Chapter 4Consumers
4.1As mentioned in earlier chapters, the National Electricity Market (NEM), like energy systems worldwide, is being transformed from a system dominated by large thermal power stations to one that includes a variety of power generation resources and technologies.
4.2Coal has historically been the mainstay of Australia’s power production. In 2024, it has provided approximately 55 per cent of energy required in the NEM, in conjunction with approximately five per cent from gas, and approximately 40per cent from renewable sources. Coal-fired energy production is expected to decrease over coming decades with 12 coal-fired power plants retiring over the past decade.
4.3This chapter explores the evidence presented to the committee in relation to issues arising from this transformation including: the uptake of consumer energy resources; costs to consumers and the community; and suggestions for improvement.
Market transformation
4.4Over decades of energy market regulation, concepts of consumers and their agency have changed. During energy market reforms of the 1990s consumers were conceived as ‘disinterested and passive takers of electricity’. By the early-to mid-2000s, regulators pursued retail competition motivated by the perspective that ‘competition is better than the absence of competition’.
4.5Dr Ron Ben-David explained that in pursuing retail competition, the regulators of that time reframed what it meant to be a consumer. Regulators switched from seeing consumers as passive, to viewing consumers as ‘active, interested and discerning shoppers of electricity’.
4.6Over the past two decades, the regulatory conception of consumers has shifted again. Consumers are now conceived as ‘market participants’ who are interested, willing and capable of trading and shaping their energy load, the volume and timing of their electricity exports, and access to their storage assets (e.g. electric vehicles). As such, consumers are viewed as traders of these services. In this context, Dr Ben-David characterises regulators as ‘taking a permissive approach toward ever more complex market contracts despite the incomprehensibility of these contracts for many or most consumers’.
4.7Under such assumptions, the role of the market regulator is ‘simply to support consumer sovereignty through transparent flows of information and removing barriers to consumers shopping as they please’.
Consumer Energy Resources
4.8As noted above, the energy market has undergone radical transformation, in part due to the widespread uptake of Consumer Energy Resources (CER) or Distributed Energy Resources (DER). These are small scale energy systems that generate or store electricity and includes flexible loads that can alter demand in response to external signals. They include any devices with a power load that can be applied flexibly over time, such as rooftop solar photovoltaic (PV) systems, domestic batteries, electric vehicles (EVs), electric hot water systems, dishwashers and pool pumps.
4.9The Australian Energy Market Commission (AEMC) submitted that ‘CER is transforming Australia's energy landscape, presenting opportunities and challenges that are often unique to our country and power system’. Similarly, the Australian Council of Trade Unions (ACTU) described CER as:
…key to Australia’s secure, affordable, and sustainable electricity future, providing benefits and equitable outcomes by smoothing the transition, rewarding consumer participation, and lowering emissions. Well-integrated CER presents an opportunity to support the least cost and faster energy transition, system reliability, and reduce consumers’ energy bills. Optimised use of CER can reduce the need for large-scale generation and storage capacity, resulting in lower costs and bills for all consumers, including those who do not own CER.
4.10It was argued that the effective integration and coordination of CER has the potential to deliver net benefits of between $1 billion and $6.3 billion between 2030–2040. Benefits would include lower energy bills for all consumers, including those who do not have direct access to such technology. Mr David Westerman, Chief Executive Officer (CEO), Australian Energy Market Operator (AEMO), told the committee:
As consumers continue to invest in their own resources, both rooftop solar and batteries, electric vehicles and other smart appliances…the Integrated System Plan did find in its analysis that if those resources are able to participate in the broader market, the whole system will cost $4.1 billion less for consumers. We say it's important to find ways for consumers and their devices to participate in the broader system because that results in lower costs for everyone, not just for those who can afford those devices.
4.11According to the Department of Climate Change, Energy, the Environment and Water (the Department), one third of Australia’s households have installed rooftop solar. Total capacity of rooftop solar across Australia amounts to 22.6 gigawatts (GW) as of May 2024, a more than seven-fold increase since 2014. Collectively, rooftop solar is the second largest source of renewable electricity generation in Australia (behind wind energy generation), and the fourth largest source of electricity generation, making up approximately 11.2 per cent of the country’s installed capacity for power supply. The installed capacity of rooftop solar combined is greater than the single largest generator in the NEM.
4.12The centralised energy system of the past where power flowed one way from supply-side to demand-side is transforming to a grid that is more decentralised, accommodating two-way power flows. As noted in previous sections, the lines between demand and supply are increasingly blurred, creating a more complex system.
4.13The National Consumer Energy Resources Roadmap – Powering Decarbonised Homes and Communities (CER Roadmap) was released by the Energy and Climate Change Ministerial Council (ECMC) in July 2024. It envisages a future where:
Consumer Energy Resources are an integral part of Australia’s secure, affordable and sustainable future electricity systems, delivering benefits and equitable outcomes to all consumers through efficient use which smooths the transition, rewards participation and lowers emissions.
4.14The CER Roadmap states that it ‘does not seek to duplicate reforms underway within Australia’s energy market, but rather focuses on optimising opportunities that complement other reforms and which benefit from a consistent national coordinated response’. Reforms progressed under the CER Roadmap seek to support consumers to:
increase exports from rooftop solar systems to the grid
benefit from new opportunities like vehicle-to-grid
get paid for participating in programs that benefit the electricity system
manage energy use to save on bills and pay back CER investments faster
safely participate in the energy market.
