how data estimated or substituted in the critical peak period may affect the eligibility of that customer for the rebate, and how this will be managed, and communicated to customers.

Due to the various ways a critical peak rebate program can be designed, it is problematic to prescribe in the Rules how estimated data should be treated in determining customer’s eligibility for the rebate; rather this should be specified in the contract and include a right of appeal against the estimation used.

6.6.3 Customer right to challenge estimations on the bill

Customers have an existing right to challenge the bill where they believe a mistake has been made. EMRWG is proposing further enhance this existing provision by giving customers the right to challenge the basis of the estimation or substitution used for billing. This would allow the consumer to present evidence that, even though the estimation may have been calculated according to the correct Metrology Procedure, the result is not a reasonable reflection of their energy usage.

Given the inherent limitations in the Metrology Procedure, EMRWG considers giving customers to right to challenge estimations will over time improve and refine the estimation process, to the benefit of consumers, and the entire supply chain. In particular, industry will need to be able to justify why data was estimated (or substituted) and how the estimated value was calculated. This

94


right to query estimated values should be available to all customers regardless of tariff type.


If any estimation or substitution of data occurs during a CPP event, the customer should be charged at tariff rate that would have applied if a CPP event was not called.

Ongoing monitoring of estimated and substituted data used for billing retail customers by the AER should take into account estimation and substitution of data during CPP events. This ongoing monitoring may inform future Metrology Procedure amendments if it is deemed necessary.

The CPR contract should stipulate how estimated/substituted data will affect eligibility for the rebate, and includes a right of appeal against denial of the rebate due to estimated data.

Customers should have the right to challenge the basis of the estimation or substitution used for billing.

6.7 AER monitoring of the use of estimated and substituted data

In its’ response to draft policy paper one SCO recommended ongoing AER monitoring of the use of estimated and substituted data as one indicator to measure the reliability of the metering system. This monitoring was seen as a way to “inform future considerations of guaranteed service levels for metering data and treatment of estimated and substituted data on bills”.

Draft policy position 24 stated that “The AER will have an ongoing role in monitoring the use of estimated and substituted data.”


Consumer groups supported ongoing AER monitoring on the use of estimated and substituted data for customers with both accumulation and smart meters.

Retailers provided cautious support for ongoing AER monitoring. However, retailers oppose changes to the retailer performance reporting obligations at this stage. Retailers believe distribution businesses should form part of the focus of any ongoing monitoring and reporting. Origin stated that they “do not support this being a retailer performance reporting obligation as suggested by the EMRWG as this implies that retailers have some control of this issue.” Origin believes this reporting requirement on distributors and metering data providers should include both the volumes and the reasons why estimations and substitutions have occurred.

95

Introduction

EWON supported this position, noting that AER should also take into account Energy Ombudsman complaint data.

Ergon and Jemena supported this position, while United Energy believes there are currently sufficient indicators in place at this stage. Ausgrid stated that “existing procedures should continue with monitoring and reporting of estimates over time.”


AER monitoring of estimated and substituted data is supported by all industry participants. This reporting should not be limited to a retailer performance reporting obligation. The reasons why estimations and substitutions occur should also be taken into consideration, and this should require reporting from MDPs. EMRWG also supports EWON’s position that the AER should take ombudsmen complaint data into consideration; however the exact parameters of this reporting should be decided upon by the AER.

EMRWG notes the view that there are sufficient indicators on quality and timeliness in the market from a meter data viewpoint. Whilst AEMO collects this data, it is for market settlement purposes and AEMO does not collect statistics on the proportion of customer bills that contain estimated and substituted data, or the proportion of estimated or substituted data such a bill contains.

The intention is to use this information to inform future regulatory decisions on billing on estimated data, including the threshold for reporting estimated data to consumers, treatment of estimations during CPP events, and inform amendments to the Metrology Procedure over time.

As the bill is issued by retailers, they are the only party able to report on the number of bills containing estimated data and the proportion of estimated data these bills contain. As the reasons for data estimation and substitutions are relevant to informing future policy decisions reasons for estimation and substitution should be reported as well. This will assist in identifying systemic issues and provide a good understanding of failure rates.

As this is a compliance issue this monitoring should include all small customer interval metering, not only where smart meters are installed.

This would be implemented through a request to the AER to incorporate into its compliance framework. The AER would need to consult on the appropriate indicators for small customer billing, keeping in mind the purposes for which this information is requested.

An amendment to the NERR may be required to enable the AER to obtain the information required for this monitoring from the relevant parties.


96


EMRWG recommends the AER should monitor the use of estimated and substituted interval metering data used for in small retail customer billing.

97

Introduction

7 Consumer engagement

Recommendations

59. EMRWG confirms the objectives for consumer engagement as set out in the draft policy paper. These are to :

provide information about the rollout of smart meters and how it will affect consumers;

provide information about smart meters and how they operate; empower consumers to take control of their energy usage by showing

them how they can access accurate and timely information about the services enabled by smart meters, and the opportunities to reduce their energy usage and bills;

provide a mechanism to enable consumers to directly provide information about their issues and concerns and have those concerns addressed; and

increase general consumer understanding and acceptance of a smart meter program.

60. EMRWG recommends that the Commonwealth government and/or the state or territory governments, where they are the project proponent, should have a co-ordinating role in the consumer engagement program for the widespread installation of smart meters to enhance the understanding of the program by the community.

61. To develop relevant strategies for the consumer engagement program

and to recommend the most appropriate strategies for different customer groups and circumstances, the involvement of industry and consumer representatives is essential.

62. A jurisdiction should give further consideration to responsibilities and information requirements/delivery where a large scale roll out occurs but the state or territory government is not the proponent.

Engaging consumers is an integral part of the success of smart meter deployments and will have a major impact on the overall effectiveness of a program. The main issues are around the objectives of engagement, how consumer engagement should be managed and who is responsible for co-ordinating engagement at each stage of a rollout. The main focus of this chapter is on the role of governments.

Draft policy paper two outlined a broad brush strategy for engaging consumers and suggested a number of objectives of a consumer engagement strategy. These were to:


provide information about smart meters and how they operate;

98


empower consumers to take control of their energy usage by showing them how they can access accurate and timely information about the services enabled by smart meters, and the opportunities to reduce their energy usage and bills;



It suggested that, where there was a widespread rollout of smart meters, the role of government is to co-ordinate consumer messages, but the role of the industry and consumer groups was equally important. Feedback was sought on the role of government in the absence of a mandated roll–out and who should take the lead role prior to, during or after the commencement of a rollout.

7.1.1 Stakeholders submissions: general themes

A consistent theme throughout submissions from all stakeholder segments is that consumer energy literacy needs to be dramatically improved. The introduction of smart meters can lead to increased complexity in pricing arrangements and the types of services likely to be offered. Unless consumers have a better understanding of their electricity usage, their ability to manage this complexity will be diminished and they would be less likely to be able to benefit from the services potentially enabled by smart meters – or could even potentially be worse off. All stakeholders who commented suggested that consumer engagement plays a key role in increasing energy literacy. All parties agreed that targeted engagement strategies are needed to engage different segments of the community.

CUAC stressed the importance of effective consumer engagement to achieve consumer benefits. They stated:

“Smart meters and the information provided through them offer the opportunity to empower consumers with more knowledge and awareness of energy, how to reduce consumption and how to save money….. CUAC supports the development of a broad education campaign on energy literacy that would incorporate smart meters, energy efficiency and retail market participation”.

7.2 The objectives of consumer engagement

Draft policy paper two outlined the possible objective of consumer engagement and asked:

if the objectives were sufficiently comprehensive

if there were any other objectives that need to be identified

99

Introduction

what other issues may need to be addressed.


Consumer groups were generally supportive of the objectives. The joint consumer submission suggested that the objectives should be expanded to include “an understanding of the costs and benefits of the program”. They were also concerned that acceptance of a program would be hard to achieve and understanding of a program is a more realistic objective. CUAC suggested that the information provided should cover the rollout, its implications, costs, safety, how to access the benefits of smart meters including the use of HAN devices and the appropriate choice of a tariff for the individual consumer’s circumstance.

As part of their submission CUAC provided a copy of research they had undertaken in 2010 with funding support from the Department of Primary Industries in Victoria. This research assessed the information needs of the community sector and business groups in relation to smart meters. CUAC consulted with a broad range of community sector and business representatives to determine current knowledge and perceptions of smart meters. The consultations also identified approaches to providing these groups with information and materials that would enable them to support their members and clients regarding their smart metering queries.

Drawing on this research, CUAC suggested that consumers sought information on three basic questions: What is a smart meter? Why am I getting a smart meter? What will a smart meter mean for me? CUAC further suggested that consumers need clear and accurate information on cost, particularly immediate costs. Lack of transparency will mean price rises for other reasons will be blamed on smart meters. Customers need to understand the direct costs of any smart meter rollout and the associated impact on bills.

Retailers broadly agreed that the objectives stated in the draft paper are sufficient, although both the ERAA and AGL suggested that a review of the existing consumer engagement program be conducted39. The ERAA stated:

“Consumer awareness and acceptance needs to be carefully managed…The challenge then is how we get these customers to progress along a spectrum from being uninformed to informed, to engaged, to empowered. Furthermore it won’t mean a standard message to all…Tailored messaging is required for each segment group and these needs [sic] to be done with benefits to consumers as top of mind. Early claims that smart meters will save energy or money or reduce emissions may leave anyone making such claims in a difficult position later on.”

Ombudsmen also supported the objectives of consumer engagement and argued that unified consistent communications from industry and government is important prior to mass rollout.

39 Although not specified in their submission we take this to refer to the Victorian program.

100


Distributors were also in agreement. Ergon suggested that a consumer engagement program should also cover safety issues, while Ausgrid believes that a key objective should be to inform and educate electricity consumers about the value of cost reflective pricing tariffs that are possible with smart meters and the reasons it is being introduced.

A third party, Opower, also supported the objectives of consumer engagement, but suggested that retailers and distributors should empower consumers to take control of their energy use by contracting with proven third party service providers.


Stakeholders as a whole were supportive of the objectives for consumer engagement set out in the draft policy paper. EMRWG notes the joint consumer groups suggestion to include “an understanding of the costs and benefits of the program” as an objective. Whilst agreeing that this is important EMRWG does not believe that this is an objective of consumer engagement per se, rather this is part of the objective of understanding the program and as such is already included in other objectives.

Further, understanding of costs and benefits of the program are unlikely to be relevant to many consumers – most will be more interested in their personal circumstances.

EMRWG also acknowledges the views of consumers that acceptance of smart metering may be difficult to achieve. However, EMRWG considers this an important objective. It is to be hoped that increasing consumer understanding of the technology and the services it supports would also lead to increased acceptance.

EMRWG is generally supportive of CUAC’s view that consumer engagement on smart meters should form part of a broad education strategy to improve energy literacy incorporating smart meters, energy efficiency and retail market participation. This strategy could include information on many of the new services enabled by smart meters, including new pricing options, and the rights and responsibilities of consumers although it should be noted that it is not the role of government to promote particular forms of retail pricing. Caution will be needed that some essential information specifically related to the rollout process (such as relevant installation and safety information) is not lost in a larger energy literacy campaign.

The EMRWG agrees with Opower’s view that the objective of “empowering consumers to take control of their energy usage by showing them how they can access accurate and timely information about the services enabled by smart meters and the opportunities to reduce their energy usage and bills” is of critical importance. However, it does not support their recommendation that retailers and distributors should be required to engage third parties to achieve this

101

Introduction

objective. Rather this should be a commercial arrangement between the parties involved.

EMRWG therefore confirms the objectives for consumer engagement as set out in the draft policy paper.

Many of the objectives of consumer engagement will be the same regardless of the rollout model. However, under the scenario of a commercial, non-mandated rollout, where consumers may have some choice over the type of meter they have there will be greater onus on the proponent of a rollout to engage with the customer and persuade them of the benefits of the technology or services, particularly if some options are higher cost than others.

EMRWG notes that Western Australia (WA) has had significant success in trialling smart meters, remotely operating a full suite of functions including load control and integration of distributed generation, and creating strong consumer support and demand for smart meters. The WA approach could provide a good model for consumer engagement in other jurisdictions.


EMRWG confirms the objectives for consumer engagement as set out in the draft policy paper. These are to :


provide information about smart meters and how they operate;

empower consumers to take control of their energy usage by showing them how they can access accurate and timely information about the services enabled by smart meters, and the opportunities to reduce their energy usage and bills;



7.3 The role of government, industry and consumers in consumer education

Draft policy paper two discussed how consumer understanding could be enhanced with a particular emphasis on whether governments should play a co-ordinating role. It concluded that the Commonwealth Government and/or the

102


state or territory governments should have a co-ordinating role in the consumer engagement program for a widespread installation of smart meters to enhance the understanding of the program by the community. The policy paper also asked what the role of governments should be in a non-mandated rollout.


