Policy Challenges for the Energy Industry: Views from Key Stakeholders Forum Wednesday 16Th March 2016 Contents

POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM WEDNESDAY 16TH MARCH 2016 CONTENTS

INTRODUCTION...... 3 GAVIN DUFTY, ST VINCENT DE PAUL...... 4 TIM NELSON, AGL ENERGY...... 10 TIM ROURKE, CITIPOWER POWERCOR...... 30 JANINE YOUNG, ENERGY AND WATER OMBUDSMAN NSW...... 38 ANDREW MCKENNA, BUSINESS SA...... 58 CARLY HYDE, QUEENSLAND COUNCIL OF SOCIAL SERVICE...... 70 JO DE SILVA, SOUTH AUSTRALIAN COUNCIL OF SOCIAL SERVICE...... 80 RON BEN-DAVID, ESSENTIAL SERVICES COMMISSION...... 98 MARGARET SEWELL, DEPARTMENT OF INDUSTRY...... 102 Stakeholders Forum. Policy Challengesfor the Energy Industry: Views from Key de Paul Society Victoria warmly thank you for attending the The SouthAustralian Council ofSocialService andSt Vincent consumers. to meetthelongterm interests of structures to supportthesechanges they are central indeveloping appropriate that we allface inthefuture. Furthermore, understanding andmeetingthechallenges conversations are essential inrecasting our emerging issues. We believe these of discussing themesand identifying sector interests andviews withtheaim This Forum brought together diverse service provider protections andreshape what isanenergy particular themodelsofdelivery and fundamentals oftheenergy market, in These changesquestion thecurrent production andthat oftheconsumers. energy retailer, energy networks, energy the traditional view androle ofthe market -thistransformation challenges increasingly diverse andchangingenergy explore thepolicy challengesinan This Forum was heldto discuss and of SocialService South Australian Council Jo DeSilva Best wishes, the continuation ofthisconversation. We trust thesepresentations willassist in most appropriate ways to dealwiththem. emerging policy challenges andfindthe We willcontinue to engagewith the • • • Key themesfor discussion were: implications for consumer protections. explore thischangingenergy market and This Forum’s particularfocus was to current andfuture activityinthisarea V jurisdictions issues andconcerns from different C energy industry perspective Curr onsumer experiences andemerging iews from various policy makers of ent andfuture challengesfrom an

S G t Vincent dePaul avin Dufty

3 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM 4 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM St Vincent dePaul Setting theScene Gavin Dufty, ENERGY REGULATION FORUM

PREPARED BY GAVIN DUFTY MARCH 2016 POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

5 6 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM [INSERT DEPARTMENT] |[INSERTTITLE] ENERGY REGULATION FORUM • [INSERT TITLE] Gas pricingintothe future(veryuncertain) and behindthemeter“kit”different for different consumers Potential changesinthemixofreliability, securityandaffordability basedonmeteringtype skin inthegame) Greater consumerengagementand, asimportantly, investment (moremoneyonthetablemore ● ● ● ● ● Market istransforming-theremoredivergenceacrosstheNEMeg STATING THEOBVIOUS-MARKETIS CHANGING 40MWVs!60MW(TSSreach) Universalvstargeted(NECF–derogationstothestates) Generationmixandimpactsonreliability/contestabilityinwholesale Metering typesandproducts services (mandatedvscompetitive)acrossstatesand Retailmarketcontestability(Vic – ACT/Tas) within states Insert textasrequired–use Arial Narrow18ptasstandardfont [INSERTENERGY DEPARTMENT]REGULATION FORUM | [INSERT TITLE]

[INSERTENERGY TITLE] REGULATION FORUM – WHO SHOULD BE COVERED

•Lack Insert of clarity text as about required protections – use Arial and Narrow obligations 18pt as- Behind standard the font meter vs through the meter At very high level – “Long term interest of Consumers” – does the law / rules and obligations cover the production part of the PROsumer through the meter energy obligations needs to be made clear Protections based on metering type and hence the types of products and services that can be offered Embedded networks, exemptions carve outs and residual markets POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