4.15However, the committee also received evidence that the future of CER requires a ‘fundamental regulatory rethink’. A range of suggestions to improve the regulation and management of CER, are outlined below.
Integration of CER
4.16CER challenges the business models of incumbent energy market participants including electricity distribution and transmission networks, retailers and large-scale generators. CER also disrupts established retail markets and therefore necessitates the development of new business models.
4.17Noting the shift towards ‘bi-directional energy flows’, where consumers generate energy (e.g. solar PV systems) or feed stored energy (for example through home batteries) to the electricity grid, aspects of existing electricity distribution networks require reform. Submitters however stated that:
…the current regulatory framework often favours incumbents, limiting the evolution and competitiveness of new entrants and the development of consumer-centric technology solutions. There is a critical need to reassess the roles of traditional and innovative players in the energy retail and distribution network landscape.
4.18The UNSW Collaboration on Energy and Environmental Markets noted that there has been some attempt at reform, but there remains a ‘significant absence’ in considering changes in demand-side activity. It submitted:
…though the [Integrated System Plan] ISP includes considerable capacity additions of consumer-owned distributed energy resources in its optimal development path, it is an input assumption (provided by consultants), into what is largely a transmission planning process that predominantly identifies supply-side solutions. The expansion of rooftop solar PV (largely treated as being ‘behind the meter’, and thus on the demand side) and the nascent emergence of distributed batteries (standalone or, more significantly, within electric vehicles) makes the need to reform oversight of the demand-side more acute.
4.19Submitters called for AEMO to ‘better integrate’ CER into the Integrated System Plan (ISP). Climateworks stated that integrating analysis on CER more effectively into AEMO’s planning and forecasting tools would allow ‘governments and energy system stakeholders’ to be better equipped to implement policies that support CER deployment.
4.20The 2026 ISP Consumer Panel (Consumer Panel) told the committee that ‘the key to effective utilisation of CER for the “common” good is “orchestration” which needs to be effectively implemented for the ISP to be optimal’. It submitted:
The Panel does not consider orchestration to be just another forecast input into the ISP plan, rather it is a necessary precondition for the ISP that sits outside much of the ISP. As such, effective orchestration needs to be recognised as necessary for an effective ISP but it is mainly the responsibility of parties outside the ISP process.
4.21The Consumer Panel outlined the components of orchestration or coordination that it believes sit outside of the ISP, some of which are outlined below:
tariff setting by networks, retailers and the AER that encourage the effective use of CER;
policies and tariffs that enable a fair return on investment in CER;
equity provisions to ensure those unable to acquire or directly utilise CER are not subsidising those able to afford to do so;
engagement and communication with consumers to assist them to understand and participate in orchestration;
policies to improve energy efficiency of appliances and housing; and
improved consumer protections that also support and encourage effective, efficient and consumer focused providers.
4.22The Consumer Panel noted that while the CER Roadmap is ‘vital’, it also demonstrates ‘how much is still to be done to ensure coordination’. It concluded:
…the CER Roadmap…is under-resourced, and will take up to 6 years to deliver the reforms that need to be delivered in two or three years, given the opportunity for the rapid uptake and integration of demand side resources and the imminent threat of coal closures. The Panel strongly urges all governments to recognise and act on the urgency of the Road Map so the 2026 ISP can forecast a more rapid growth in coordinated CER, and earlier benefits flowing to consumers in terms of reliability, lower consumer bills and reduce need for network investments.
4.23The AEMC also noted the importance of CER orchestration and told the committee that this ‘has a significant impact on end customer prices’. Ms Anna Collyer, Chair, AEMC told the committee that it has looked at customer behaviour such as when they choose to charge their electric vehicle, and the impact this has on the network, and end user prices. Ms Collyer explained:
On the one hand, customers may adopt what we call convenience charging, which is when, in some ways, you treat it like your mobile phone: you plug it in when you get home and leave it to charge. If everybody charged their electric vehicle between the hours of six and eight, for example, when there's already peak use of the network, we would need significantly more network expenditure. On the other hand, if we can have smart charging, where we've got customers charging in different times of the day, particularly during the day when there's solar power or alternatively overnight, then we see that significantly less network expenditure is required, and that has a big impact on end use prices.
4.24The AEMC also noted the importance of integration and told the committee that it is undertaking a range of reform programs to ‘better integrate community energy resources into the retail market’ for example, by allowing a customer to have a different plan for their electric vehicle charging than for their regular electricity consumption. Ms Collyer stated:
For example, you might be able to get a plan that says charging your car is very cheap if you can do it during the day or in the middle of the night but more expensive if you do it during the peak, to encourage more people to charge when it's beneficial for them to charge. Because you can choose when you fill your car with electricity in the same way you choose when you fill it with petrol, you might be quite happy with that but prefer a flat tariff for your other energy usage, which is less discretionary.
4.25Nexa Advisory recommended an independent review of the role and performance of electricity distribution networks to consider: their role in facilitating the transition to renewables; their ability to adapt existing business models to integrate CER; and how existing governance and oversite ensures value for energy consumers.
4.26The Australian Council of Trade Unions (ACTU) also called for regulatory reform to increase network access and visibility, and distribution hosting capacity to ensure that consumers can participate and benefit from CER uptake. The ACTU suggested that distribution businesses could be subject to mandates that require the publication of the level of export they allowed CER customers to make, and what they expect to allow in the future. In addition, distribution businesses could be required to ‘provide price signals that reflect real- or near-real-time conditions in the network to CER consumers to provide better information and more confidence in making decisions regarding grid participation’.