Nearly all stakeholders were supportive of this position. CUAC suggested that this would allow links to be made with other policies such as improving energy efficiency and enabling consumers to make informed choices on their energy usage.

Ombudsmen also supported a coordinating role for government to avoid mixed messages.

Distributors generally supported a strong role for government in the early stages of a mandated rollout with distributors taking the lead during and afterwards. UE suggested a role for the AER.

Retailers were supportive of government involvement in the early stages with retailers taking the lead in disseminating information on specific products and services.

Draft policy paper two discussed consumer and community involvement and concluded that a successful engagement program requires the involvement of industry and consumer representatives. Stakeholders broadly endorsed this approach. EWON noted that there is a role for energy ombudsmen to contribute their expertise.


Stakeholders generally agreed with the proposition that governments will play an important role in co-ordinating a comprehensive consumer engagement program particularly in the case of a mandated rollout. The report by CUAC, along with comprehensive evidence from pilots and trials here and overseas suggests that a program will benefit from having a co-ordinated consumer engagement strategy in place well before smart meters are rolled out. Evidence from around the world suggests that early and robust consumer engagement is essential to the success of a smart meter program. Such a strategy needs to be transparent, consumer focussed, and involve all stakeholders.

EMRWG is supportive of the need for a comprehensive consumer engagement program, which commands broad support from industry and consumers. The role of government in this program is to co-ordinate and promote consistent and accurate messages, recognising the diversity of different consumer groups. The widespread literature from around the world and experiences gained during the Victorian rollout provide valuable lessons on the need for engaging consumers early.

103

Introduction

EMRWG notes that the Victorian government is taking a lead role in consumer engagement for its Advanced Metering Infrastructure program including through a Ministerial Advisory Council This Council has a focus on realising the benefits to consumers from smart meters and ensuring that Victorians have a strong voice in the program. The Council includes a broad spectrum of consumer groups and industry representatives and will work towards bringing forward the benefits of the smart meter program. The Council will also monitor other smart meter consumer information and engagement programs.

EMRWG also notes that the AEMC Power of Choice review discusses consumer engagement, education, the role of network business, retailers and other parties to engage with consumers - how dialogue can take place in a transparent manner when offering different products and services.


EMRWG recommends that the Commonwealth government and/or the state or territory governments, where they are the project proponent, should have a co-ordinating role in the consumer engagement program for the widespread installation of smart meters to enhance the understanding of the program by the community.

To develop relevant strategies for the consumer engagement program and to recommend the most appropriate strategies for different customer groups and circumstances, the involvement of industry and consumer representatives is essential.

7.4 Consumer engagement in a non-mandated rollout

Draft policy paper two discussed the responsibility for consumer engagement at each stage of a rollout and asked whether this might differ under a commercial, non-mandated rollout.

7.4.1 Stakeholders views

Stakeholders had differing views on this question although most submissions stressed the need to work with retailers, distributors and community groups to avoid mixed messages and educate consumers on smart meters.

CUAC supported a strong lead role for governments working with industry and local governments, whilst the joint consumer submission suggested that whoever mandated the rollout should take the lead role initially with retailers and distributers assuming this responsibility after the installation phase.

Ombudsmen supported a key role for distributors and retailers.

104


Under a non-mandated rollout consumer groups stressed that government should still be involved in promoting a nationally consistent message but that the costs associated with consumer engagement should be borne by the parties instigating the rollout.

Distributors and ombudsmen believed that the government still needs to be involved, but retailers suggested that a customer’s retailer is the appropriate party to co-ordinate messages for any particular customer.

Distributors and retailers were also generally supportive of a role for government with the notable exception of Origin Energy who stated that:

“In the absence of a government mandated rollout Origin does not support government having a co-ordinating role for a consumer engagement program on smart meters or flexible pricing. However, we do agree that government should be aware of measures taken by the industry and there should be co-ordination across parties to ensure consistent messaging for consumers. We agree that the primary responsibility for consumer engagement should fall predominantly on the parties providing the meters and the smart meter services.”


EMRWG considers that any wide-scale rollout of smart meters is unlikely to be successful without the engagement and acceptance by consumers, and that in these instances, government has a co-ordinating role in formulating a comprehensive consumer engagement strategy, as a minimum.

In an industry led deployment the parties installing and operating the meters will have the primary role for communication and engagement. In targeted deployments supporting particular products, consumer engagement would be primarily a matter for the company offering the product to consumers.

In any rollout situation government has a legitimate role in relation to safety, security and consumer protections.


A jurisdiction should give further consideration to responsibilities and information requirements/delivery where a large scale roll out occurs but the state or territory government is not the proponent.

105

Introduction

8 Customer access to data and the home area network (HAN)

Recommendations63. Customers should be able to register a device on the Utility Home Area

Network (HAN) without the device being part of a contract for the supply and/or sale of electricity.

64. A registration facility should be provided by the responsible person. Customers should register a device on the utility HAN using an agreed industry-wide device registration procedure.

65. The charge for the registration of a device, if any, should be determined as part of the overall set of charges for metering services. The AER should be asked to consider the AEMC’s proposed beneficiary pays principle (and limitations thereof) in any appropriate determination.

66. During any jurisdiction’s transitional period a jurisdiction may determine whether such device registration should be at no direct charge to the consumer. In such cases the party providing the registration facilities should be able to recover the costs of registering devices through the most appropriate metering charge, rather than a separate direct charge.

67. Device registration should be considered a metering service.

68. The AER should develop guidelines for the terms and conditions for registering a device on the utility HAN and ongoing meter access by the device.

69. Registering a device on the HAN or logging on to a web portal constitutes a request for access to metering data for the purposes of the NER.

70. Customers should be able to access their own data via an In-home display (IHD0 or similar device, that they supply and web portal provided by the retailer or distributor, at no additional cost charged by the electricity retailer or distributor. Customer access to data, through these methods should be considered part of the metering services.

71. Supporting procedures to enable device registration processes should be developed through AEMO’s existing procedure development processes.

72. In accordance with current practice, customers may authorise provision

of their data to any authorised third party.

73. Rules around data access should be clarified for third parties based on the conclusions of the Commonwealth Sapere scoping study and recommendations by the AEMC.

74. Distributors sending messages in relation to power emergencies and

106


planned interruptions, in accordance with the regulatory requirements, to customers through their IHD does not require prior consent.

75. Emergency warning messages sent on behalf of emergency services, may be sent to customers through their In home display (IHD) without consent.

76. Retailers, distributors or third parties cannot send marketing or similar information to customers through the IHD without the customer’s explicit informed consent.

77. For retailers this consent can be obtained at the entry to the contract or during the contract period. Distributors and third parties should be required to have clear mechanisms whereby this consent can be obtained. All parties must be able to provide clear evidence of this explicit informed consent.

78. Where appropriate the energy marketing rules should be extended to distributors and third parties using the HAN and IHD to market to consumers.

Customer access to data and use of the home area network (HAN) provide tangible benefits to consumers from smart meters, which may assist consumers in understanding and better managing their energy use. To be able to effectively use the information generated from a smart meter, consumers must be able to access the data in a timely and easily understood manner. The utility HAN provides the potential for consumer access to data directly from the meter and may provide for control of certain appliances.

The NER requires metering data is kept confidential. It provides for customers to access the metering data for their premises and grants access rights to specified persons to fulfil their obligations under the electricity laws. The NECF also gives customers a right to access their billing data. The interface to the HAN provides a technical capability for customers to access real time data directly from the meter although the technology is still relatively immature and there may be some technical issues that are still to be resolved.

8.1 Registration of devices on the HAN and customer access to data

This section is concerned with a customer’s right to access to data from the smart meter, including how any costs involved should be recovered. It does not consider technical implementation, which is beyond the scope of this paper. Third party access to data is considered in section 8.2

Draft policy paper two proposed that customers should be able to register a device on the utility HAN without having to enter a contract with any party. It then asked if this registration should be at no direct cost to the customer.

Draft policy paper two further proposed that registering a device on the HAN, and logging on to a web portal should constitute a request for access to metering

107

Introduction

data and also asked if customers should be able to access their own data via an in-home-display (IHD), web portal or similar device without a direct charge.


Consumer groups supported the draft policy that customers should be able to register devices without having to enter a contact with any party and believe that there should be no direct cost to register devices for consumers.

Consumer groups also agreed that registering a device or logging on to a website constituted a request for access to data, and believe that consumers have the right to real-time access to metering data at no charge. Whilst acknowledging that there is a cost to this service, it should be recovered through a means other than an ongoing data access charge.

CUAC cited the Texas Smart meter portal as an example that could be followed to provide consumption information to consumers, and noted this service is provided free of charge to the consumer. CUAC also noted that the some Victorian retailers and distribution businesses have developed web portals to enable customers to access their data free of charge.

Retailers generally agreed that customers should be able to register devices without having to enter a contract with any party; however they suggested that customers may need to consent to terms of use in registering devices on the utility HAN. Retailers suggested that registration of devices should be provided at low or minimal cost to consumers.

AGL suggested that more consideration should be given to issues including who the customer contacts to provide binding support, how is ongoing support provided, and what is the limit on the number of devices a customer can register free of charge.

Retailers supported the policy position that registering a device or logging on to a website constituted a request for access to meter data, but noted that it indicated why terms and conditions may be needed for device registration or use of an internet portal.

Retailers noted that the NECF provides free access to meter data under particular scenarios. Beyond basic provision of metering data, a range of sophistication may develop in relation to portals, IHDs and other energy information portals, and this should be left to the market to develop.

The Ombudsmen support consumers being able to register devices on the utility HAN without entering a contract with any party and without direct cost and also supported customers being able to access metering data free of charge.

Distributors generally supported customers being able to register devices on the HAN without entering a contract with any party. However Ausgrid suggested that a solution that did not involve registration would be preferable. Distributors had mixed views as to whether consumers should be charged a direct cost to

108


register a device. Some suggested that customers who wished to use this service should pay a direct charge covering the cost of providing the registration service, as not all customers would wish to use the utility HAN.

Distributors supported the view that customers registering a device or logging on to an internet portal constituted a request to access metering data but split on whether consumers should be able to access data free of charge.

8.1.2 Direct consumer access to data

The interface to the HAN will enable provision of access to energy consumption data. Smart meters will support real time access to data, and also provide the opportunity for energy use patterns to be explored through the provision of interval data with a relatively short time lag. It is expected that the provision of validated interval data will be provided electronically through web portals. Both of these methods of data access raise some specific consumer protection issues which are discussed below.

8.1.3 Real time data access (via the utility HAN)

To access data in real time, customers need to have a device capable of communicating with the meter through the utility HAN, such as an IHD. There is expected to be a number of different IHD devices on the market and some consumers may wish to purchase and use their own device or to use one purchased via a third party.

The energy industry has indicated that the registration of devices on the utility HAN is necessary for security and data privacy reasons. This registration process will “pair” the device with the meter and ensures secure communication between the device and the appropriate meter. It was proposed that customers can register a device on the HAN without having to enter a contract with any party. This would allow customers to buy and register their own devices (or devices provided by other parties) on the HAN. In particular, the device would not have to be part of an electricity retail contract to be registered on the HAN.

Businesses have suggested that registration of a device on the HAN may be subject to terms and conditions, and this would imply a contractual relationship between the parties. As one of the reasons for requiring registration is to ensure the security of the system, it is reasonable to expect that customers would need to agree that certain conditions have been met in order to register a device. These terms and conditions should be standardised where possible, simple to understand and not impose unreasonably onerous conditions on the consumer. To provide this assurance and standardise terms and conditions, the AER could issue guidelines for the terms and conditions for registering a device and ongoing meter access. Conditions of device registration may include that an electricity account exists for that address and that the device is capable of communication securely with the meter.

109

Introduction

EMRWG acknowledges that that there will be a cost to provide a facility to register devices on the utility HAN. Who bears this cost needs to be considered.

Some stakeholders have suggested that this should be on a user pays basis, as a customer who registers a device receives a benefit. A direct charge would be consistent with the beneficiary pays principle40 as recommended by the AEMC41. The AEMC also recommended that the beneficiary pays principle should only be applied where the allocation of costs can be transparently and effectively applied in practise, having regard to the associated administrative complexity and transaction costs involved. EMRWG notes that realising a benefit involves more than just registering the device on the HAN, and any charge should not act as a disincentive to customers use the HAN interface.

Although not all customers will wish to take advantage of the ability to access real time data or seek detailed consumption information the customers should have the option available to access information in a simple, timely and low-cost way. Where the customer effectively pays for a smart meter, including the interface to the HAN, it may appear unreasonable to impose an additional charge for a customer to use the functionality. Additionally a direct charge may be perceived as a barrier for consumers to access their information.

