Financial issues ‘just the tip of the iceberg’ in supporting energy consumers, prompting new tactics from the AER

The Australian Energy Regulator (AER) is consulting on a bold new strategy, launched today for consultation, to improve outcomes for consumers experiencing vulnerability and help them stay engaged with the rapidly transforming energy market.

Latest energy debt figures show a 56% increase over four years in average 90-day debt, from $640 in 2016-17 to $1000 in 2020-21. Alongside this, 44% of Australians have literacy levels below what is considered enough to get by in everyday life, one in five have a disability and almost half the population will live with mental illness issues at some point in their life.

“In the past, the energy sector has been focused mainly on addressing payment difficulties, but our research has helped us to understand that this is just the tip of the iceberg when it comes to improving outcomes for consumers experiencing vulnerability,” AER Chair Clare Savage said.

“Energy isn’t just something we choose to consume - it is a vital part of the way we live. As COVID-19 has shown us, anyone can suddenly find themselves in vulnerable circumstances, which can affect access to this essential service,” she said.

These concerns have formed the basis of the AER’s first ever draft Consumer Vulnerability Strategy, released for consultation. It follows extensive, ongoing engagement, working closely together with consumer groups, energy businesses, government and market institutions.

The term ‘consumer experiencing vulnerability’ refers to someone who is significantly more likely to suffer detriment or find themselves unable to pay for energy usage, whether from market complexity or personal circumstances such as low income, disability or poor mental health.

Many such consumers, however, struggle to self-identify as being ‘vulnerable’, whether due to shame, embarrassment or simply believing the term ‘vulnerable’ is too permanent for their individual situation.

Ms Savage said more needs to be done across the energy sector to break down these barriers so that consumers can access products and services that best meet their needs, that payment difficulties are met with more tailored support, and that the future energy market meets the needs of consumers.

“The energy market is rapidly transforming and it is important that new products and service design have consumers experiencing vulnerability in mind so that no one gets left behind,” Ms Savage said. “Now is the time for the energy sector to ask what else we could do to support consumers who find themselves in vulnerable situations, especially when they least expect it.”

The AER’s draft strategy introduces five overarching objectives designed to deliver lasting change, which are listed here with just some of the actions and ideas the AER will explore further with consumer groups, industry and government.

  1. Improve identification of vulnerable consumers:
  • Frequently, consumers don’t identify as being vulnerable due to embarrassment, shame, or not having experienced being in this situation before. We are proposing a toolkit, including indicators that energy businesses should consider and use to activate early conversations with consumers.
  1. Reduce complexity and enhance accessibility for energy consumers:
  • The AER’s new draft billing guideline (the Better Bills Guideline), also released for community consultation today, aims to ensure all consumers can easily understand their energy bills. It comes after AER research confirmed up to 45% of consumers were unable to select the cheapest offer when presented with three bill options.
  • We are also improving the AER’s Energy Made Easy website so that consumers can directly engage in the market and seek out better energy deals.
  • We propose to explore how Retailer Report Cards could be more consumer-friendly, allowing them to directly compare the service quality of energy providers.
  1. Strengthen protections for consumers facing payment difficulties:
  • We would like to improve engagement between energy businesses and consumers experiencing vulnerability to ensure that disconnection is truly a last resort. In addition, the AER would like to review the minimum disconnection threshold which currently allows retailers to disconnect customers with debts greater than $300, a limit that has remained unchanged since 2012.
  1. Use the consumer voice and lived experiences to inform regulatory design and change.
  • We need to ensure the consumer perspective is considered as technology changes in the energy market, particularly on how these changes impact consumers experiencing vulnerability. This includes reviewing the potential gaps in the current consumer protection framework that may emerge with new energy products and services.
  1. Balance affordability and consumer protections by minimising energy businesses’ costs to serve their customers where possible:
  • We want to work with the sector to review regulations and consumer protections to ensure they remain fit for purpose, and encourage more consistency across jurisdictions. This will include considering reducing the cost on energy businesses in meeting their obligations – as these costs are passed on to consumers.

“The many groups we have spoken to during our consultation on this draft have indicated a willingness to collaborate in 2022 and to be ambitious in discussing next steps,” Ms Savage said.

“Our vision is that the actions arising from our Consumer Vulnerability Strategy will ultimately help to improve energy accessibility and affordability, ensure consumers stay connected, and are better off, now and in the future.”

Stakeholder feedback will be collated for inclusion in the AER’s three-year Consumer Vulnerability Strategy, expected to be published mid-2022.

Issued date: 
20 December 2021
AER reference: 
NR 40/21
Contact: 
AER Media 0466 409 921 media@aer.gov.au