Technical standards
4.27There is a current lack of national oversight for CER devices and installation, with states and territories imposing differing technical standards and creating additional cost and complexity for consumers. For example, manufacturers and installers may need to customise devices and installation processes to meet different state standards, resulting in higher prices for consumers. The ACTU called for ‘a set of national standards, overseen by a central body such as the Clean Energy Regulator, should be established and maintained to improve value for CER consumers and reduce customer concern about negative outcomes in CER adoption’.
4.28The Clean Energy Council (CEC) similarly noted that the CER Roadmap includes a recommendation for the establishment of a CER Technical Regulator, and described this as ‘critically important’. The CEC suggested that to be effective, the Regulator must have ‘decision making power, and regulatory authority over a range of different CER technical requirements that sit within different legislative frameworks’. The CEC noted that it is ‘agnostic’ as to where the CER Technical Regulator should functionally be located, but that it should have a broad enough scope to manage multiple regulatory frameworks and drives jurisdictional consistency.
4.29The Australian Council of Social Service (ACOSS) noted that while the CER Roadmap provides important guidance on a number of critical technical issues, it is limited to priority issues. As such, coordination is required to account for intersections between the Roadmap and other policy reform processes which will strongly influence CER. These include minimum performance standards for appliances, and policies to improve the thermal performance of existing homes.
4.30However, the AEMC stated that CER has ‘been an AEMC priority for several years’. It noted that a CER taskforce has been established with clear terms of reference to deliver six priorities including ‘consistent technical standards and consumer protections to minimise risks and maximise participation, and clear allocation of responsibilities and data flows for distribution connected assets to enable those assets to be optimised within the system and market’.
4.31The AEMC noted that it has also ‘called for an overarching, national narrative about the energy transition in general and CER in particular, to support social trust and encourage participation’.
Investment support
4.32Lower income households are often unable to benefit from CER due to the prohibitive cost of installation. The ACTU called for subsidies to be granted to a range of households, including low-income, social housing, and renters to allow for the installation and maintenance of the CER ecosystem. The ACTU stated that ‘incentives for CER uptake can assist customers in reducing high upfront costs and reinforce the value of CER in the management of energy bills while driving greater system benefits and savings for all consumers’.
Consumers — agency
4.33Many energy consumers have limited real choice in the marketplace, and see little incentive in exercising what market choice is available. The majority of consumers are disengaged customers and are unlikely to take an active role unless there exists a proposition that is ‘credible, trustworthy and of significant value to focus their attention’. Measures to lower costs and emissions associated with energy systems that focus on consumer choice are only effective where there is adequate consumer knowledge, control, resources, support and regulation. Engineers Australia and the Australian Academy of Technological Sciences and Engineering in a joint submission, stated:
…individual consumers do not necessarily want to engage and make decisions within a complex energy system. Many consumers simply want affordable, reliable and clean energy. Despite owning rooftop solar, household batteries and EVs, very few consumers act as true ‘market participants’ who are willing and capable of making decisions around their timing and energy use. We cannot have a system where consumers must be energy experts, or we risk losing their confidence in the changes and unintentionally harming them. Some may want to engage in this way, and they should be empowered to do so.
4.34Dr Ben-David noted that consumers, particularly those with solar PV systems, must now evaluate market contract variables including:
the price of electricity supplied by, and exported to, the grid;
volumetric limits on how much electricity can be exported to the grid and, in some cases, limits on how much electricity can be drawn from the grid;
delegated control over onsite electricity production, storage and load;
price, access, ownership and control of electricity stored offsite (e.g. in community or network batteries); and
payments for the provision of ancillary system services.
4.35Consumers may also be required to consider:
dynamic prices or controls which change in real time (reflecting underlying system conditions);
lock-in periods potentially lasting a number of years;
an array of penalties (not necessarily monetary) for breaches or customer-initiated overrides of previously agreed thresholds;
financing arrangements that are indistinguishable from payments for energy services; and
reliance on multiple suppliers providing interacting services.
4.36Of concern, consumers face assessing these market variables regardless of their proficiency in understanding. Dr Ben-David stated that the ‘complexification of contracts in the energy market creates enormous risks for consumers who – for whatever reason – are not effective in managing these risks efficiently’. Further, such complexity results in ‘many – or most – consumers entering contracts that do not align with their best interests’.
4.37In addition, unlike other markets, the majority of consumers cannot avoid market risks by not participating. There are considerable barriers to exit and ‘there is no escaping the energy markets, particularly for electricity’.
Consumers – interests
4.38The long-term interests of consumers are assumed to be at the centre of the design and regulation of the national energy market because the National Electricity Objective (NEO) states that the objective of the National Electricity Law (NEL) is ‘to promote efficient investment in, and efficient operation and use of, electricity services for the long-term interests of consumers of electricity’.
4.39Mrs Clare Savage, Chair, Australian Energy Regulator (AER), told the committee:
We are required to make our decisions consistent with the National Electricity Objective, the National Gas Objective and the National Energy Retail Objective, all of which are couched in terms of the long-term interests of consumers. That's a statutory responsibility that we have, and that is obviously the guiding principle that we take into consideration in our decision-making.