As the interface to the HAN is included in the meter and the registration will be carried out by the metering provider, EMWRG recommends that device registration on the utility HAN be considered a “metering service”. The charge for the registration of a device, if any, should be determined as part of the overall set of charges for metering services. Where metering services are regulated, the AEMC’s proposed beneficiary pays principle (including its limitations) is a relevant factor. The application of this principle would be a matter for the AER for regulated metering services.

Under alternative commercial smart meter rollout models, a metering company may provide an option for offering additional services. In such a case it may be appropriate that the commercial provider charge separate fees for that service.

As the device registration facility can only be provided by the party responsible for the meter, EMWRG considers that including device registration as a metering service gives a clear mechanism for costs to be recovered. Regardless of who provides the registration facility, the customer would register a device on the utility HAN using the agreed industry device registration procedure. To promote a smooth transition to smart metering it is important that consumers have a chance to explore the opportunities offered by smart meters without barriers such as additional charges to use this functionality. Therefore, EMRWG recommends that for any transitional period that might apply in a particular jurisdiction, jurisdictions may determine that customers be able to register a device on utility HAN at no additional cost. This transitional period is likely to

40 This could be full or partial if the portion of costs to each beneficiary could be calculated41 AEMC 2010 Request for Advice on Cost Recovery for Mandated Smart Meter Infrastructure

110


correspond with any transitional period associated with the introduction of TOU tariffs, as this is a supporting measure to assist with the transition.

EMRWG notes retailers concerns that the technology is still immature, and there are more issues to consider, including whether there should be a limit on the number of registrations a customer can request free of charge. As this is a way to engage customers with their energy use, EMRWG does not recommend limiting the number of devices that can be registered on a utility HAN at this stage. It is expected that only IHD’s would be registered in the short term. In addition customers should be able to simply deregister and unbind a device to the meter at no charge.

The act of registering an IHD or similar device on the utility HAN is a positive choice by the customer that they want to access their real time energy data on an ongoing basis. Provision of data directly from the meter to a device registered on the utility HAN, should be considered part of the basic metering data service. In circumstances where the retailer may not have control over provision of the registration facility, EMRWG recommends that customers be able to request device registration from their distributor, rather than just their retailer. EMRWG expects that both the retailer and distributor would be able to facilitate device registration and data access through the HAN on request. Subject to the customers staying at the premises, the device should only unbind at the request of the customer.

EMRWG considers that the responsible person has an obligation to provide a registration facility to allow customers to register devices. EMRWG notes that this service may have some technical limitations, for instance a customer’s IHD is not able to wirelessly connect to the meter on their premises. Customers should be informed of the conditions and limitations associated with IHD registration and be advised of other options to monitor their energy use.

8.1.4 Data access through a web portal

Smart meters generate a large amount of interval data which could be provided in a timely fashion to consumers through a web portal by either retailers or distributors. Web portals would enable validated metering data and basic analysis to be provided.

Consumer access to data potentially enables a wide range of activities and services: such as to check bills, consider alternative energy purchase and energy management offers, and to help make decisions about energy use. Only energy industry participants can provide validated data. Given its importance to consumers, and the weak incentives on market participants to provide it, EMRWG considers they should be required to do so at no additional charge to customers.

As a minimum requirement, customers should be able to access validated historical metering data from the retailer or distributor. Availability of this validated metering data in standardised format to customers through a web

111

portal provided by the retailer (and potentially distributor)42 should be considered a standard feature of the retail supply of electricity, where smart meters are in place.

EMRWG considers that there is scope for innovation in web portals within a competitive retail market. Analysis provided by a retailer’s customer web portal is a point of differentiation in the market, and this is not likely to be undermined by free provision of metering data to customers.


Customers should be able to register a device on the Utility HAN without the device being part of a contract for the supply and/or sale of electricity.

A registration facility should be provided by the responsible person. Customers should register a device on the utility HAN using an agreed industry-wide device registration procedure

The charge for the registration of a device, if any, should be determined as part of the overall set of charges for metering services. The AER should be asked to consider the AEMC’s proposed beneficiary pays principle (and limitations thereof) in any appropriate determination.

During any jurisdiction’s transitional period a jurisdiction may determine whether such device registration should be at no direct charge to the consumer. In such cases the party providing the registration facilities should be able to recover the costs of registering devices through the most appropriate metering charge, rather than a separate direct charge.

Device registration should be considered a metering service.

The AER should develop guidelines for the terms and conditions for registering a device on the utility HAN and ongoing meter access by the device.

Registering a device on the HAN or logging on to a web portal constitutes a request for access to metering data for the purposes of the NER.

Customers should be able to access their own data via an IHD or similar device, that they supply and web portal provided by the retailer or distributor, at no additional cost charged by the electricity retailer or distributor. Customer access to data, through these methods should be considered part of metering services.

Supporting procedures to enable device registration processes should be developed through AEMO’s existing procedure development processes.

42 As is the case in Victoria with Jemena

8.2 Consumers authorising data provision to third parties

With the increasing complexity of their engagement with the electricity market, consumers may wish to engage third parties who can help with interpreting information so they can make more informed decisions about how they use their energy or whether another retailer’s offer would be best for them. An important principle is therefore that customers should be able to authorise provision of their data to any third party.

Draft policy paper two recommended that in accordance with current practice, customers may authorise provision of their data to any authorised third party. The paper also asked if there were any policy and regulatory changes needed to ensure that where customers give their consent to third parties to access their data, this can be readily implemented


CUAC gave in-principle support for the position that customers may authorise provision of their data to any authorised party. They noted that consumers need to give their explicit informed consent, and there needs to be a standard method to achieve this consent. Consideration needs to be given to how long the authorisation lasts and what happens when the customer moves out.

CUAC also raised issues around data privacy and accreditation of third parties receiving metering data.

Retailers gave conditional support to the policy position but noted there are some issues to be resolved, including privacy issues. AGL believed that customer authorisation needs to be written, to protect privacy.

Retailers also suggested that for privacy reasons, consent needs to be given by the account holder. The ERAA suggested that retailers shouldn’t be held liable if the third party failed to obtain valid consent. Retailers don’t have formal processes in place to manage the demonstration of consent by third parties.

EWON supported the policy position.

Distributors supported the policy position. Jemena noted the customer is free to provide their data to anyone they choose. Energex noted the regulatory framework does not cater for third parties and an AEMC review of the Rules is required to appropriately consider these issues. Distributors also noted that the Rules on who may access metering data from the metering database, may prevent distributors (and retailers) from providing data directly to third parties (even with customer consent).

Distributors also raised privacy concerns with giving data to third parties, raising questions of consent and verification of the customer’s identity, which the distributors are not in a position to do.

Better Place suggests the lack of protocols for facilitating third party access to metering data with the customers consent is a barrier to the development of innovative energy services in the NEM.


Given the in-principle support for the policy position that, consistent with current practises a consumer can authorise provision of their metering data to any third party, the policy position is unchanged.

Stakeholders have suggested that current regulation presents a barrier to third parties accessing metering data on behalf of customers in a timely and effective manner, and in particular clause 7.7 of the NER regarding access to metering data needs to be reconsidered.

Consumer access to information, including by third parties acting with their customers’ consent should be simple, timely and low cost. The Australian Government has completed a scoping study43 into means of improving access to data for consumers and third parties with the consumers’ consent, which considers many of the issues raised by stakeholders in regard to third party access, including privacy and potential barriers in the existing framework.

Key areas for policy decision identified in the scoping study include:

Data access rights for customers: Development of clear rules and processes to enable customers to access their energy data in a timely and convenient basis, including the right to authorise third parties to access energy data on their behalf.

Data access obligations for data custodians: Development of obligations for data custodians to provide customers, and authorised third parties, with their energy data. This will include definition of privacy obligations.

Standardisation: Energy consumption data formats and structures should be standardised.

Registration of authorised third parties who wish to access their customer’s energy information via energy market databases. This would include obligations to obtain customers’ explicit informed consent and comply with data privacy requirements.

Similarly the AEMC, as part of it’s Power of Choice review, is considering improvements to the existing rules to clarify and provide guidance on the provision of consumers’ individual load profiles. The AEMC has also indicated that consumers should have access to their own load profile, and should be able to decide whether to grant access (with appropriate consent provisions) to third parties. This would include requirements on a retailer to provide consumers’

43 Sapare, 2012, Scoping study for a consumer energy data access system (CEdata). Available from: www.ret.gov.au/energy_markets/electricity_market_development/data/Pages/default.aspx


energy and metering data to a consumer’s agent (third party), following explicit informed consent.

EMRWG is committed to work with market institutions and stakeholders to improve the consumer energy data access system to improve the flow of consumption information. This could allow consumers, or other parties authorised by consumers, easier access to their energy information to help inform decisions affecting energy use. Energy providers and service companies could use data to provide energy management tools and support better consumer decisions. The scoping study identifies some positive movement by energy suppliers towards providing customers with access to their data. It also identifies however, that some major barriers including significant information inequality between different providers, timeliness of access to information and access by other parties approved by the customer, may affect the ability of consumers to make informed choices.

As a result of the work undertaken EMRWG recommends that the rules around data access be clarified for third parties based on the conclusions of the Commonwealth Sapere scoping study and recommendations by the AEMC.

As discussed in Chapter 9, EMRWG is considering the privacy implications of smart metering in a separate piece of work, and privacy concerns regarding third party access will be addressed in that advice.


In accordance with current practice, customers may authorise provision of their data to any authorised third party

Rules around data access should be clarified for third parties based on the conclusions of the Commonwealth Sapere scoping study and recommendations by the AEMC.

8.3 Messaging through the HAN and IHD

An IHD is potentially a communications pathway directly into the home. As the registration of devices is specific to customers, this raises the question of what sort of information could be sent through this channel and by whom.

In Draft policy paper one it was proposed that the energy marketing rules in the NECF be extended to cover distributors. This recommendation was supported in the submissions and is confirmed.

Draft policy paper two proposed three further policy positions on messaging through the IHD. Namely that:

115

Introduction

Distributors can send messages on imminent power emergencies and planned interruptions, in accordance with the regulatory requirements, to customers through their IHD without consent;

The retailer, distributor or any third party cannot send marketing or similar information to customers through the IHD without the customer’s explicit informed consent;

For retailers this consent can be obtained at the entry to the contract or during the contract period. Distributors and third parties must have clear mechanisms whereby this consent is obtained. All parties must be able to provide clear evidence of this informed consent.

The paper also asked if it was reasonable to assume that the retailer could send information on pending price increases and other changes to contractual terms through the IHD without a customer’s consent, and if not, should the retailer obtain the explicit informed consent of the customer to use this medium for transmitting such information.


Consumers supported all three policy positions. They noted that where supported by legislation, emergency service representatives may send messages on the utility HAN through a registered participant and must abide by the procedures governing the use of the facility.

Consumer groups suggested that even though distributors can send messages about imminent emergencies and interruptions without consent, customers should be made aware of this possibility when registering the device.

Consumers groups argue that the marketing consent should always be opt-in, and not an automatic contract term, and they should have the ability to revoke their consent if they no longer want to receive marketing information.

CUAC suggested that retailers may only send information on pending price increases and other changes to contractual terms, in accordance with regulatory requirements, if the customer has provided their explicit informed consent to receiving such information in this manner. This should be on an ‘opt-in’ basis and not an automatic contract term.

Retailers generally supported the policy positions but noted that this is conditional on the IHD supporting the messaging functionality.

Retailers stated it is not clear how the audit of explicit informed consent will be undertaken for third parties who are not covered by the NECF or other relevant jurisdictional codes. They also noted that the mechanisms for third parties and to some extent for distributors to establish the granting of explicit informed consent have not yet been established and are not obligations

116


AGL sought clarification on when consent is deemed to expire, and what happens when the relationship ends. However they support in principle the position that IHD messaging can not be used for marketing unless the customer has provided their explicit informed consent.

Retailers considered that the customer’s prior explicit informed consent is needed to send information on pending price rises and changes to other contractual terms through an IHD.

EWON supported the policy positions and noted that such a service could be based on the model of email notifications where customers have a right to unsubscribe. EWON also considered it is reasonable that retailers may send information on impending price increases and other changes to contractual terms through the IHD without consent, but this should not replace the obligation under the NECF.

Distributors generally supported the three policy positions.

Distributors did not consider it reasonable to assume that retailers should be able to send information on pending price increases and other changes to contractual information without customer consent. One distributor noted changes to the NECF would be needed if messaging to the IHD replaced current forms of communication.


Given the general support for the draft policy positions, no changes to the policy positions will be made.

EMRWG notes all messages sent through the smart metering infrastructure would need to comply with the relevant procedures for using the system.