7 8 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM [INSERT DEPARTMENT] |[INSERTTITLE] ENERGY REGULATION FORUM • [INSERT TITLE] Concessions coverageoff thebillversus orenergyconsumedfromgrid Dispute resolutionsscopeOmbudsman schemes standards etc) Obligation standardsonnewtechnologies(invertersFrequency,batteries, building What’s essential,what’s not ROLR Retailerorotherinsolvencies(nearmissgoenergyothers) New marketentrants(companieslinkedtoDBs–specialityproviders) What isanenergyretailer(bundledinsurancetypeproductplus PV etc) ENERGY REGULATION FORUM –WHAT SHOULDBECOVERED Insert textasrequired–use Arial Narrow18ptasstandardfont 9 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM 10 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Industry View AGL Energy Tim Nelson Transitioning to a 1 cleaner energy sector: a 21st century regulatory framework for a 21st century technology

Tim Nelson March 2016

AGL’s Nyngan Solar Plant FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

11 12 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM > Date (Verdana 10pt) > Author > Presentationtitle Analysis andPolicy 2020’ -Economic between 2015and Australia may fall costs inEastern residential electricity ‘Relief insight: why 2 Average costpricingandthe‘deathspiral’resultsinhigher prices Demand hasbeen‘grindingdown’ > March2016 > TimNelson > SACOSS/Vinnies forum 3

13 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM 14 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Consumption hasrespondedtohigher electricity prices Electricity prices > March2016 > TimNelson > SACOSS/Vinnies forum 4 Bills couldhavebeenmateriallyhigherwithoutconsumption response Electricity pricesandcapacityutilisation > March2016 > TimNelson > SACOSS/Vinnies forum 5

15 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM 16 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM LRMC analysisisinstructiveaboutcostdrivers Looking atcosts > March2016 > TimNelson > SACOSS/Vinnies forum 6 Focus onbehindthemeteriscriticalinrelationtoconsumption Looking atbills > March2016 > TimNelson > SACOSS/Vinnies forum 7

17 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM 18 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM instead Very fewcustomerswillbeableto‘self-satisfy’–partial gridsubstitution Grid defectionunlikely > March2016 > TimNelson > SACOSS/Vinnies forum 8 9 An evolutionary economics perspective – what has changed and what hasn’t?

> Presentation title

> Author FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS > Date (Verdana 10pt) 19 20 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Simplistic evolutionaryeconomicsperspective What haschangedandwhathasn’t? › › > March2016 > TimNelson > SACOSS/Vinnies forum Consumer sentimentandtechnologyhavechanged Regulatory frameworkhasbeenlaggingbehind › › › › › › information Solar –firmsmustkeeppacewithrapidlychanging Digital –consumersarenowableto Intersection between regulationandfinancialmarkets Roles andresponsibilities–prescribed byregulation Pricing isstilllargelyregulated (c.a. 50%ofthebill) Batteries justaroundthe corner? › › Solar Solar Metering respond morequicklytopricing/ generation technologies 10 Some things won’t change! 11 Customer and community expectations about policy

› Stakeholders driving change, not just technology and consumers

› Investors (divestment), governments (policy), NGOs (political pressure)

› Issues of focus unlikely to change and in conflict (sometimes)

› Reliability – unlikely consumers will accept lower reliability

› Consumer choice – partial grid substitute

› Affordability – electricity considered an essential service, should other services (e.g. solar, batteries) be thought of in the same way?

› Environmental – increased focus on reducing emissions

› With all of this to be considered, it is little wonder the regulatory framework is lagging!