4.40However, the NEO does not place any formal obligation on regulatory authorities to formally consider consumer interests. Dr Ben-David stated, ‘the NEO’s reference to the long-term interests of consumers is provided for contextual purposes only. It does no work’. Dr Ben-David highlighted the findings of the Full Federal Court in Australian Energy Regulator v Australian Competition Tribunal (No 2) [2017] that ‘the necessary legislative premise is that the long term interests of consumers will be served by regulation that advances economic efficiency’.
4.41The committee received evidence that the interests of energy consumers are not well represented in comparison to the views and interests of energy suppliers. ACOSS noted that while all three market bodies have mechanisms for consumer consultation, there exists a ‘clear gap in systemically driving the activities of these bodies towards the evolving interests of consumers, who are likely to benefit most from expanding demand-side measures in energy markets’. ACOSS called for greater numbers and diversity in consumer representation in energy market decision-making to facilitate genuine consultation. Ms Kellie Caught, Program Director, Climate Change and Energy, ACOSS, noted:
In the market regulators, none of the boards, with the exception of the AER, have any members with consumer experience or skills, and most of the staff in these organisations are economists or engineers, who, again, don't have that consumer perspective or demand-side expertise. So we see that there needs to be that top-down approach, making sure that we embody more of that consumer and demand-side expertise at both the board and the senior level but within staff as well.
4.42Choice also argued that ‘having a strong consumer voice in energy market decisions is…critical’ to minimising the costs associated with any transition to renewables and that ‘we assign responsibility to the entities best placed to manage risk – which is rarely consumers’. Choice suggested that:
The institutional arrangements in the National Energy Market must therefore include and support a strong consumer voice, particularly at a time when the energy market is changing so quickly.
4.43Other submitters called for people and communities to be centred in all discussions of the energy market. For example, the Engineers Australia and Australian Academy of Technological Sciences and Engineering in a joint submission submitted that:
An expanding range of energy options empowers and challenges end users and consumers. Their needs must be placed at the centre of decision-making processes. Policy settings need to reflect how structural change will be managed equitably across industry sectors and geographies for a ‘just transition’.
4.44Similarly, Dr Ben-David and the South Australian Council of Social Service (SACOSS) suggested that the NEOs should introduce a new regulatory objective of avoiding ‘exposing consumers to risks they are ill-equipped to understand, manage or price’. This may temper how existing NEOs are applied and to ensure that:
…if the market is not guaranteed to result in benefit to consumers, and/or consumers are not able to protect themselves from adverse market forces, then it is only reasonable that the regulator has the responsibility to protect consumers from harm.
4.45Dr Ben-David submitted that this would recognise that any ‘fulfilment of the National Energy Law efficiency objective is unachievable if risks are misallocated to consumers because they are unqualified to identify, avoid or efficiently transact away those risks’.
4.46Dr Ben-David went further and suggested that a new duty of care model should also be adopted to ensure a redistribution of risk, requiring service providers to act in the best interests of customers when offering or providing services under contract. Dr Ben-David suggested that such a duty should:
apply to any service provider who has the contractual capacity to control, constrain or prevent the flow of electricity to or from a customer’s premises or assets;
impose a positive responsibility on service providers to make reasonable efforts to identify a customer’s best interests, and ensure compatibility between service offerings and such interests;
require service providers to advise customers proactively, conscientiously, reasonably and demonstrably of any risks associated with a contract being offered; and
oblige service providers to monitor that a contract continues to serve the customer’s best interests.
4.47Dr Ben-David acknowledged that constructing such a duty to ensure enforceability ‘is clearly challenging, but it is a challenge worth confronting in the absence of other reforms’.
Vulnerable consumers
4.48Energy justice is a broad concept that is used to address equity issues associated with a transition from traditional energy technologies. It underpins justifications for providing support to vulnerable customers such as low-income energy consumers and renters, particularly around energy affordability issues; and the communities residing near, and working in, coal-based industries as they transition away from fossil fuels.
4.49When used in energy regulation, energy justice is used to address equity issues in energy systems, ensuring fairness in energy access, affordability, and sustainability. It encompasses several key tenets:
distributional (allocation of costs and benefits);
procedural (who participates in decision-making); and
recognition justice (respect for, engagement with and fair consideration of diverse cultures and perspectives).
4.50It also aims to ensure that energy's benefits and burdens are shared equitably across all segments of society, regardless of income, race, or other socioeconomic factors.
4.51Since 2023, there have been policy developments aligned with the principle of energy justice in Australia. These policies largely target energy affordability because it directly affects economic stability, social welfare, and quality of life. Regulatory frameworks aim to make energy both accessible and affordable while maintaining the sustainability and reliability of the supply. As such, governments at all levels provide targeted interventions to enhance energy efficiency measures, increase support for low-income households, promote competitive energy markets, and encourage the adoption of cost-effective renewable energy technologies, particularly by disadvantaged communities.
4.52Nevertheless, the committee received a range of evidence outlining the impact of rising energy prices on vulnerable consumers, and the inability of vulnerable consumers to access the benefits associated with a transition to renewable energy. It was noted that:
…while renewable energy has the potential to reduce energy costs in the long term, the transition period has seen rising energy prices in some regions. This has placed financial strain on households and businesses, particularly those with limited capacity to invest in energy efficiency or distributed energy technologies.
4.53ACOSS noted in its submission that the transition from ‘a fossil fuel dependent centralised energy system with passive users, to a more distributed renewable energy system in which energy users can generate, store and trade as well as consume their own energy…has largely benefited people with wealth, choice and control’. It stated that:
…people experiencing disadvantage pay disproportionately more for the energy bills and towards the cost of the transition to clean energy, while missing out on the benefits delivered through energy efficiency, electrification and new technologies.