EMRWG sees the IHD as an additional communications path, not as a replacement for the communications required under the NECF. Sending messages via the IHD is unlikely to meet regulatory requirements for required customer notifications, and would only fulfil regulatory requirements if the customer had agreed to receive messages in this way.

The registration of the IHD will provide an opportunity to get consent for messages to be sent to the IHD, and what type of messages the customer wishes to receive.

EMRWG also considers that consumers should have the ability to change their preferences at any time after the device has been registered. This should be simple and convenient for customers to do without needing to re-register the device. This should allow consumers to both opt-out of receiving messages they had previously agreed to receive, and to opt in to receiving messages.

117

Introduction

EMRWG considers that any messaging to IHDs, except for emergency warning messages, can only be sent with the customer’s explicit informed consent. An agreed protocol for warning messages needs to be established.

A third party sending messages to the IHD as part of an agreed service to the customer would be required to obtain consent as part of that service. Where the third party advertising is facilitated through the retailer or distributor, EMRWG considers this to be third party messaging, rather than messages from the retailer or distributor.


Distributors sending messages in relation to power emergencies and planned interruptions, in accordance with the regulatory requirements, to customers through their IHD does not require prior consent.

Emergency warning messages sent on behalf of emergency services, may be sent to customers through their IHD without consent.

Retailers, distributors or third parties cannot send marketing or similar information to customers through the IHD without the customer’s explicit informed consent.

For retailers this consent can be obtained at the entry to the contract or during the contract period. Distributors and third parties should be required to have clear mechanisms whereby this consent can be obtained. All parties must be able to provide clear evidence of this explicit informed consent.

Where appropriate the energy marketing rules should be extended to distributors and third parties using the HAN and IHD to market to consumers.

118


9 Privacy

The introduction of services and applications enabled by smart meters will result in increased opportunity for consumer participation with their electricity use, but will also result in increased data flows. The increased amount and granularity of data has raised concerns about the privacy and security of the metering data as well as about personal information.

9.1 Policy positions and questions from paper two

Draft policy paper two noted that EMRWG intended to assess the data flows from smart meters in a subsequent piece of work. It also noted that the Victorian Government had commissioned a Privacy Impact Assessment (PIA) to understand the issues and privacy risks arising with access to and the collection, use and disclosure of information in a smart meter environment. It was noted that the Victorian PIA would form an input into the broader national PIA.

9.2 General stakeholder views

Consumer groups were generally supportive of the proposed PIA and supported consideration of the work being done by Victoria in this area.

Consumers also suggested that all businesses not covered by the Privacy Act 1988 (Cth) be required to opt in to apply the National Privacy Principles. It was also suggested that the PIA should consider the importance of a mandatory breach notification requirement in the Privacy Act.

Distributors generally supported the approach, and noted that other work should be considered as part of the PIA.

The ESAA supported the approach including the intention to consider the ESCV work on privacy issues and defer to the National Privacy Principles.

9.3 General policy analysis

The PIA commissioned by the Victorian Government has made 24 material recommendations with respect to privacy considerations relating to smart meters.

The PIA found that the privacy controls around smart meter data are generally good, and that no major changes to industry information flows are needed. The PIA found that there were areas in which regulatory requirements should be strengthened and also made recommendations to improve consumer understanding of the privacy protections and what the data is used for, and to include privacy considerations in developing HAN procedures and data access protocols.

119

Introduction

The key recommendations made by the PIA were that all metering data from or about residential meters should be handled throughout the advanced metering infrastructure system in accordance with the National Privacy Principles, and that third party service providers and retailers with turnover under $3 million should be required to opt in.

The ESCV is currently undertaking a review of these recommendations to consider strengthening the regulatory requirements. The ESCV advised that they considered 8 of the 24 recommendations to be outside their scope. However all 24 recommendations are being considered as part of the national process.

Given the findings of the PIA, as well as the similarity of key concerns, issues and the relevant regulations across jurisdictions, EMRWG considers that a PIA of the national program would replicate the work done by Victoria and delay resolution of the issues. EMRWG is instead seeking further advice on whether the conclusions and recommendations are applicable to other jurisdictions, on any other consequences for the energy market of implementation, and whether changes to the Privacy Act currently before the Federal Parliament would affect the recommendations made by the ESCV.

This work will take into account the work the ESCV is doing in this space.

EMRWG notes that retailers and distributors could do more to address consumer concerns about privacy, and could implement some recommendations immediately through their business privacy statements, without changes to regulatory instruments.

A requirement to opt in to the National Privacy Principles for businesses with a turnover with less than $3 million would be targeted at third party service providers, and smaller new entrant retailers, as it is unlikely that major retailers or distributors would have a turnover of less than this threshold. All retailers and distributors are currently bound by the confidentiality requirements in the NER. It is not clear that energy services providers have any special characteristics which mean the exemption given to small businesses in the Privacy Act should not apply. Whether or not the Privacy Act should apply to small businesses providing energy services will be considered as part of the advice being sought on privacy.

EMRWG notes the suggestion that the proposed further national smart meter work consider the importance of a mandatory breach notification requirement in the Privacy Act. This is a broader issue and is being considered as part of the privacy law reform process currently underway. EMRWG does not intend to recommend changes to the Privacy Act relating to data from smart meters at this stage.

9.4 Conclusion

As EMRWG is doing further work in relation to privacy, no changes to the Rules are recommended at this time. The advice sought on the Victorian PIA includes

120


advice on implementation of the recommendations and EMRWG does not intend to pre-empt that advice.

The Victorian work will be a key input into the broader national considerations.

121

Introduction

10 Independent dispute resolution for customers

Recommendation

79. EMRWG recommends that jurisdictions consider the extent to which their jurisdiction’s Ombudsman scheme should, in the interests of consumers, provide coverage of the activities of third parties in the energy market and work with their energy Ombudsman to ensure that the powers and resources available to the ombudsmen are sufficient to deal with services provided by third parties as necessary.

The independent dispute resolution service is a key consumer protection, enabling customers to easily access independent dispute resolution when they can’t resolve complaints about the service provided by their retailer and distributor. The functionality of a smart meter will support services such as DLC, which may be provided by parties other than the retailer or distributor. Such third parties may not be members of the jurisdiction energy ombudsman schemes, and so the ombudsman may not be able to investigate these complaints.

Draft policy paper two asked if any party offering services such as DLC through the HAN be required to become members of the relevant Energy Ombudsman scheme. Stakeholders were also asked to comment on the implications and risks of this approach.


Generally stakeholders supported a single dispute resolution service for all parties providing services closely related to the supply of energy. Stakeholders noted that there were several issues to be addressed and considered this issue to be closely related to the regulation of third parties within the energy framework.

Consumer groups supported the broad principle of consistent dispute resolution between consumers and third party service providers and supported the proposition that all parties offering load control services be required to become members of the ombudsman scheme.

Consumer groups considered that the purchase of an IHD or similar consumer appliance is adequately covered by existing legislation including the Australian Consumer Law, with complaints directed to the jurisdictional consumer affairs body.

Consumer groups believed that the energy ombudsman may be the more appropriate entity to assist customers to resolve their complaints against third parties offering smart metering service that are closely connected to the supply of energy (SCC and DLC). Consumer groups acknowledge there are issues to be considered in expanding the ombudsman’s jurisdiction to third parties offering such services, and some form of licensing may be required for these services.

122


Retailers were also in general agreement that third party service providers be required to become members of the ombudsman scheme. However retailers noted that it may not be appropriate that all service providers be required to become members of the ombudsman scheme, and should ideally be considered as part of a review of third party service providers.

Retailers raised concerns about how third parties become members and how the costs would be recovered.

EWON gave conditional support, if the third party providers are regulated by the energy regulatory framework. EWON noted significant practical issues that need to be addressed if the current ombudsman scheme jurisdictions were extended to cover third party service providers.

EWOV noted that the decision to expand the jurisdiction of the ombudsman would be a decision for their board, and they are not in an informed position to consider extending jurisdiction to third parties. EWOV suggested issues which would require careful consideration include: the number and type of third party providers expected to become members of a jurisdictional ombudsman scheme; the type and characteristics of the customers serviced by third party service providers; an appropriate and equitable charging model to fund services; suitable start up costs for entry into the scheme, suitable membership category; voting rights and company representation; estimated complaint and enquiry numbers; the number of type of complaints handled by the relevant consumer affairs bodies; and the enforcement.

EWOV noted there would be impacts on resources, and changes to the charter and constitution to allow third party membership. EWOV is satisfied the existing general consumer dispute resolution processes are sufficient to help customers with third party providers of electricity products.

EWOV suggested a feasibility study was needed, while EWOV suggested that the Australian and New Zealand Energy and Water Ombudsman Network enter into formal discussion with EMRWG to develop a process to ensure that customers have access to relevant independent dispute resolution services.

Distributors generally supported third party service providers offering products like DLC being required to join the ombudsman scheme. However like other industry stakeholders, distributors raised issues that need to be considered including enforcement of decisions and funding arrangements.

10.2 Policy analysis

EMRWG notes that the role of third parties, who are not participants in the NEM, is still an area of active debate.44 Many of the services offered by third parties relate to areas such as energy efficiency or energy information analysis and other similar types of services and would not generally fall within the remit of jurisdictional energy ombudsmen schemes. The Energy Ombudsman should only 44 The role of third parties is discussed more fully in chapter 3

123

Introduction

cover those services that are directly related to the supply of energy, such as direct load control and supply capacity control. As a general principle, if the service is regulated under the energy framework, the energy ombudsman should have the power to resolve disputes about the provision of these services.

Services that could only be provided by the retailer or distributor, such as device registration and meter data provision, would fall under the jurisdiction of the energy ombudsman.

EMRWG acknowledges that there many issues to be addressed if the energy ombudsman’s jurisdiction was to due be extended to third parties providing services such as direct load control. As noted above if the service is regulated under the energy framework, the Energy Ombudsman should have the power to resolve disputes about the provision of these services.

10.3 Policy recommendation

EMRWG recommends that jurisdictions consider the extent to which their jurisdiction’s Ombudsman scheme should, in the interests of consumers, provide coverage of the activities of third parties in the energy market and work with their energy Ombudsman to ensure that the powers and resources available to the ombudsmen are sufficient to deal with services provided by third parties as necessary.

124


11 Metering installations and customer impacts

Recommendations

80. Eligible low income households with electrical defects at their meter box or connection point (for which the customer is responsible), identified through the smart meter installation process, should be financially assisted with the repairs.

81. Jurisdictions should be responsible for determining which customers are eligible and the extent of the assistance to customers in these circumstances, depending on the nature of the rollout.

The replacement of an old meter may identify pre-existing electrical safety issues preventing the straightforward installation of the new meter. These issues might include deficiencies or hazards with the premises’ meter box, or a wider problem of hazardous wiring in the premises. Although these situations are regularly encountered in routine meter replacements, under a widespread smart meter rollout they will inevitably be encountered on a much larger scale.


The financial liability for rectifying these problematic situations usually lies with the homeowner. In the case of a widespread smart meter rollout, a much higher number of cases are likely to be encountered, along with a correspondingly higher number of vulnerable households which may require financial assistance with rectification.

Draft policy paper two proposed that:

Low income households should not be placed in additional or unexpected financial hardship as a result of the need for electrical repairs being identified during the installation of a smart meter at their premises.

Jurisdictions should be responsible for determining how to assist low income customers in these circumstances, depending on the nature of their rollout.


Consumer groups strongly supported the proposal for assisting low income households with rectifying faults uncovered during a smart meter rollout.

The joint consumer group submission stated that, while recognising that ensuring safety is paramount, it was the responsibility of the body undertaking the rollout to ensure that householders were fully informed about the process. This should include: the possibility of defects being discovered, the process for

125

Introduction

the householder if defects are found, the likely timeline and costs for rectification, and the availability and criteria for financial assistance, if available.

CUAC also identified the possibility that tenants may be vulnerable to prolonged disconnection if dangerous defects were discovered in rental properties. It suggested a requirement for expedited rectification of defects in rental properties be implemented.

The Energy Supply Association of Australia agreed with the proposed policies, but noted that neither energy retailers nor distributors should be liable for subsidising the rectification of defects for low income households.

TRUenergy supported the procedures for managing and rectifying defects developed in the smart meter rollout in Victoria. The Victorian system classifies faults according to seriousness, allowing smart meter installation to proceed in cases of less serious defects being found which do not require disconnection, to be rectified at a later date. The Victorian scheme also provides financial assistance for low income households to rectify defects, under the Victorian Government’s existing energy concessions framework. TRUenergy also observed the occasional difficulties in effecting timely rectification of defects in Victorian rental properties.

Origin noted the distinction between rectification work which arises directly from the smart meter installation, and unsafe situations which are discovered in the course of installation.

