Earlier intervention needed to help consumers tackle energy debt

Electricity and gas disconnections are on the rise again after the Australian Energy Regulator (AER) stopped them during COVID lockdowns and more consumers entered hardship programs but with higher levels of debt, than the same time last year, according to the AER’s latest quarterly retail market report.

The report shows that to the end of March this year more customers have moved on to payment plans with their retailer or into hardship programs that have more extensive support such as financial counselling, with the average electricity debt upon entry into a hardship program rising to $1,741, an increase of $183 on last year.

However, of the 26,833 customers who entered hardship programs between January and March, more than a quarter (26%) had more than $2,500 of debt, prompting the AER to call for energy retailers to step in sooner to help customers experiencing payment difficulties.

“As a first step, retailers must offer and apply payment plans to residential consumers requiring payment assistance and must have regard to a consumer’s capacity to pay where relevant,” AER Chair, Ms Clare Savage, said.

“But now we are seeing higher debt upon entry to the more extensive hardship programs. It’s crucial that retailers take appropriate action at earlier stages to ensure that customers are protected,” she said.

On Thursday last week the AER held a forum with Financial Counsellors Australia to talk to retailers about their specific obligations to customers experiencing vulnerability, with a particular focus on early identification and on the customer’s individual capacity to pay when they identify payment difficulties.

“Anyone can experience hardship at any point in their lives. It’s important to remember that customers are entitled to various payment plans and hardship programs under national energy retail law,” Ms Savage said.

“It’s also about understanding a customer’s individual capacity to pay, which can change quickly in this inflationary environment as households juggle increasing costs in food, transport and energy.”

The retail report shows that consumers are still accumulating debt while on a hardship program. Data indicates that 42% of electricity and gas consumers on hardship programs did not meet their usage costs, in other words they were using more energy than they could pay for, as of 31 March 2022.

“A blanket or automated approach to payment difficulties by a retailer is not going to be enough to stop the cycle of debt,” Ms Savage said.

“It is vital that an early two-way conversation occurs between retailer and customer to have genuine insight into their situation and apply supports early such as rebates, concessions, or an agreed payment plan tailored to suit their needs.

“Retailers are required to ensure consumers in financial difficulty are given the full suite of protections in the Retail Law and Retail Rules, including protections outlined in their hardship policies.”

Every energy retailer is required by law to have a hardship policy in place that identifies and supports residential customers to overcome energy debt. Hardship programs, as opposed to concessions and payment plans, take the support further by providing a more tailored and face-to-face approach, such as financial counselling and energy efficiency audits.

Last week the AER wrote to retailers and generators outlining the importance of meeting their obligations. We also highlighted our monitoring and enforcement of laws to protect consumers at this difficult time and the role we play in monitoring market conduct.

This website and its free and independent bill comparison website, EnergyMadeEasy (www.energymadeeasy.gov.au) offers information and advice on the obligations of retailers and what questions customers should ask to get the support they need.

Issued date: 
29 June 2022
AER reference: 
NR 49/22
AER Media 0466 409 921 media@aer.gov.au