4.54Further, energy affordability is a significant factor in determining the well-being of low-income Australians – approximately 40 per cent of all households. Such households have been ‘hardest hit by the rapid escalation in electricity prices evident since 2005–06’.
4.55ACOSS highlighted that vulnerable households were ‘the least well equipped to understand and respond to the different pricing structures, and often had the least flexibility in terms of shifting their electricity use to different periods, and ultimately paid higher prices for their electricity under time-of use tariffs’.
4.56ACOSS also noted the AER’s State of the Energy Market 2023 report found that:
…customers experiencing vulnerability are likely to face additional challenges keeping energy bills low because they may be less able to implement some of the most effective means of reducing energy bills, including modifying energy use, making home energy efficiency upgrades, adopting new technologies and shopping around for better deals. As such, customers experiencing vulnerability are more susceptible to periods of high energy prices and disproportionately represented in the number of customers experiencing debt, hardship, and disconnection.
4.57It was suggested that governance and policy reforms are required to support an equitable and accessible energy transition. For example, Rewiring Australia suggested ‘reforming rental laws and strata regulations to overcome split incentives, creating innovative financing mechanisms that eliminate upfront cost barriers, [and] ensuring energy concessions and support programs that focus on electrification rather than just bill relief…’.
4.58The Justice and Equity Centre argued that there is an opportunity for energy regulation, policy and planning to have an ‘explicit purpose which better reflects the essentiality of energy in supporting health, wellbeing and prosperity’. It suggested that current regulatory frameworks ‘need review and reframing to ensure they equitably protect and promote the interests of all consumers’.
Consumer protection
4.59The National Energy Customer Framework (NECF) is a suite of legal instruments that regulate the sale and supply of electricity and gas to retail customers. The framework includes the National Energy Retail Law (NERL) which regulates that supply and sale of energy to retail customers in New South Wales, Tasmania, South Australia, Queensland and the Australian Capital Territory.
4.60As noted in Chapter 1, the NERL provides a range of consumer protections. The NERL also sets out the mechanisms customers can use to resolve complaints and disputes. Under the NERL, retailers and distributors must have their own standard complaint and dispute resolution procedure and must be a member of an energy ombudsman scheme.The NERL also makes provisions for a Retailer of Last Resort (RoLR) scheme for participating jurisdictions and seeks to ensure continuity of supply to consumers in the event of a retailer failure.
4.61The AER noted that it regulates the retail energy markets in those states and territories which have adopted the NECF. It also regulates the RoLR framework in Victoria since it adopted the relevant part of the NECF in 2024. The AER stated that it protects ‘consumers experiencing vulnerability while enabling consumers to participate in energy markets’ and to this end, in October 2022 it released the Towards Energy Equity Strategy. The AER submitted:
This strategy is focused on reducing barriers to participation, supporting consumers experiencing payment difficulty, ensuring the consumer voice is heard in sector reforms and improving affordability by reducing the cost to serve energy consumers through 15 specific actions.
4.62The AER outlined its progress against a number of its action items, noting in particular its work advocating for ‘sector wide “game changer” reforms…which recognises the enormous potential in the energy sector to innovate and better allocate resources to not only provide a safer, healthier experience for consumers, but also potentially saving money and resources throughout the system’. It also noted that it is progressing implementation of the Better Bills Guideline to provide guidance to retailers on preparing and issuing bills to make it easier for consumers to understand billing information. This initiative would also require retailers to notify consumers if they could be on a better retail plan.
4.63The AER is also responsible for assessing and approving customer hardship policies to ensure compliance with its Customer Hardship Policy Guideline. It noted that all energy retailers must have such a policy to support residential consumers experiencing bill payment difficulties, and that retailers must also assist such consumers to better manage their energy bills on an ongoing basis. Mrs Clare Savage, Chair, AER told the committee:
Our latest data shows that the proportion of residential electricity customers accessing hardship programs has increased from 1.4 per cent to 1.9 per cent over the past 12 months. This reflects both higher energy prices and broader cost-of-living pressures coupled with our compliance and enforcement focus on ensuring retailers give their customers the help they may need.
4.64Mrs Savage also noted that there has been ‘an increase in the number of customers entering hardship programs with low levels of debt, particularly even less than $500’. Mrs Savage explained that ‘the average debt on entry to a hardship program has fallen’ and that the AER expects to ‘see customers getting help earlier, given our significant compliance and enforcement focus on that’.
4.65Mrs Savage went on to explain that in 2022 the AER began implementing the Towards Energy Equity strategy to ‘rethink and reshape how the energy market supports consumers experiencing vulnerability and those who will always struggle to participate in the energy market’. As such:
Our strategy includes the implementation of the better bills guideline, a customer vulnerability toolkit for retailers to improve their identification and support and real payment difficulty protections, the outcomes of which we hope to share with energy ministers in the coming year.
4.66The AER told the committee that its ‘compliance and enforcement functions are a key regulatory tool to protect energy consumers, build trust with the community and keep the energy system stable and secure through the transition’. Mrs Savage outlined to the committee that:
In recent years, we have expanded our compliance and enforcement activity while maximum penalties have also increased. In the 14 years up to 2018-19, we issued 118 infringement notices totalling $2.36 million and obtained court ordered penalties totalling $900,000. In comparison, since 2019-20, we have issued 121 infringement notices totalling $3.95 million and obtained court imposed penalties totalling $48.5 million.