EWOV noted its experiences with the smart meter rollout in Victoria. It had received around 1600 complaints arising from the program over 2.5 years, of which 28 concerned disconnection due to dangerous defects. It noted that although the obligation to rectify faults is on property owners, most low income households are also tenants. It also pointed out the need to communicate the positive safety and financial benefits of a smart meter rollout in actively identifying electrical hazards in homes, preventing potential injury or damage occurring in the future.

EWON recognised the difficulties in enforcing the cost of rectifying safety defects, particularly on low income and vulnerable households, which requires careful policy consideration. EWON believed that the principles to address the implementation and funding of a rectification program as part of a smart meter rollout should be a national approach, consistent across jurisdictions.

Ausgrid noted that under a large-scale roll-out scenario, it may be difficult to find enough electrical tradespeople to rectify a much larger than normal number of identified deficiencies. This needs to be taken into account when defects are notified, particularly in the most serious cases when premises are disconnected.

Ausgrid also noted that in a large-scale rollout, there are likely to be common patterns of certain defects, for which procedures may be developed in anticipation. This approach may reduce the overall cost of fault rectification.

126


11.3 Evidence from Victoria and other states

This issue has been comprehensively addressed in the mandatory smart meter rollout in Victoria. At the end of July 2012 12,500 hazardous electrical installations had been identified and repaired across all smart meter installations. Additionally over 40,000 meter boards had been identified as substandard and replaced.

Low income households can receive financial assistance to undertake rectification work identified as being required in the course of a smart meter installation. The funding for the scheme varies between distributors. Two distributors are funding the scheme directly, with funds recovered through their pricing determination, while the remaining three distributors are receiving funds from the Victorian Government.

The demand on the scheme has been relatively low: of the average 250 defects per month identified in homes in the course of the smart meter rollout, around 10 have qualified for assistance. The scheme is restricted to low income home-owners who qualify for a Commonwealth concession card and for work for which they are liable, being work at the meter box and connection point.

There is considerable experience in NSW, arising from the 500,000 interval meters that have been installed in the Ausgrid network area, under its own metering policies. Many of these meters are installed by Accredited Service Providers (ASP), as they are due to new work being undertaken at the premises, and are classified as “contestable works”. In these cases, the onus to pay for remediation is with the householder. Where the meter replacement is due to failure or other maintenance-related issues, the cost of minor rectification is borne by Ausgrid. There is no assistance for low income households for work undertaken by ASP. Contestable work is assumed to be undertaken on a voluntary basis.


All submissions supported the provision of financial assistance to low income households which may become liable for rectifying deficiencies identified in the course of a smart meter rollout. It was also noted that such assistance could be efficiently delivered under existing jurisdictional concession regimes.

Stakeholders recognised the difficulty in achieving balance between protecting the safety of householders, and minimising costs.

It is recognised that there are greater potential equity issues in the case of mandated rollouts, or other cases where the householder has not explicitly chosen to have their electricity meter replaced. The argument for financial assistance for low income households in these cases is stronger than for households which have voluntarily undertaken to have a new meter fitted.

127

Introduction

EMRWG therefore endorses the draft policy positions, recognising that this obligation should be limited to electrical defects identified through the smart meter installation process.


Eligible low income households with electrical defects at their meter box or connection point (for which the customer is responsible) identified through the smart meter installation process, should be financially assisted with the repairs.

Jurisdictions should be responsible for determining which customers are eligible and the extent of the assistance to customers in these circumstances, depending on the nature of the rollout.

128


12 Radio-frequency emissions and smart meters

Recommendations82. Irrespective of whether a smart meter deployment is government or

commercially led, key stakeholders should ensure that consumers are adequately informed about the standards which apply to radiofrequency emissions, the obligations on distribution businesses/metering providers to comply with these standards, the outcomes of any relevant trials, and how compliance with these standards is monitored.

Smart meters may collect and transmit data in many different ways, although those installed in Australia typically use low-powered wireless technology to communicate to a nearby data collection point from which the signal is relayed to the distributor’s back-office systems. Smart meters also incorporate a separate low power transmitter designed to communicate with “smart” electrical devices or appliances around the home such as in-home displays, computer dongles, thermostats and air-conditioners.

The technology employed by smart meters is similar to other radio-transmitting devices, such as mobile phones, cordless phones, baby monitors and wireless internet routers (Wi-Fi). The strength of the radio-frequency (RF) electromagnetic field (EMF) generated by all these devices when they are communicating is low. Further, smart meters only transmit intermittently, usually for extremely short periods (milliseconds) and from outside the home, and their average field strength is typically much lower than other common radio devices over time. Additionally, exposure levels drop as you move further away form the source.

The international scientific consensus, which is supported by the World Health Organisation, is that there are no known health risks associated with such low levels of RF EMF. Nevertheless, some consumers are concerned about both the potential short and long term effects of exposure to RF EMF.

Draft policy paper two highlighted the importance of distribution businesses being transparent and proactive in providing information to their consumers. The paper also proposed that there are actions that EMRWG could take now in order to develop a more effective national approach to addressing and allaying consumer concerns. These actions include ensuring that all smart meters comply with the applicable Australian Standards, and that consumers are aware that the device is installed in accordance with the requirements of the Radiocommunications Act 1992 (Cth).

To address these issues of public concern and public confidence in the safety of smart meters and their installation, the paper contained a single policy position and consultation question.

The paper proposed that:

129

Introduction

“Consumers must be informed about the standards which apply to radiofrequency emissions with respect to smart meters, the obligations on distribution businesses to comply with these standards, the outcomes of any relevant trials, and the compliance monitoring role of the Australian Communications and Media Authority (ACMA).”

The paper also asked stakeholders:

“Who should be responsible for communicating information to consumers and what role the distribution businesses should take?”


Consumer groups voiced strong agreement on the need to inform consumers. CUAC also noted the work that Victoria has been doing in this regard.

The joint consumer submission emphasised the importance of making readily available and easily understood information from the outset as an important step towards allaying concerns. They noted that the volume of inaccurate information on the internet means that there is a high likelihood that anxieties about smart meters will be reinforced by health claims for which there is no evidence with consumers left to search for information on their own. They also note that it is “extremely difficult” to allay concerns left unaddressed for any period of time, and the subsequent importance of consumers accessing accurate information on the internet - particularly at the program outset.

They also recommend that consumers be informed about the mechanisms for making complaints if they believe that their smart meter does not comply with the standards. Whilst acknowledging that this approach might be resisted by industry on the basis that it might increase the incidence of “frivolous or trivial” complaints, it was felt that some consumers would be reassured by the existence of avenues for addressing individual concerns.

CUAC and the joint consumer submission also noted the need to ensure that information is expressed as clearly as possible, with plain language explanations (such as relevant standards, trials, and levels of radiofrequency emissions). Although an avoidance of technical jargon was advocated wherever possible, this was counterbalanced by the observation that overly focusing on the use of precise terminology or the avoidance of jargon might reduce the accessibility of information produced by government or industry bodies. In support of this assertion, consumer groups stated that where consumers research their concerns on the internet using very simple terminology, most responses would appear to confirm and reinforce their fears: querying the internet with more sophisticated/complex terminology would surface more positive results. Further study may be required to find an effective bridge between these extremes – such as an agreed Plain English Glossary of terms.

Consumer groups advocate the need for consistent messaging by all stakeholders of independent, reliable and trusted sources of information: communicating

130


relevant information is the responsibility of all parties involved in the smart meter rollout. Additionally, regardless of whether a rollout is government or commercially led, their view is that both government and regulators have a role in ensuring and reassuring safety and in providing supporting information in an impartial manner.

On the basis that distributors are likely to be the first point of consumer contact when smart meters are installed under a distributor-led rollout, consumer groups emphasise the importance and responsibility of the distributors in communicating information, addressing customer concerns and referring them to reliable sources of information, as well as the need for technical information to be easy to understand and for government and distributors to work together.

Consumer groups suggested that notification that a customer’s meter is going to be replaced should include details about sources of further information from either the distributor or ACMA as the body responsible for regulating radio communications infrastructure.

Consumer groups also suggest that installers be able to answer questions about radiofrequency emissions, or to provide fact sheets in advance of the installation.

The ERAA suggested that the draft policy position was unnecessary and that it should therefore not be a focus of smart meter education.

Individual retailers, however, were broadly supportive of the draft positions, and made the following specific suggestions:

visibility of the ACMA compliance mark to provide assurance of compliance with applicable ACMA standards;

inclusion of radiofrequency emission information in the communication packs provided to consumers when a smart meter is installed;

for mandated rollouts, communications, information and assurance on government or the jurisdictional safety regulator’s website, in conjunction with the technology operators; and

a single source of information from ACMA, as the responsible independent regulator with the expertise to provide qualified advice and governance around compliance obligations .

Retailers expressed strong views in relation to the question of responsibilities. Some stated that whoever is undertaking the roll out of the smart meter infrastructure under either a commercial or government mandated rollout should also be responsible for communicating information to consumers about the safety aspects of the smart meter installed. The ERAA stated that leaving the development of messaging to the party undertaking the rollout could lead to conflicting and inconsistent messages being communicated to end consumers, and that this could be overcome by consistent information being provided across industry.

131

Introduction

Origin stated that the obligations on industry do not need to be mandated because they will need to respond in any event and that they must have necessary measures in place to assist consumers under a mandated rollout, but that retailers should not have to bear these costs.

Distributors were broadly supportive of the draft policy positions.

In relation to mandated rollouts, Citipower stated that distributors have a large role to play in consumer engagement and that government holds the key responsibility for objectively presenting the benefits of the program to consumers. Conversely, Ergon Energy stated that the role of distributors should be limited to providing high level information on their websites and directing consumers to the relevant body for further information. Ausgrid stated that Governments (or related agencies) should play a key role in communicating information on smart meter safety to consumers, because consumers “… are likely to trust government more than distributors who could be perceived to present a biased view”.

Jemena stated that, irrespective of whether it is a government mandated rollout, both government and distributors have a key role in communicating the relevant information to consumers. This is consistent with the view expressed by Ausgrid that the party installing smart meters should support government communications and provide specific information to consumers when requested.

Whilst agreeing with the policy position, Energex proposed that the wording be changed from “the obligations on distribution businesses to comply with these standards” to “the obligations on the metering provider to comply with these standards.” They also stated that these requirements need to be reflected in equipment standards (Australian Standards).


EMRWG notes the need for a strong and consistent framework to manage issues around RF emissions. In this context EMRWG notes the normal legal framework provides for corporate responsibility to manage risk around products and services a company supplies or controls. Additional occupational health and safety safeguards also exist around requirements to maintain safe workplaces. If there were any public safety risks corporations would be directly liable.

The Australia Radiation Protection and Nuclear Safety Authority (ARPANSA) can assess general risks and provide general information to both the public and industry on exposure levels. ARPANSA is also responsible for setting the EME exposure limits which are mandated by ACMA. ARPANSA’s current assessment is that in order for them to assess risk in more detail the industry would need to work closely to provide them with technical details on the capabilities and configuration of the equipment installed and accurate advice on how the meters are being used or configured for operation (e.g. how often data is sent back to base, is the HAN enabled etc).

132


Australian and international evidence is that communication technologies used by smart meters operate within exposure limits set by ARPANSA and the World Health Organisation.

Compliance with ARPANSA standards is a condition of a radio communications licence. The ACMA has the lead authority to enforce compliance with the appropriate standards and investigate and take appropriate compliance action if there is a breach of the licence conditions. Importers and manufacturers of smart meters with integral antennas also have obligations under the ACMA’s technical regulations for equipment that need to be met before the meter can legally be supplied to the Australian market.

ARPANSA sets the human exposure limits, which are referenced in the ACMA regulatory arrangements. The ARPANSA limits are based on assumptions regarding the use/placement of the device. As a consequence, the ‘compliance’ of the device is not synonymous with the ‘safety’ of the operation of the device.

Given the existing legal framework, and that the available evidence suggests a low of negligible health risk, the main policy action relates to information provision.

Most stakeholder responses were closely aligned in relation to the need for consumers to be provided with accurate and consistent information at the earliest opportunity. EMRWG accepts the view that there is a need for information to be available on these matters and that it should be presented in plain English and that technical language be avoided unless it has a precise meaning, in which case it should be defined as clearly as possible.

EMRWG also accepts the prevailing view that the proliferation of often conflicting information on this issue can confuse and unnecessarily alarm consumers. Consistent with the view of most stakeholders that government should take a more active role, EMRWG considers that the maximum value to the community arises where all relevant stakeholders take a strategic response to responding to public and community concerns, with government potentially taking a coordinating role.

Consumer concern about perceived risks is likely to be lower where there is a clear benefit available. Communications on RF therefore needs to be integrated or complemented by more general communication and customer engagement.

To enhance public confidence and trust in any smart meter deployment, this approach needs to be supported by all relevant agencies and responsible businesses.