> SACOSS/Vinnies forum

> Tim Nelson FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

> March 2016 21 22 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM > Date (Verdana 10pt) > Author > Presentationtitle responsibilities Roles and

12 Current regulationactingtopreventevolutionarychange Roles andresponsibilities-metering › › › › > March2016 > TimNelson > SACOSS/Vinnies forum Implementation maybechallenging AEMC shiftingmeteringtobecomeaconstableservice Metering hashistoricallybeenascheduledmonopolyservice Metering isakeypartoftechnologyevolution › › › › e.g. Declining meterinstallationsfor‘technical’ reasons Consumer, ratherthanregulatory,driven Facilitates customerengagement/controloftheirenergyusage Allows pricingarbitrage 13

23 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM 24 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Current regulationactingtopreventevolutionarychange Roles andresponsibilities–competitive neutrality › › › › › › > March2016 > TimNelson > SACOSS/Vinnies forum Evolution ofincentivestructures required Customers havea‘right’toinstall solar Regulation stillcatchingup Solar hasfundamentallychangedhouseholdenergyconsumption (andproduction) Regulated revenueshould be strictlyformonopolyservices Competitive neutralityiscriticalforsuccessful evolution ofenergy markets › › › required toinstallanair-conditioner! What sizesystem? Solar connectionshavebeenrefused.Incontrast,nopermission hasever been Regulated entitiescurrentlyentitledtoclaiman ‘innovationallowance’! 14 Current regulationactingtopreventevolutionarychange Roles andresponsibilities–newproducts › › › › > March2016 > TimNelson > SACOSS/Vinnies forum Regulatory arbitrageisapooroutcome! Other issuesrequireconsideration Affordability andessentialservice Technology standards › › › exemption fromsucharrangementsimpactoncompetitiveneutrality principles? contribute througha‘sharedresponsibility’approach–howdoes their Electric vehicles Multiple tradingrelationships Should newtechnologieswhichsignificantlyimpactcustomerenergy supply 15

25 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM 26 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM > Date (Verdana 10pt) > Author > Presentationtitle Some policyprinciples

16 It is important to get public policy right 17 The evolution of energy markets dependent upon policy

› Cost reflective network tariffs › Policy principles » Contestability, rather than regulation, in the absence of market failure » Competitive neutrality » Consumer protections » Appropriate ring-fencing » Technology standards › A focus on addressing hardship › GHG mitigation must be considered for c.a. 70% of market that is non-residential » Financing innovation must keep pace with technology/regulatory issues

> SACOSS/Vinnies forum

> Tim Nelson FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

> March 2016 27 28 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM AGL andEconomicResearch > March2016 > TimNelson > SACOSS/Vinnies forum › › Working onpapersrelatedto:metering;marketdesign;andcompetitive Two papersforthcoming: neutrality withinaregulatoryframework » » Book chapterinFutureofUtilities-thefuture side response’acceptedfor publicationinAustralian EconomicReview ‘Australia’s NationalElectricityMarket–optimisingpolicy to facilitatedemand-

18 19 More information

› Blog – aglblog.com.au › Twitter - @tanelsonaus › Google Scholar - https://scholar.google.com.au/citations?user=oEzbRF4AAAAJ&hl=en

> SACOSS/Vinnies forum > Tim Nelson

> March 2016 FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

29 30 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM CitiPower PowerCor Industry View Tim Rourke Presentation by Tim Rourke Chief Executive Officer CitiPower and Powercor

Challenging times for a changing industry – we are adjusting POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

31 General overview of the industry

GENERATION TRANSMISSION Over supply Utilisation decreasing

CUSTOMER DISTRIBUTION Action centre

CitiPower and Powercor Australia networks POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS 2 32 Industry challenges

Carbon emissions Clarity of accurate • Customer/industry desire and price information to reduce prices to customers while reducing carbon emissions $$ abc • Technology available but commercial challenges (cost to install, run, subsidies for flow on effect) • Clarity of accurate information to customers to enable good decisions Industry challenges • Different ownership models has driven varying cost structures across the NEM

Complex ownership Exposure to and cost structures emerging technology POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS 3 33 What can and are we doing to address these challenges at CitiPower and Powercor

Conveying focus on the customer • Clarity of information to customers • Cost and reliability driven • Building a network that enables all technology as potential solutions AND AT ALL TIMES doing so safely Wind power for all involved. Customers generation

Technology advancements enable more efficient operation and management of networks How we compare – Distribution charges across Australia (2015 dollars) Access to detailed Weekly power bills consumption data on smartphones $271 CitiPower (VIC) Smart metering Coal power generation (traditional ) ActewAGL (ACT)