4.67Mrs Savage explained that much of the enforcement work of the AER focuses on consumer matters relating to retail law, and noted that these matters have attracted the ‘largest penalties from the Federal Court’. Mrs Savage stated:
We have also pursued failures in generator performance standards, such as our investigations into the statewide system blackout in South Australia or the explosion at Callide C. They are in-depth and technical but essential to building confidence as we continue the transformation of our energy system. We will continue to focus on enforcing compliance with the energy laws and rules in the wholesale networks and retail sectors and take appropriate action when required.
4.68The AER also noted that it facilitates ‘price comparison for consumers in a competitive retail market’ through its Energy Made Easy website. Mrs Savage explained:
In 2023-24, there were over 3½ million visits to Energy Made Easy. More than 1.3 million Australians completed an energy plan search to compare retailers' offers.
4.69The Justice and Equity Centre noted the ‘critical role’ the AER plays in ‘protecting and promoting the interests of consumers’ but stated that there is ‘an opportunity to empower the AER by providing a clearer remit’. This would ‘allow the AER to operate more independently, and to more aggressively promote the interests of consumers’.
4.70The Justice and Equity Centre suggested that the AER’s role should be more clearly delineated from the AEMC and AEMO. Further, its ‘role in assessing the efficiency and prudency of projects as needed in the ISP should be strengthened’.
4.71Submitters also called for improved consumer protection to increase confidence in emerging technologies and markets such as CER. New CER products and services are often closely integrated with existing energy retail arrangements having a direct impact on consumers’ supply and use of energy. In this context, it is important to note that existing consumer protections do not necessarily extend to new CER products and services.
4.72The NECF also provides customer protections which extend beyond those provided by the Australian Consumer Law (ACL). The NECF applies in all NEM jurisdictions, however each jurisdiction has modified its application to suit local conditions, and Victoria has only adopted it to a limited extent.
4.73The NECF applies to some CER technologies and circumstances, but not others. For example, when a grid-connected customer buys a solar PV and battery system from a third party, the applicable consumer protections are: the NECF for the electricity purchased from the grid; and the ACL for the solar PV and battery system. Further, different dispute resolution and enforcement processes are available depending on whether the issue falls within the remit of the ACL or the NECF. As such, navigating the NECF is difficult for consumers.
4.74The Energy and Water Ombudsman Victoria (EWOV) noted the findings of the AER in 2023:
‘simply extending the [existing consumer protection framework] to new energy services is not viable, given the framework is specific and prescriptive to the retail supply of electricity and gas and the essential nature of this service’.
4.75EWOV suggested that an effective customer protection framework requires ‘easy access to a free, fair and independent external dispute resolution service’ for customers encountering issues with a product or service. Without such access, customers ‘may lose trust in providers of these products and services more broadly’. EWOV suggested that ensuring that EWOV and its counterparts in other state and territory jurisdictions should be provided with appropriate jurisdiction to manage disputes arising from CER products and services.
4.76Dr Brendan French, CEO, Energy Consumers Australia (ECA), similarly told the committee that ECA is of the view that consistency of jurisdiction between states and territories is required. Dr French stated:
Consumers have ready access to an energy ombudsman in most of the mainland states—certainly, all the NEM states—but not all the ombudsmen have the same jurisdiction. Critically, they don't all have the same capability to respond to more cutting-edge issues. For example, for consumer energy resources, if I went and put a solar panel on my roof and a battery on my house, or I went and bought an electric vehicle, there's no guarantee that all of the activities that go into purchasing, installing, and checking standards would be captured by the jurisdiction of an ombudsman. In some instances, I might have to go to a trading jurisdiction, the Commonwealth Ombudsman, a government body or a court. We think that in the context of the energy transition, it's critically important that consumers have very much a one-stop-shop for dispute resolution. That's why we support the energy ombudsman having consistent and strong jurisdictions to respond to these newer energy challenges.
4.77Other submitters noted that while the New Energy Tech Consumer Code (NETCC) is crafted by leading industry and consumer groups, implementation remains voluntary. The ACTU suggested that the NETCC provides a ‘quick and effective way to build consumer confidence’ in the rapidly evolving technologies and business models of the CER marketplace. As such, expanding the NETCC to establish a ‘national trusted protection scheme for consumers and developing mandatory structures for its adoption is crucial for enhancing consumer trust in CER adoption’.
Consumer representation and consultation
4.78A range of government bodies undertake consultation as an important component of their work in regulating the energy market. However, the committee also received criticism of the scope and value of such consultation in relation to consumers. These issues are explored below.
4.79ECA, the ‘independent, national voice for residential and small business energy consumers’, was established to ‘promote the long-term interests of Australian consumers to decision makers and industry.
4.80Dr Michael Schaper, Chair, ECA, told the committee that it is ‘structured as an independent not-for-profit organisation, and that independence is fairly integral to our ability to provide evidence and input into the processes in which we're involved’.