A key element will be the ability to provide reassurance with independent authoritative health advice in relation to the electromagnetic emissions from smart meters. Critically, this approach must be consistent between stakeholders, with all stakeholders using a common set of independent, reliable and trusted

133

Introduction

sources of information, including the World Health Organisation (WHO) and ARPANSA.

This approach must monitor and consider any emerging trends and patterns which may necessitate the need for policy changes. It therefore needs to be entirely transparent and inclusive, and to engage with the affected community in ways that they feel confident will be responsive to their queries and concerns.

At the same time, it is important to recognise that there is on-going international research to improve knowledge and information in this area.

As a consequence, best communication practice as recommended by the WHO is to “establish a dialogue on risks from EMF”45 and not simply seek to inform concerned parties in a one-way communication process, because they are unlikely to listen unless they feel involved by a process and source of information they can trust.

In order to achieve a coordinated strategic response to public concerns each of the role of each of the responsible parties - ACMA, ARPANSA, and metering vendors, operators and providers – needs to be clear and they each need to commit to specific actions arising from their responsibilities.

Therefore, the EMRWG proposes that the responsibilities of each of these agencies be clearly defined, agreed and communicated, and that government assumes a central role in ensuring that this occurs, using the responsibilities set out in Table 1 below as a starting point. To assist with this process, government would provide a coordinating narrative to these agencies. This narrative would confirm that the installation of smart meters is based on the meter vendors, providers and installers procuring, installing and operating smart meters in a manner that complies with health and safety standards and clarifying how and by whom compliance under the Radiocommunications Act is assured.

If in the course of this process, it is found that there is a key role which is not being filled then government will need to identify what steps need to be taken to bridge this gap.

Table 1 - Roles and responsibilities for communicating information

Stakeholder Responsibility

Government (State) To provide clear and objective information about RF EMF

To ensure that consumers are aware of the mechanisms for making a complaint or raising a concern

Meter vendors To ensure that their customer communications reflect the steps that they have taken to ensure that smart meters comply with the RF

45 WHO (2002) Establishing a Dialogue on Risks from Electromagnetic Fields.) Geneva, World Health Organisation. ISBN 92 4 154571 2

134


protection requirements of the Radiocommunications Act administered by the ACMA

Meter importer (if manufactured overseas) or meter manufacturer

To ensure the meter complies with the applicable standards under the ACMA’s technical regulations including EMC, EMR, Radiocommunications and Telecommunications.

To ensure they hold the appropriate compliance documentation and the meter is labelled in accordance with applicable ACMA labelling notices

Proponents: Distributors / Meter providers / Retailers

To include details about sources of further information in the notification that a customer’s meter is going to be replaced

To communicate information, address customer concerns and refer consumers to the relevant body for reliable sources of information

To provide facts sheets in the customer communication packs at the time of installation

To ensure that meter installers are able to answer questions about RF EMF

To provide case management of specific customer concerns

To ensure the operation of the meter complies with applicable EMR requirements as required by the applicable radiocommunications transmitter licence.


Irrespective of whether a smart meter deployment is government or commercially led, key stakeholders should ensure that consumers are adequately informed about the standards which apply to radiofrequency emissions, the obligations on distribution businesses/metering providers to comply with these standards, the outcomes of any relevant trials, and how compliance with these standards is monitored.

135

Introduction

13 Remote energisation/re-energisation and customer safety

Recommendations

83. Retailers should be required to inform customers with smart meters that disconnection of their electricity supply may occur remotely rather than manually in all disconnection warning notices and in the model standard contract.

84. Where de-energisation is requested, remote energisation and re-energisation should become the standard practice across all jurisdictions, subject to the approval of the relevant safety regulator

85. The method of remote re-energisation is subject to the decision of the jurisdictional safety regulator.

86. Jurisdictions should amend legislation, regulations and codes of practice to facilitate the implementation of remote energisation and re-energisation as standard practice for smart meters.

87. Guidance must be provided to customers to assist them to undertake the relevant checks, prescribed by the safety regulator, before remote energisation or re-energisation is undertaken.

88. Retailers and distributors must not remotely energise or re-energise if they are not assured that the necessary steps prescribed by the safety regulator have been or can be followed.

89. Customers may be offered the option of a manual energisation or re-energisation.

90. Jurisdictions should have regard to the needs of disadvantaged groups of consumers for whom remote energisation or re-energisation is not appropriate.

91. Electricity retailers and/or distributors must develop procedures for the remote energisation or re-energisation of premises where customers do not have convenient access to their meter, subject to the approval of the safety regulator.

92. Training and communication for electrical tradespeople should be promoted to raise awareness of the possibility of remote re-energisation when electrical work is undertaken.

93. Codes of practice, guidelines and other documentation relevant to the electrical trades should be amended to recognise the possibility of remote re-energisation.

136


The ability to remotely energise and de-energise the electricity at a customer’s premises is a core function of a smart meter. In reducing the requirement for electricity supply personnel site visits, this function will result in considerable operational cost savings.

The issues of customer protection for remote de-energisation were considered in Draft policy paper one, and largely focused on the procedures for discontinuing supply for non-payment, and issues of financial hardship. These issues are addressed in detail in the NECF. The first stage of this review also recommended that customer should be advised on the disconnection warning notice that disconnection may occur remotely, and this advice is also included in the standard model contract.

Remote energisation issues are sufficiently different to those of de-energisation that they can be considered separately and are mostly concerned with the safety of customers where supply is restored without the attendance of electricity supplier personnel. Issues also arise from the possible requirement for customers to physically access and operate their smart meter to restore supply.

13.1 Policy positions and questions from draft policy paper two

13.1.1 Remote energisation and re-energisation

The implementation of remote energisation would require jurisdictions to consider current legislation and regulation, which may require the presence of electricity supplier personnel whenever an energisation occurs.

The detailed procedure for remote energisation would need to be determined, regarding the use of smart meter functions such as Arm and Monitor Supply.

The draft paper proposed that:

Remote energisation and re-energisation should become the standard practice across all jurisdictions.

Remote re-energisation could be carried out using the Arm or Monitor Supply functions of smart meters, depending on the jurisdictional decisions.

Jurisdictions should amend legislation, regulations and codes of practice as necessary to facilitate the implementation of remote energisation and re-energisation as standard practice for smart meters.

13.1.2 Customer information

If remote energisation is to be undertaken safely, customers may be required to follow safety scrips designed to minimise or eliminate potential hazards. They may also be required to operate their smart meter Arm button or mains switch.


137

Introduction

39. Guidance must be provided to customers to assist them to undertake the relevant safety

checks in their premises before remote energisation or re-energisation is undertaken.

40. Retailers and distributors must not remotely energise or re-energise if they are not

assured it is safe to do so.

The draft paper asked:

13.1 What are the options for providing guidance to customers on their obligations

regarding remote energisation and re energisation of electricity supply?

While it should be straightforward for most consumers to undertake required safety checks and restore their own supply, suppliers may also offer manual energisation as an option to all customers, possibly on a cost-recovery basis.

There are some groups of customers for whom remote energisation may be inappropriate, such as the elderly or disabled. For these customers, the cost of manual energisation may need to be waived.


Guidance must be provided to customers to assist them to undertake the relevant safety checks in their premises before remote energisation or re-energisation is undertaken.

Retailers and distributors must not remotely energise or re-energise if they are not assured it is safe to do so.


What are the options for providing guidance to customers on their obligations regarding remote energisation and re energisation of electricity supply?

13.1.3 Customer access to meters

Where the Arm function is a jurisdictional option to energise their premises, physical access to the smart meter is necessary. This may not be possible or convenient for some common dwelling situations, such as apartment blocks.

An alternative procedure would be for the smart meter to be fully remotely energised, possibly using the Monitor Supply function. Customers may then energise the premises with the mains switch at the premises’ accessible switchboard.


Electricity retailers and/or DNSPs must develop procedures for the remote energisation or re-energisation of premises where customers do not have convenient access to their meter.


138


When an energisation request is made by a customer, should distributors and retailers ensure that the safety risks are mitigated by asking the customer to ensure that the main switch is turned off?

What additional requirements are necessary when customers with smart meters make a request for an energisation that remote energisation is carried out safely?

13.1.4 Worker health and safety

While existing electrical safety practices should prevent premises’ wiring becoming live due to remote energisation while work is being undertaken, safety practices should be amended to explicitly recognise and avoid this possibility.


Training and communication for electrical tradespeople should be promoted to raise awareness of the possibility of remote re-energisation when electrical work is undertaken.

Codes of practice, guidelines and other documentation relevant to the electrical trades should be amended to recognise the possibility of remote re-energisation.

13.2 General summary of stakeholder views

Consumer groups supported the implementation of remote energisation as a standard practice, as the resulting reduced operating costs were expected to flow through to consumers. The issue of liability for adverse outcomes of remote energisation should be clarified, with consumers protected from liability.

Consumer groups agreed with all of the proposed policy positions in the Chapter. CUAC suggested that the EMRWG consults closely with Energy Safe Victoria (ESV), as many of the issues raised have already been examined in the course of the Victorian smart meter rollout.

Retailers, and their peak body the ERAA, generally agreed with the proposed policy positions in draft policy paper two. Retailers noted the desirability of consistent processes and procedures across jurisdictions.

Retailers raised the issue of who controls the remote energisation function. TRUenergy notes that the ability to coordinate the precise time of energisation with the customer’s contact with their retailer’s call centre could potentially improve safety. This may require direct control of the energisation process by the retailer.

AGL suggests that remote energisation and de-energisation be classified as a contestable service

139

Introduction

TRUenergy notes the lack of experience in Australia with remote energisation, which makes it difficult to establish the extent of risk. However, AGL notes that many customers presently average one unscheduled supply outage and restoration per year without significant safety issues, which suggests that the risks of remote energisation under a guided scenario would be very low.

AGL notes that extensive customer service training, procedures and “safety scripts” for remote energisation have been developed by retailers in Victoria, in consultation with ESV.

The proposed policy position that customers may be offered the option of manual energisation was widely supported by retailers. Origin Energy strongly emphasised that customers must fully bear the cost and this should only be offered where remote service is not justified. The cost of providing a manual service to disadvantaged groups must not be pushed onto retailers – the financial responsibility for this needs to be clarified.

Ombudsman submissions generally agreed with the proposed policy positions. EWON desired further consideration of proposed regulatory changes to implement remote energisation as standard practice, to ensure that current consumer protections are maintained.

EWOV observes that it is critical that all information intended for consumers, such as safety checklists and instructions for operating smart meter functions such as the Arm button, must be presented in plain, simple English.

Distributor submissions mostly supported the proposed policy positions, with some exceptions noted below.

Ausgrid does not endorse remote de-energisation and re-energisation becoming standard practice on moving in and moving out (MIMO). It argues that smart meters in particular collect enough data that the patterns of consumption should indicate clearly when a new occupant moves in. This then becomes the starting date for the new billing period.

United Energy notes that in Victoria, where a large base of smart meters has already been installed, call centre “safety scripts”, have been developed by stakeholders and approved by the safety regulator (ESV). However, business-to-business (B2B) procedures have not been developed to specifically request remote energisation and de-energisation services, which are still the responsibility of distributors.

A third party submission suggested that the remote de- and re-energisation functions be available for consumer operation through the Home Area Network (HAN).

140


13.2.1 Position and evidence from Victoria and other states

Many of the submissions referred to the smart meter rollout in Victoria, where many of the issues discussed here have been addressed, or will need to be addressed in the near future.

Remote energisations commenced in Victoria in April 2012. At the time of writing, many thousands of re-and de- energistions have been completed under the call centre-led safety script procedure, with no reported adverse safety incidents.

Householders are required to switch off their main switch before remote energisation. Using its Monitor Supply function, if the smart meter detects a load upon energisation, the meter immediately de-energises. Despite the requirement to turn the main switch off, where this has not occurred the Monitor Supply function ensures the premises remains safe.

Electricity authorities in California have a mandatory requirement for premises to be de-energised on move-out, and re-energised again on move-in. The introduction of smart meters has allowed this requirement to be met without staff attendance.


Almost all of the proposed policy positions were broadly supported by the submissions received. There where two issues where there was some notable disagreement, which may require further consideration before a final policy position is made.

13.3.1 Control of energisation function

Two retailer submissions raised the issue of the control of the remote energisation (and also presumably de-energisation) functions. Currently, manual energisation is performed by distribution field staff. In a smart meter environment, the installation and operation of the meter could be a separate service from the distribution network, similar to the current situation for contestable meter Types 1 – 4.

The key issue raised in the submissions is the coordination of the remote energisation function with conducting safety script process, which would most likely be undertaken by the retailer. The timeliness and security of the energisation action may affect the safety outcomes of the process. This issue is addressed in Victoria through the retailers’ safety scripts and the requirement for customers to switch off their main switch, and the use of the Monitor Supply function.