United Energy (VIC) Switch retailers Off peak charging of faster electric vehicle $382 Powercor (VIC)

Jemena (VIC)

AusNet Services (VIC)

Endeavour (NSW)

Price-sensitive, remotely On and off-grid controlled appliances The empowered SA Power Networksoptions for(SA) local generation A future network customer Ausgrid (NSW)

TasNetworks (TAS) Solar power Cogeneration and Energex (QLD) generation trigeneration Time of use Battery storage pricing options Essential (NSW)

Ergon (QLD) Demand response Automation $0 $200 $400 $600 $800 $1,000 $1,200 Competitive suppliers POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS Battery storage offering new energy products Source: CitiPowerand and services Powercor analysis 4 34 Summary: Preparing for the future We are transforming into an energy services business that has the capability to build a smarter network and leverage new technologies that enables customer choice.

Our commitment to striking the right balance for our CUSTOMERS between safety, reliability, growth and affordability is the foundation on which we build a more sustainable future for our communities. POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS 5 35 Thank you POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS 6 36 37 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM 38 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Energy andWater OmbudsmanNSW Industry View Janine Young Smart meters, exempt retailers, emerging products…… A new era for policy makers and consumers

Janine Young Energy & Water Ombudsman NSW

SACOSS & SVDP FORUM , 16 MARCH 2016 FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS 39 What’s on the agenda?

Changing Dmes for Industry, Consumers and EWON

1. IntroducEon of smart meters 2. New energy products and services 3. Growth of exempt retailers 4. Vulnerable customers – some things don’t change POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

40 Metering and InformaDon InnovaDon Smart Meters

41 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM 42 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM . . Smart Meters: benefits . . o o parEcipaEon billing, demand side e.g. monthly opEons InnovaDve their energy usage through Customers can make informed decisions customer needs IntroducEon of energy tariffs which reflect their consumpDon Opportunity for vulnerable customers to manage Energy smart homes Energy management soYware and tools energy products/services and billing about

Smart Meters: challenges

. Metering services transfer from distributors to retailers . NSW Fair Trading will oversee safety and installaEon standards – resourcing? . Meter replacements and premises with poor wiring . Will vulnerable customers benefit or suffer from Time of Use or cost-‐ reflecEve tariffs POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

43 44 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM EWON’s view . . . . with informed consent The introducEon of smart meters must occur to anEcipate / support customer need eﬀecDve An awareness needed be will program independent, dispute free, resoluDon! All consumers should conEnue to have access to the introducEon of smart meters Vulnerable customers must to customers and minimal disrupDon share the beneﬁts of

Emerging Products

Solar generaDon and baKery storage POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

45 46 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM New enable: technologies Emerging Products: benefits . . . . . generaEon baèry and storage Retailers developing products that combine solar regulatory framework Products services and developed outside current Prosumer role -‐ selling back to the grid PotenEal to move off the grid Less dependence on tradiEonal energy sources Emerging Products: challenges

Consumer issues . Technology has outpaced consumer protecEons . New technology requires iniDal expenditure that limits who can parEcipate . Financially vulnerable customers are most probably excluded from the benefits of innovaEon and change . Going off the poses grid dangers that must be avoided FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS 47 48 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM . . . EWON’s view dispute resoluDon! have access to independent, free, All consumers should conEnue to financial hardship and retailer debt! these products – they could reduce the benefits of the introducEon of Vulnerable customers must losses choice, impacts, long term gains / about Consumers must be fully informed

contract terms, rebates, share Exempt retailer framework

. The number of exempt retailers is increasing in NSW . AER exempEons mean that those retailers are not required to be a member of the Energy Ombudsman scheme in their State . NSW legislaEon provides EWON with jurisdicDon to accept complaints from customers of exempt retailers POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

49 50 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Exempt retailers -‐ challenges . . . . retailers! It’s worked before entrants without imposing a barrier to new resoluDon independent, dispute free Adequate protecEons including could that have in the future? – EWON Members. What impact Who pays for the EWON complaints Framework protecEon Energy NaDonal Customer Many customers may not have must be provided – second Eer Vulnerable customers