4.81ECA noted in its submission that while energy companies and industry peak bodies are well staffed with government relations and policy advocates who promote industry interests, it is a small organisation. Dr Schaper told the committee:
We're funded by levies paid for by consumers within the NEM states. It is a passingly small amount that equates to much less than one per cent. It is approximately 0.03 per cent of an average household electricity bill, or, that is to say, about 66c in the average bill. That hasn't changed, effectively, in the 10 years or so since our inception. Back in 2015 it was 65c in the bill. Today it is 66c. That leaves us with a budget of approximately $9½ million. In the 2023-24 financial year, we had a $9.6 million dollar budget, $2.6 million of which went to grants that we fund for external parties, leaving us with about $7 million to operate an organisation with 25 staff. We run a very lean entity. We seek simply to break even. In comparison to the other players within the sector, especially in the decision-making processes of government and regulatory frameworks, it is passably small to have 25 staff compared to the resources available elsewhere.
4.82It also noted that while many other consumers advocates ‘do excellent work’, none are specifically funded to advocate to the energy sector on behalf of all households and small businesses in Australia. Dr Schaper told the committee that the ECA is ‘trying to build the capability of other voices within the consumer and small-business space’, and noted that:
Australia is the only country that has specifically made provision for a national voice for consumers and small businesses within the overarching frameworks and decision-making processes. No other advanced, developed economy has done that, and we think that makes an important contribution. It's one of the few countries in the world where you have a national consumer body that can actually provide a full picture when it comes to this most complex policy area, which is energy.
4.83ACOSS noted the impact of a lack of funding on its ability to participate in advocacy. Ms Kellie Caught, ACOSS told the committee:
…we absolutely need more adequate funding for consumer advocates because we see that, for example, when we come to do reviews, inputs into inquiries like this, market rule changes et cetera, it's dominated by networks, energy retailers and in some cases industry associations, but the consumer voice is lost because we're just not resourced to be able to participate. At any one time, there are something like 10 to 15 inquiries happening. We're lucky if we can be at one of those to represent people and communities experiencing disadvantage.
4.84Submitters were broadly supportive of the work of ECA and described it as doing ‘good work, with very broad remit and limited resources given the significant growth in regulatory processes, including energy network revenue determinations and the increasing pressure on consumers due to the rising cost-of-living’.
4.85However, submitters also noted that ECA is unable to offer targeted advice to consumers. Dr Ben-David described ECA as being ‘expected to be a master of all trades, and so, not surprisingly, it is a master of none’.
4.86As such, while the ECA does a ‘good job of providing broad advice’, consumers ‘need much more bespoke support and federal and state governments need to think about how best to provide that bespoke support, because it will be crucial to underpin social licence’ for a transition to renewables.
4.87The Coalition for Conservation also suggested that the ECA should both ‘challenge instances of groupthink between the other statutory entities’, and advocate on behalf of consumers to ensure ‘better protection for consumers from rising energy costs and a proven approach to successful and sustainable decarbonisation’.
4.88The Australian Pipelines and Gas Association (APGA) which represents the owners, operators, designers, constructors and service providers of Australia’s pipeline infrastructure, was also critical of the ECA’s focus on ‘electrification’ despite its ‘notional’ remit of representing all energy consumers. APGA suggested that the national focus on electrification as the sole solution to gas decarbonisation has led to ECA providing insufficient support for current residential and small business gas customers.
4.89The Justice and Equity Centre argued that there is a need for ‘a structure to more durably establish capacity for consumer advocacy from a broader range of organisations, across jurisdictions’. Similarly, Dr Ben-David suggested:
There is a place for the role ECA currently plays, but there is also a role for a highly specialised consumer body that can ‘mix it up’ with regulators and enormously well-resourced industry players during regulatory proceedings.
4.90Professor Bruce Mountain, Director, Victoria Energy Policy Centre alternatively suggested that:
One way forward might be to approach rate payer, consumer and business associations to encourage them to nominate some of their members to perform the equivalent of periodic “jury service” in energy consumer representation. These individuals should be supported through access to a standing panel of technical advisors who they can select and direct as they choose, to assist them in their task of representing consumer interests. Such a model is likely to result in consumer representation that might be able to claim greater legitimacy as representing the perspectives of households and businesses that actually pay the bills.
4.91Rewiring Australia called for the reformation of all market bodies to include at least one consumer representative on their boards.
4.92AEMO noted that it runs a dedicated consumer forum to provide regular updates and exchange information on key AEMO initiatives for consumer and community advocates. It also noted that its newly formed Consumer and Community Reference Group (CCRG) will complement the work being undertaken by its other consultation groups in providing additional, broader, views and context to specific issues.
4.93Engineers Australia and the Australian Academy of Technological Sciences and Engineering, in a joint submission, while noting the work of the CCRG, submitted that even those with technical experience such as electrical engineers do not have sufficient time to examine any proposed changes to processes and rules. Further, ‘most energy consumers would not even be aware these processes are taking place’.
4.94Erne Energy stated that:
…too often consumers have no influence because industry…have decided on the outcome and the consultation is window dressing. Additionally, the market bodies give greater weight to industry and political stakeholder views, and this would be the case even if consumers were able to flood a consultation with submissions.
CER advocacy
4.95As noted above, submitters are broadly supportive of the work of the ECA but some noted that it has traditionally focused on advocating for traditional energy customers (particularly those in vulnerable populations). As such, submitters called for specific representation of CER consumers, noting their particular needs.
4.96Nexa Advisory recommended that a new independent consumer representative body be established separate to ECA, representing CER consumers within policy and decision-making. It suggested that such a body would ensure transparency regarding how such consumers are considered within the governance of each market and regulatory body.