141

Introduction

13.3.2 Remote energisation practices

Draft policy paper two proposed the policy that remote energisation should become standard practice on moving in and moving out (MIMO). This was agreed in all submissions, except for the NSW distributor Ausgrid.

Ausgrid submitted that this proposal was unnecessary, that this is currently not required by Australian regulations or local practices. The end of one electricity account, and the beginning of the subsequent account, can be determined easily by remote reads.

This issue also has implications for the previously noted issue of the control of meter functions. While current manual practices are determined by the distributors, who must dispatch field staff if de- or re-energisation is to occur, the liability for electricity consumption, and the correct billing to account holders, lies with electricity retailers.

The decision on whether premises are de-energised immediately on moving out or closure of accounts appropriately lies with the retailer, as the financially liable party. Premises should only be de-energised on request, and the draft policy position suggests that remote de or re energisation should be standard practice when a de or re energisation occurs.

One approach, used in Victoria, is that only premises which have been remotely de-energised are able to be remotely re-energised. Where electrical work has been undertaken on the premises, a manual energisation by qualified personnel is required.

EMRWG recommends that subject to the approval of the jurisdictional safety regulator, remote de or re energisation should become standard practise, when re or de energisation is requested. Further the method used to remotely re-energise premises is subject to the approval of the safety regulator. A business wishing to use remote de and re energisation must propose a safety case to the jurisdictional safety regulator for approval.

Customer should also be offered a choice of remote or manual re-energisation, noting businesses, in developing their safety cases, should have regard to the needs of vulnerable consumers for whom following a safety script may be difficult, and those customers who are unable to access their meter. These customers should not be disadvantaged due inability to access a meter to use the arm function. There will be some circumstances in which a manual de-energisation and physical disconnection from the network is appropriate, and a manual re-energisation would be in these instances required.

13.3.3 Implementation

The current practices on some of the issues examined here differ between jurisdictions, such as a regulatory requirement for electricity supply staff to attend premises being energised. Each jurisdiction will need to consider whether

142


and how its regulations and procedures be changed to accommodate smart meters functions, and the recommendations of this report.

In principle, where smart meters are deployed, jurisdictions should look to ensure the benefits of the meters including the use of the remote en/re-en function, are achieved. This may mean updating current practices that were applicable with the older technology. As proposed in the draft policy paper, this also involves educating tradespeople about the possibility of remote re-energisation, and updating policies, procedures, practises and training to reflect the possibility of remote re-energisation.

Regardless of the benefits, remote re-energisation should only occur where it is safe to do so. Any business wishing to use the remote re-energisation function should propose a safety case to the appropriate safety regulator for approval to use this function. The safety case may include a safety script that customers can be talked through prior to a remote re-energisation.

13.4 Recommendations

Retailers should be required to inform customers with smart meters that disconnection of their electricity supply may occur remotely rather than manually in all disconnection warning notices and in the model standard contract.

Where de-energisation is requested, remote energisation and re-energisation should become the standard practice across all jurisdictions, subject to the approval of the relevant safety regulator

The method of remote re-energisation is subject to the decision of the jurisdictional safety regulator.

Jurisdictions should amend legislation, regulations and codes of practice to facilitate the implementation of remote energisation and re-energisation as standard practice for smart meters.

Guidance must be provided to customers to assist them to undertake the relevant checks, prescribed by the safety regulator, before remote energisation or re-energisation is undertaken.

Retailers and distributors must not remotely energise or re-energise if they are not assured that the necessary steps prescribed by the safety regulator have been or can be followed.

Customers may be offered the option of a manual energisation or re-energisation

143

Introduction

Jurisdictions should have regard to the needs of disadvantaged groups of consumers for whom remote energisation or re-energisation is not appropriate.

Electricity retailers and/or distributors must develop procedures for the remote energisation or re-energisation of premises where customers do not have convenient access to their meter, subject to the approval of the safety regulator.

Training and communication for electrical tradespeople should be promoted to raise awareness of the possibility of remote re-energisation when electrical work is undertaken.

Codes of practice, guidelines and other documentation relevant to the electrical trades should be amended to recognise the possibility of remote re-energisation

144


14 National minimum functionality and embedded generation94. No changes to the national minimum functional specification to support

embedded generation are recommended.

A national minimum functional specification for smart meters has been developed and this specification was endorsed by SCER in December 2011. With embedded generation, such as solar PV becoming more commonly installed by residential consumers, it is important to assess whether the smart meter minimum functionality is a barrier to installing embedded generation.

14.1 Consideration in draft policy paper oneDraft policy paper one proposed no changes to the de-energisation provisions in the NECF where embedded generation was installed. The response confirmed that no changes to the de-energisation provisions we needed for premises where embedded generation is installed.


Draft policy paper two asked if there are any areas in which the national minimum functionality may inhibit the use of embedded generation.


Consumer advocates are of the view that the minimum functional specification for smart meter infrastructure has achieved a balance of cost effectiveness and functionality with respect to demand side participation.

Consumer groups also noted that the HAN should generally support communication of metering data from any embedded generators and from sub-metering (or child metering) of end use devices and controlled circuits, (noting that this will not be practical or desirable in some cases).

Retailers noted that the minimum functional specification requires that the meter will measure, record and store import and export energy flows and therefore supports embedded generation, and did not believe that embedded generation would be inhibited.

EWOV is not aware of any areas where the minimum functionality of smart meters inhibits the use of embedded generation.

Distributors believed that the minimum functional specification would not inhibit the use of embedded generation.

Distributors noted that the net metering configuration is simpler and has lower costs, however the minimum functionality supports both net and gross metering.

145

Introduction

14.4 Analysis and recommendation

EMRWG notes that the national minimum functionality was endorsed by Minsters on 9 December 2011. No stakeholder indicated that they believed that this national minimum functionality would inhibit the use of embedded generation. EMRWG believes that the national minimum functionality supports the use of embedded generation and therefore does not recommend any changes.

EMRWG notes that a net metering configuration is simpler and has lower costs than a gross configuration, but notes that the metering configuration chosen for a particular metering installation needs to meet the relevant jurisdictional requirements, including the appropriate arrangements to any applicable feed in tariff. EMRWG expects a like for like meter replacement when a smart meter is installed, and acknowledges that this may mean that most consumers installing embedded generation after the installation of a smart meter are likely to have only net metering available.

EMRWG notes the consumer’s statement that the HAN should support communication of metering data from embedded generation and any sub-metered circuits. However, the HAN will only support the communication of metering data from sub-metered circuits such as embedded generation if there is metering at these points that supports the HAN communication. EMRWG expects that where this is the case, it will be for the parties concerned to resolve. Unless special arrangements are made the embedded generation will be net metered though the smart meter, and the HAN will support the communication of this data. Final policy positions

EMRWG is of the view that the national minimum specification does not inhibit the use of embedded generation and that generally there will be options available for consumers to choose the type of metering configuration.Hence no changes are recommended to the national minimum functionality in order for the specification to support embedded generation.

No changes to the national minimum functional specification to support embedded generation are recommended.

146


15 Appendix 1: List of stakeholder submissions

As part of the review, stakeholders were given the opportunity to make written submissions on the two draft policy papers. Written submissions were received from the following organisations as part of the review:

AGL

Aurora Energy

Ausgrid

Better Place

Consumer Utilties Advocacy Centre

Council of the Aging Victoria

Country Energy

E-meter

Energex

Energy and Water Ombudsman of New South Wales

Energy and Water Ombudsman of Victoria

Energy Networks Association

Energy Supply Association of Australia

Ergon Energy

Ethnic Community Council

Integral Energy

Jemena

Landis & Gyr

Opower

Origin Energy

Powercor and Citipower

Simply Energy

St Vincent de Paul

147

Introduction

TRUEnergy

United Energy Distribution

Victorian Council of Social Services

The following consumer groups contributed as part of joint consumer submissions:

Alternative Technology Association

Australian Council of Social Services

Consumer Action Law Centre

Consumer Utilities Advocacy Centre

Ethnic Communities Council of NSW

Public Interest Advocacy Centre

Queensland Council of Social Service

Queensland University of Technology

South Australian Council of Social Services

St Vincent de Paul Society

Tasmanian Council of Social Services

Uniting Care Wesley

Victorian Council of Social Service

Western Australia Council of Social Services

Submissions may be accessed from the SCER website:

www.scer.gov.au/workstreams/energy-market-reform/demand-side-participation/smart-meters/

148


16 Appendix 2: Possible implementation of policy positions

This table gives an indication of the likely implementation instrument for each policy positions

Policy position

Discussed in chapter

Policy Position Possible implementation

1 2 Small consumers should be given an effective choice of retail tariffs. This would be facilitated by requiring that retailers, where they are required to offer a standing offer tariff, to offer both a standing offer flat tariff and a standing offer TOU tariff to small customers.

Jurisdictions, with supporting NER changesPotential NERR change

2 2 Retailers should be required to offer a controlled load tariff as a standing offer to consumers who have qualifying controlled load. Consumers who accept this standing offer would be able to choose whether they wish their general tariff to be the standing offer flat or TOU tariff.


3 2 Existing customers should remain on a flat standing offer tariff unless they choose to move to a TOU standing offer or any market offer. Subject to the jurisdictional transitional arrangements, new customers, unless they request a flat tariff, should default to the retailer’s TOU standing offer.


4 2 Jurisdictions, consistent with their price regulation responsibility, may determine that a transitional period should apply following the widespread commencement of time varying pricing.

Jurisdictions

5 2 Transitional measures that could apply during this period include allowing customers to switch from a retail market contract, back to a standing offer contract with the same retailer without an early termination fee being applied.

Jurisdictions

149

Introduction

Policy position



6 2 Distributors should be required to provide a number of tariffs that are available for small customers with smart meters. The available network tariffs should include, at a minimum, at least one flat tariff, one time varying tariff and at least one dedicated controlled load tariff for customers whose meter will support it.

NER/NERR

7 2 Distributors should be required to offer retailers the available network tariffs for each customer so that retailers can choose the network tariff that aligns with their customer’s retail tariff.

NER/NERR

8 2 Distributors may establish reasonable conditions for the application of each tariff recognising the need for revenue certainty, that there are costs associated with changing a customer’s tariff and the potential for gaming. Such reasonable conditions could include that the tariff would apply for a fixed period.

NER/NERR

9 2 Despite the above conditions, a retailer should be able to choose an alternative network tariff at any time when there is a customer move-in or new connection to align the network tariff with the retail tariff choice.

NERR

10 2 Despite the above conditions and at any time, the customer’s retailer should be able to choose an alternative network tariff where the retailer varies a hardship customer’s retail tariff to the most cost-effective tariff in accordance with regulation.

NERR

11 2 The powers of the AER should be strengthened to allow them to take into account, as part of the AER’s network tariff approval process, the overall effect of all the network tariffs on effective retailer choice.

NER

12 2 Only retailers could offer critical peak price tariffs directly to customers NFA13 2 Critical peak rebates could be offered by both retailers and where it is a non tariff

product, by distributors.NER/NERR

150


Policy position



14 2 Critical peak pricing tariffs and critical peak rebates should be offered as a voluntary product and only established with a customer’s explicit informed consent.

NERRAER guidelines/regulatory instrument

15 2 Jurisdictions may apply appropriate transitional measures to CPP and CPR products. These measures could include allowing retailers to apply an exit fee during the first year of a CPP contract. The need for such transitional measure should be reviewed, the timing of this review to be set by the jurisdiction but not later than after 5 years of operation.

Jurisdictions

16 2 The AER should consider whether guidance on what is needed for explicit informed consent for a CPP tariff or rebate is required.

AER Possible NERR change

17 2 The AER should undertake monitoring and reporting in a number of areas. These are:The number of hardship consumers on any particular tariff type; the particular tariff choices of vulnerable consumers; andthe number of consumers choosing a flat standing offer tariff.

NERRAER guidelines

18 2 State and territory governments should review, as appropriate, the structure of their energy concessions regimes and customer service obligations in the light of new pricing arrangements as they become available in each jurisdiction.

Jurisdictions

19 3 EMRWG proposes that the AER clarify the application of the NECF to the provision of energy management services to small customers where bundled with or associated with energy supply, including where services are offered by third parties.

NER/NERR

20 3 EMRWG proposes that a form of authorisation or registration (including customer consent and privacy obligations) should be a prerequisite to enable third-party access to consumer data via market systems, but should not be a condition of operating in the energy information market generally.

NER/NERRAER guidelines?

151

Introduction

Policy position



21 3 Rules and processes should be established to clarify the obligations of energy supply market participants to provide access to third parties operating in energy information and energy management markets and any conditions of such access.