Current trends may exacerbate ﬁnancial vulnerability . 14% of Australians live on/below the poverty line . DisconnecEon rates are rising . Diﬃculty in arranging payment plans is sEll evident . Access to hardship programs is less than 1% of customers . Credit default lisEng and debt collecEon complaints are rising . Unconscionable credit repair agent acEon prevails POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

51 52 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Concession Policy Conundrum Poorly heated or cooled housing leads to poorer health outcomes Social Housing $ Aging social housing stock = energy eﬃciency in houses poor Disadvantaged customers access government assistance Higher energy usage by disadvantaged tenants Higher health care costs and energy bills Health $ Energy $ What if it looked like…..

High quality energy eﬃcient housing stock using new technology

Lower energy usage by disadvantaged tenants

PotenEal for prevenEon and reducEon in health issues

PotenEal for lower health care costs and energy bills

Reduced need for government assistance POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

53 54 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM . . short… In A potenEal soluEon …. from new energy and services products energy efficient, affordable housing presents an opportunity for upfront investment in The current NSW social housing reform program preventaEve healthcare , educaEon etc. for vulnerable consumers health concessions / rebates and it frees up money front, potenEally reduces the need for energy and Government investment in quality social housing up to spend on food, which benefits

In summary

. Smart meters, new technology, energy products and new players in the energy market can have a tremendous benefit for society . Policy needs to catch up with the change cycle . Benefits need to be directed towards the most disadvantaged and financially vulnerable in our society so that vulnerable customers are not leU behind . It is in all of our interests! . We all have a role to play!

FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

55 56 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Freepost Web Email Freecall CONTACT US NSW 1234 Sydney South Reply Paid 86550 www.ewon.com.au [email protected] 1800 246 545 SACOSS & SVDP FORUM , MARCH 2016

twi`er.com/ewonsw facebook.com/ewonsw

57 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM 58 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Consumer Experience Andrew McKenna, Business SA Energy Energy Ma7ers Ma7ers for SA Business! for SA Business! Andrew McKenna – Senior Policy Adviser Andrew McKenna – Senior Policy Adviser Energy Ma7ers for SA Business! Andrew McKenna – Senior Policy Adviser POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

59 2 Key challenges

Wholesale market impact on energy rates

Move to cost-‐reﬂecDve tariﬀs

Network impacts; short, medium and long term

Andrew McKenna – Business SA POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

60 Andrew McKenna –BusinessSA Key Industries High intensive and trade exposed: Medium intensive: Manufacturing Retail

per annumgrowth SA economy–4.5% Strongest performerin Particularly food&beverage

Hospitality Agribusiness Agribusiness wine andfood We lovetoenjoyouriconicSA Viticulture/Horticulture/Agriculture

Aged-‐Care Mining States Oldest populationofmainland driving profitabilitydown Commodity cyclealready 3

61 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM 4 Wholesale market volatility hits SA business! Wholesale cost component up to 75% for large users, although around 40 – 50% on average

140% 124% Premium SA 120% over Victoria 100% 93% 88% 80% 63% 64% 60% 38% Premium SA 40% over VIC/QLD/ 20% NSW average 0% 2016 2017 2018 POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

62 Andrew McKenna – Business SA How long to renewable base-‐load? Suitable forallcategoriesbusinessandpersonal presentation, eaqueipsaquaeabilloinventore veritatis etquasiarchitecto Source: Ernst & Young 2016

63 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM SA wholesale energy price outlook without suﬃcient access to coal ﬁred base-‐load?

South Australia

Victoria POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

64 Andrew McKenna –BusinessSA . . What are cost-‐reflecDve tariffs? Assuming the costs are efficient! mechanism to ensure this happens? When will the savings, if any, be passed back? What is the the journey? OK we theory get the but why consumers come along on should 7

65 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM 66 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Impact of network spending on end users? Predominantly drivenbydistribution,nottransmissioncosts since late 2000’s. major cost driver UnDl recently, bills! from small business decision cut 10% AER 2015 SAPN

up. least aﬀord to give beneﬁts we can appeals unwinding Network business 8 9 Medium to long term concerns for SA business Strong RAB growth in face of declining average and peak demand?