Financial impost on consumers
4.97As noted above, the transformation of the energy market over recent decades has not been without some cost to the consumer. SACOSS told the committee:
…energy policy changes or outcomes will inevitably have social equity implications, for better or worse. Recent changes to energy market design, rules and regulations; changes in technologies, services and market conditions; and the unequal distribution of energy market costs, have already created wide-ranging and negative social equity impacts. Unfortunately, there is potential for this to get worse.
4.98In examining issues related to the integration of CER into the existing market, the committee received evidence regarding the imposition of time-of-use tariffs and export charges. For example, in July 2024, Ausgrid, the largest distributor of electricity on Australia’s east coast, announced the introduction of a two-way tariff for residential and small business customers to encourage the export of electricity to the grid later in the day. Customers will be charged 1.2 cents/kilowatt hour (kWh) for the electricity they export above a free threshold during the peak export period (10am to 3pm). Customers will also receive a payment or credit of 2.3 cents/kWh for the electricity exported during the peak demand period (4pm to 9pm).
4.99Mrs Clare Savage, Chair, AER, told the committee that tariffs ‘encourage and incentivise…optimal use of solar and batteries through the day’. Mrs Savage explained:
Time of use network tariffs are a critical way that networks communicate to retailers when their assets can be used. Increasingly, there is some opposition to time of use tariffs. If we don't like time of use tariffs and giving people price signals, we will need to have greater levels of control about when different assets are used through the day. If we don't do those things in combination or one or the other or the two together, we risk higher bills. It's very much a potential risk at this point rather than an actuality. What I'm trying to do as the AER chair is make sure that we are doing everything to make sure that doesn't eventuate.
4.100Other witnesses however, told the committee that a ‘shift to “time-of-use” cost-reflective tariffs will leave some consumers worse off if they don’t have the “life flexibility” or resources to afford technology to enable them to change energy usage patterns’.
4.101Ms Stephanie Bashir, CEO, Nexa Advisory, told the committee that a ‘proper review on how we actually get tariffs that are up to date and consistent’ is important. Ms Bashir stated that at present, ‘we continue to introduce mechanisms and tariffs that penalise consumers who are trying to do the right thing’. Ms Bashir argued for network tariff reform that would incentivise the uptake of household batteries which would ‘resolve’ the issue of high electricity prices and ‘people really struggling to pay their bills’. Ms Bashir stated:
We've had over 400,000 batteries installed over the last decade. In this year alone 147,000 batteries have been installed. You can look at just the pure cost. You can also look at it from a broader perspective. What are some of the things we can do to help actually incentivise these batteries? An example is tariff reform. We've talked about network tariff reform for decades. We still don't have the right tariffs that incentivise these types of purchases. It is just like what we had with solar a decade ago. Solar technology was very expensive. With the right incentives, tariffs, demand for it and competition, Australia now leads the way in rooftop solar. We really should be looking at how we can replicate a similar model for behind the meter batteries.
4.102Submitters also noted that ‘network costs make up two-fifths of the electricity bill (more in some network areas) and at present are recovered via consumption tariffs through a combination of fixed and usage charges’. Households able to substantially reduce their usage, particularly those able to afford technologies such as rooftop solar, contribute less to network costs. As such, households unable to afford such technologies pay a greater share of all network costs through network revenue caps and non-cost reflective tariffs. ACOSS stated:
As more and more costs of the energy transition are being loaded on to energy bills via subsidies and tariffs people experiencing financial disadvantage are paying disproportionately more of the costs of the transition. For example, there is research that finds subsidy schemes for small-scale solar panels recovered through electricity bills are inequitable and regressive, such as feed-in tariffs and the Small-Scale Renewable Energy Scheme (SRES), which provide direct financial benefits to solar households.
4.103The AER also noted that ‘electricity network costs are now increasing’. It submitted that ‘a significant driver of this has been the economy-wide factors of higher inflation and rising interest rates, causing a higher rate of return compared with levels in previous 5-year regulatory periods’. The AER also told the committee that it has implemented a range of incentive schemes which have resulted in lower costs for consumers. These schemes include:
Efficiency benefit sharing scheme (EBSS) which provides networks with additional financial incentives to undertake efficient operating expenditure over time.
Capital expenditure sharing scheme (CESS) which provides networks with additional financial incentives to undertake efficient capital expenditure over time, to ensure that only efficient capital expenditure is added to the regulated asset bases.
Service target performance incentive scheme (STPIS) which provides electricity network service providers with additional financial incentives for maintaining and improving network performance, to the extent that consumers are willing to pay for such improvements.
4.104However, ‘while the incentive framework drives businesses to be more efficient, we are now seeing significant increases in proposed capital expenditure in electricity network businesses’ revenue proposals’. This increase has been driven by a range of factors, including the integration of new investments in renewable energy for transmission networks, and integration of CER distribution networks. The AER stated:
These types of investment are critical in aiding the energy transition. However, given network charges make up over 40% of customer bills, it is important that such investments are prudent and efficient so that they involve least cost for consumers.
4.105The AEMC told the committee that it is undertaking a ‘holistic review’ of the way electricity prices are structured for residential customers, which includes looking at the way distribution network charges are set, how they feed into retail prices, and how that turns up for customers in relation to both products and services’. Ms Anna Collyer, Chair, AEMC, stated:
In that respect, in particular, we're very interested in understanding different customer cohorts—customers who are able to access the assets I talked about earlier but recognising very clearly there are customers who are not in that category—and seeking to ensure that electricity prices work for all of those customers and that we don't end up with a greater energy divide as a result of the transition.