NER/NERRNEM procedures

22 4 Emergency supply capacity control should be an option available to networks in responding to or managing emergencies, including the management of the restoration of power

NER/NERR

23 4 Where distributors offer SCC as a separate condition to a network tariff, the preference is for this to be through a retailer.

NERR

24 4 Supply capacity control offered by distributors may be part of the connection agreement.

NERR

25 4 EMRWG notes that to the extent that these products are marketed, the same marketing rules as would apply directly to retailers offering this product should be applied to distributors.

NERR?AER guidelines?

26 4 EMRWG recommends that retailers should not offer SCC until such a time as there is a clear understanding of the potential nature and structure of these contracts and a fuller analysis of the risks, especially in regards to vulnerable consumers.

NFA

27 4 To facilitate this understanding EMRWG would support targeted trials of voluntary SCC.

AER framework on exemptionsChanges to ensure the AER has power to grant exemptions for trials?

28 4 For avoidance of doubt, SCC may not be used as an alternative to disconnection (credit management) and may not be offered to any customers entering or participating in a hardship program.

NERR

29 4 Consistent with the recommendations in Chapter 3 – Third Party Service Providers - that as third parties cannot offer products relating to the sale of energy, by definition they would not be able to offer an SCC product.

NFA

152


Policy position



30 4 EMRWG recommends that the supply capacity limit for an embedded generator exporting to the grid be set to the capacity as agreed in the connection agreement. For solar PV generators, this should correspond to the capacity of the inverter.

NER/NERR

31 5 Only retailers may offer DLC directly to consumers where it is part of, or a condition of, a tariff for the sale of electricity.

NFA

32 5 Distributors, retailers or third parties may offer DLC products and services to consumers where it is a standalone product not connected to a tariff for the sale of electricity, subject to general consumer law.

NERRAER guideline or exemption framework

33 5 Any ambiguity regarding when a product is, or is not, part of a tariff for the sale of electricity should be resolved through appropriate action by the AER.

34 5 EMRWG recommends that contracts containing DLC should be voluntary and entered into with the customer’s explicit informed consent.

NERR?AER Guidelines?

35 5 The AER should be requested to develop guidelines where possible and appropriate, for explicit informed consent for DLC contacts. Jurisdictions may apply appropriate transitional arrangements for the DLC contracts, including terms and conditions.

NERR/Jurisdictions AER

36 5 Subject to any transitional arrangements, DLC providers may include a fee for early termination of their contracts which must be clearly stated and reflect the cost to the business.

NFA (already provision for exit fees in the NECF)

37 5 DLC contracts should terminate when a customer moves house (unless agreed otherwise with that customer), and the terms must be clearly stated in the DLC contract. Termination fees should not apply in these circumstances.

AER Guidelines?

153

Introduction

Policy position



38 5 EMRWG recommends that customers with life support equipment should not be excluded from entering into DLC contacts. However, EMRWG also recommends that any guidelines for explicit informed consent for DLC contracts include provision for life support customers to place non-essential equipment on DLC, and consideration of the needs of customers with medical cooling needs.

AER guidelines/regulatory instrument

39 5 Consistent with existing regulatory requirements no customer should be required to involuntarily place any appliance on DLC, including as a condition of participation in a hardship program.

AER guidelines?

40 5 Retailers must demonstrate that, if a customer on a hardship program has agreed to a DLC service, this service is part of the overall assistance package provided to the customer and is appropriate to that customer’s individual circumstances.

AER guidelines?

41 5 It is not proposed to mandate that notification of whether the controlled appliance is on or off be provided to consumers with DLC contracts.

NFA - no change needed

42 5 EMRWG does not recommend that a manual consumer over-ride be mandated as a feature of DLC.

NFA - no change needed

43 6 Retailers should provide customers with consumption data for each tariff segment on their bill to assist them to reconcile their bill charges.

NERR

44 6 Where a customer requests a copy of their historical billing data in relation to a bill, retailers must be able to provide the full set of metering data on which the bill was based, and a summary of the metering data on which the bill was based.

NERR

45 6 No changes to the overcharging and undercharging provisions are recommended. NFA

46 6 Bills based on interval data will be required to show the accumulated total at the beginning and end of the billing period.

NERR

154


Policy position



47 6 Supporting metrology processes to ensure that accumulated readings are collected and passed on to the relevant parties need to be developed.

NEM procedures (AEMO) Changes to Metrology procedures and B2B procedures

48 6 All small retail customer time-varying tariffs should be expressed in local time. NERRAER retail guidelines

49 6 It is not proposed to change the requirement for the meter clock to be in Australian Eastern Standard Time.

NFA

50 6 It is not proposed to require network tariffs to be billed solely in local time, as this transaction is primarily managed by retailers.

NFA

51 6 Where retailers are required to inform customers that the bill contains estimated data, "estimated" should refer to any data that has been estimated or substituted in accordance with the Metrology Procedure.

NERR

52 6 Retailers should be required to inform customers that a customer’s bill is estimated and the extent of any estimations/substitutions if the total number of estimated/substituted intervals exceeds 96 intervals of a quarterly bill, or 32 intervals of a monthly bill. Retailers would have the discretion to inform customers of any estimation below this threshold if they wished.

NERR

53 6 Retailers should inform customers of the existence of the materiality threshold in the retail contract.

NERR

54 6 If any estimation or substitution of data occurs during a CPP event, the customer should be charged at tariff rate that would have applied if a CPP event was not called.

NERR

55 6 Ongoing monitoring of estimated and substituted data used for billing retail customers by the AER should take into account estimation and substitution of data during CPP events. This ongoing monitoring may inform future Metrology Procedure amendments if it is deemed necessary.

AER Monitoring and reporting regime

155

Introduction

Policy position



56 6 The CPR contract should stipulate how estimated/substituted data will affect eligibility for the rebate, and includes a right of appeal against denial of the rebate due to estimated data.

AER guidelines?

57 6 Customers should have the right to challenge the basis of the estimation or substitution used for billing.

NERRNER/Metrology Procedure

58 6 EMRWG recommends the AER should monitor the use of estimated and substituted interval metering data used for in small retail customer billing.

NERRAER guidelines (as part of the monitoring and reporting regime

59 7 EMRWG confirms the objectives for consumer engagement as set out in the draft policy paper. These are to :provide information about the rollout of smart meters and how it will affect consumers;provide information about smart meters and how they operate;empower consumers to take control of their energy usage by showing them how they can access accurate and timely information about the services enabled by smart meters, and the opportunities to reduce their energy usage and bills;provide a mechanism to enable consumers to directly provide information about their issues and concerns and have those concerns addressed; andincrease general consumer understanding and acceptance of a smart meter program.

NFA - no changes needed to regulatory framework

60 7 EMRWG recommends that the Commonwealth government and/or the state or territory governments, where they are the project proponent, should have a co-ordinating role in the consumer engagement program for the widespread installation of smart meters to enhance the understanding of the program by the community.


156


Policy position



61 7 To develop relevant strategies for the consumer engagement program and to recommend the most appropriate strategies for different customer groups and circumstances, the involvement of industry and consumer representatives is essential.


62 7 A jurisdiction should give further consideration to responsibilities and information requirements/delivery where a large scale roll out occurs but the state or territory government is not the proponent.


63 8 Customers should be able to register a device on the Utility HAN without the device being part of a contract for the supply and/or sale of electricity.

NERR

64 8 A registration facility should be provided by the responsible person. Customers should register a device on the utility HAN using an agreed industry-wide device registration procedure

NER/NERR

65 The charge for the registration of a device, if any, should be determined as part of the overall set of charges for metering services. The AER should be asked to consider the AEMC’s proposed beneficiary pays principle (and limitations thereof) in any appropriate determination.

NER/NERR

66 8 During any jurisdiction’s transitional period a jurisdiction may determine whether such device registration should be at no direct charge to the consumer. In such cases the party providing the registration facilities should be able to recover the costs of registering devices through the most appropriate metering charge, rather than a separate direct charge for this transitional period.

JurisdictionsAER determination process (NER?)

67 8 Device registration should be considered a metering service. AER determination process?NER?

68 8 The AER should develop guidelines for the terms and conditions for registering a device on the utility HAN and ongoing meter access by the device.

NERR

157

Introduction

Policy position



69 8 Registering a device on the HAN or logging on to a web portal constitutes a request for access to metering data for the purposes of the NER.

NER

70 8 Customers should be able to access their own data via an IHD or similar device, that they supply and web portal provided by the retailer or distributor, at no additional cost charged by the electricity retailer or distributor. Customer access to data, through these methods should be considered part of metering services.

NER/NERR

71 8 Supporting procedures to enable device registration processes should be developed through AEMO’s existing procedure development processes.

NEM procedures (AEMO)

72 8 In accordance with current practice, customers may authorise provision of their data to any authorised third party

NFA rule change not requiredNote supporting procedures may need to be developed

73 8 Rules around data access should be clarified for third parties based on the conclusions of the Commonwealth Sapere scoping study and recommendations by the AEMC.

NER? NERR?

74 8 Distributors sending messages in relation to power emergencies and planned interruptions, in accordance with the regulatory requirements, to customers through their IHD does not require prior consent.

NERR

75 8 Emergency warning messages sent on behalf of emergency services, may be sent to customers through their IHD without consent.

NERR

76 8 Retailers, distributors or third parties cannot send marketing or similar information to customers through the IHD without the customer’s explicit informed consent.

NERR

77 8 For retailers this consent can be obtained at the entry to the contract or during the contract period. Distributors and third parties should be required to have clear mechanisms whereby this consent can be obtained. All parties must be able to

NERR

AER guidelines (explicit

158


Policy position



provide clear evidence of this explicit informed consent.informed consents)

78 8 Where appropriate the energy marketing rules should be extended to distributors and third parties using the HAN and IHD to market to consumers. AER guidelines

79 10 EMRWG recommends that jurisdictions consider the extent to which their jurisdiction’s Ombudsman scheme should, in the interests of consumers, provide coverage of the activities of third parties in the energy market and work with their energy Ombudsman to ensure that the powers and resources available to the ombudsmen are sufficient to deal with services provided by third parties as necessary.

Jurisdictions

80 11 Eligible low income households with electrical defects at their meter box or connection point (for which the customer is responsible) identified through the smart meter installation process, should be financially assisted with the repairs.

Jurisdictions

81 11 Jurisdictions should be responsible for determining which customers are eligible and the extent of the assistance to customers in these circumstances, depending on the nature of the rollout.

Jurisdictions

82 12 Irrespective of whether a smart meter deployment is government or commercially led, key stakeholders should ensure that consumers are adequately informed about the standards which apply to radiofrequency emissions, the obligations on distribution businesses/metering providers to comply with these standards, the outcomes of any relevant trials, and how compliance with these standards is monitored

Jurisdictions?

Part of consumer engagement strategy

83 13 Retailers be required to inform customers with smart meters that disconnection of their electricity supply may occur remotely rather than manually in all disconnection warning notices and in the model standard contract.

NERR

159

Introduction

Policy position



84 13 Where de-energisation is requested, remote energisation and re-energisation should become the standard practice across all jurisdictions, subject to the approval of the relevant safety regulator

Jurisdictions, supporting NER changes

85 13 The method of remote re-energisation is subject to the decision of the jurisdictional safety regulator. Jurisdictions - Safety

regulator decision86 13 Jurisdictions should amend legislation, regulations and codes of practice to facilitate

the implementation of remote energisation and re-energisation as standard practice for smart meters.

Jurisdictions

87 13 Guidance must be provided to customers to assist them to undertake the relevant checks, prescribed by the safety regulator, before remote energisation or re-energisation is undertaken.

NERR

88 13 Retailers and distributors must not remotely energise or re-energise if they are not assured that the necessary steps prescribed by the safety regulator have been or can be followed.

NER/NERR?

89 13 Customers may be offered the option of a manual energisation or re-energisationNFA - doubt if rule change is needed to achieve this

90 13 Jurisdictions should have regard to the needs of disadvantaged groups of consumers for whom remote energisation or re-energisation is not appropriate. Jurisdictions

91 13 Electricity retailers and/or distributors must develop procedures for the remote energisation or re-energisation of premises where customers do not have convenient access to their meter, subject to the approval of the safety regulator.

Jurisdictions - Safety regulator decision

160


Policy position



92 13 Training and communication for electrical tradespeople should be promoted to raise awareness of the possibility of remote re-energisation when electrical work is undertaken.

Refer

93 13 Codes of practice, guidelines and other documentation relevant to the electrical trades should be amended to recognise the possibility of remote re-energisation Refer

94 14 No changes to the national minimum functional specification to support embedded generation are recommended. NFA

161

Documents

Chapter 1 - Introduction€¦ · Web viewWHO World Health Organisation Introduction . In December 2007 the Ministerial Council on Energy committed to work with stakeholders and