29% nominal RAB growth over 5 years 2015 SA Power Networks final AER decision 24% nominal RAB growth over 5 years 2016 Australian Gas Networks draft AER decision POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

67 68 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM How does it impact business? impact How it does grid, great, but what about split incenAves If businesses can be self businesses be If can and exit suﬃcient death spiral! Finally, the for tenants/landlords?

Thank you POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

69 70 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Queensland Council ofSocialService Consumer Experience Carly Hyde, Changing energy market: Consumer Experiences

Queensland consumer perspectives

16 March 2016 FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS 71 72 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Changing energymarket • • • • products services and meters, electric vehicles Industry reforms – tariﬀ reform, mix of energy Policy reforms – deregula

• Regional Queensland • 710,000 customers • Government owned retailer • Full retail compe<

• Remote Queensland • Approx. 4,500 households • Government owned monopoly retailer • Card-‐operated prepayment meters

• Qld-‐speciﬁc consumer protec

73 74 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM South EastQueensland • SEQ consumers: • • • • • vulnerable consumers and 6) Lack of ﬁnancial counsellor posi

75 76 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Regional Queensland • • • • • PPAs) natural a3ri

• If new technologies and business models are to be genuine choices for consumers (including vulnerable consumers), then consistency is required in consumer protec

79 80 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM South Australian Council of SocialService Consumer Experience Jo DeSilva, POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS

Exemptions and Vulnerability Jo De Silva South Australian Council of Social Service POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

81 82 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM • Concession recipients • Vulnerable customers • Exempt customers Consumer Outcomes POLICY CHALLENGESFORTHEENERGYINDUSTRY: VIEWSFROMKEYSTAKEHOLDERS POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS

SACOSS Retail and Network Exemption Framework: Emerging Issues for Consumers

• Effectiveness of the national regulation of on- sellers and embedded networks • Impact on the more vulnerable sectors • Consumer interviews POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

83 84 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM • Exempt consumers incaravan andresidential Broad Overview Exempt Customers – • Do notgetadequate information from thepark • Concerns are notbeingaddressed parks feel bothfrustrated anddisempowered operator POLICY CHALLENGESFORTHEENERGYINDUSTRY: VIEWSFROMKEYSTAKEHOLDERS POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS

• Not being offered a “fair deal” in terms of their electricity supply • Do not know where, and to whom, they can safely turn in order to resolve their complaints in an effective and impartial manner POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

85 86 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM • High fixed charges for supplythat appearto • Exempt Customers –Key Issues • A view that whiletheparkowner/manager had the reasons for changesto theseprices andcharges; Inadequate information onprices andcharges and the localretailer; exceed thefixed charges inthestandard offer of these were notpassed onto theconsumers; for instance, installation ofPV onoffice buildings) lower prices and/or lower energy costs (due to POLICY CHALLENGESFORTHEENERGYINDUSTRY: VIEWSFROMKEYSTAKEHOLDERS POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS

• The park owner/manager restricting and/or changing the payment options available to customers, e.g. mandating direct debit payment arrangements; • The inability of the exempt consumers to negotiate on “equal terms” with the park owner/ manager; • The lack of access to cost-effective independent energy dispute settlement mechanisms; POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

87 88 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM • The poorstate ofthenetwork infrastructure, • The lackofeffective contact pointsover the connection; and, customers’ premises andthelackofcapacityon meters, theconnection from themeters to the particularly theaccuracy ofthecustomers’ with electricitysupply. weekends andpublicholidays ifthere are issues POLICY CHALLENGESFORTHEENERGYINDUSTRY: VIEWSFROMKEYSTAKEHOLDERS POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS

Vulnerable Customers

• Essential Services Commission of Victoria Hardship Review • High degree of variation in how retailers determine who is and who is not a ‘hardship customer’, and therefore who is entitled to hardship support • How support mechanisms are provided to customers varies significantly between retailers POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

89 90 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM • There are significantdifferences inretailers’ • The discretion provided to retailers may be hardship programs situations. outcomes for customers inotherwisesimilar causing significantlydifferent experiences and POLICY CHALLENGESFORTHEENERGYINDUSTRY: VIEWSFROMKEYSTAKEHOLDERS POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS

Debt

• Customers facing payment difficulties owed retailers an estimated $50 million • Of this amount, customers participating in hardship programs owed approximately $37 million • Customers on payment plans outside hardship programs are more likely to succeed in repaying their debt than customers on hardship programs POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

91 92 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM • The level ofsuccess ofpayment plansto reduce • Success inpaying offdebtcanvary widelyfor • Current hardship programs are generally • Outcomes vary considerably for individual debt varies significantlybetween retailers individual customers, even withinaretailer. accumulation oflongterm debt ineffective inavoiding the continuing customers POLICY CHALLENGESFORTHEENERGYINDUSTRY: VIEWSFROMKEYSTAKEHOLDERS POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS

• Current framework can allow customer debt to reach levels in excess of $10 000 • Debt sold to a debt collector can lead to changes to their credit rating and possible legal consequences including credit default listings, third parties aggressively pursuing debt, bankruptcy, house repossession and the threat of eviction POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

93 94 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM • The concessions safety netcurrently operates to Concessions • Victoria hasadiscount of17.5 per cent off • South Australia hasa flat rate energy concession • With amove to cost reflective tariffs,there willbe a different degree dependentonthejurisdiction household electricitybills of upto $215peryear a wholenew stream ofnew winnersandnew losers POLICY CHALLENGESFORTHEENERGYINDUSTRY: VIEWSFROMKEYSTAKEHOLDERS POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS

Key Issues from NECF Jurisdiction Perspective

• Who pays for extensions to the consumer protection framework? • The old policy framework of trying to overcome this by encouraging everyone to join the NECF is simply not relevant any more • The new energy policy landscape - learning from each other and dynamic • Complimentary measures, particularly

concessions, need to be fit for purpose FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

95 96 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM • Disconnection andreconnection –permissibility What We Want To Keep • Disputes andcomplaints –procedures and • Standing andmarket contracts –terms and • Explicit andinformed consent –obtaining and and pathways information provision conditions, provision of informing POLICY CHALLENGESFORTHEENERGYINDUSTRY: VIEWSFROMKEYSTAKEHOLDERS POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS

• Billing – estimation versus actual, under and overcharging • Life support POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

97 98 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Essential Services Commission Policy Activities Ron Ben-David, SACOSS &STVINCENTDEPAUL SOCIETY WEDNESDAY 16THMARCH2016|SYDNEY ENERGY INDUSTRY POLICYTHE CHALLENGESFOR providers &business models Whole new classes ofservices, service (except for afew ‘energy geeks’) complexity andthey’ll pay for simplicity Why? Because customers don’twant of thefuture? electricitycontractscan eat” =Harbinger Just thisweekend, majorretailer: “all you Electrons ain’telectrons Remember: Oilsain’toils=>now . & even artificial intelligence internetsmart phoneapps,‘the ofthings’ demand management),electricvehicles, (FiTs), energy efficiency (load control & (Tesla power wall), distributed generation tariff reform (demand charges), batteries • solar, smartmeters (TOUs), network New technologies &developments SPEAKING NOTES these definitions But .theindustry isregulated basedon structures anddefinitions. (good!) butalsobreak down industry break down tradition industry barriers All thosenew technologies/developments Today, however .awarning customers. competition =>accompanying benefits for regulation willfinallyfixthislackoftrue concluded that technology rather than Last year =>my Lara Binglepaper=> retail energy markets. critical ofclaimedlevel ofcompetition in Unlike most ofmy peers,Ihave been On theonehand=Fantastic ! the scaleof thisthing. authorised retailers. Don’tunderestimate 1,600? That compares to, say, 30 exempt suppliersregistered by AER? This isalready happening. How many its obligations. service providers whoare notsubjectto not covered by regulatory framework, or i.e. customers receiving services that either the market willbecompletely blurred. I predict within~3years, hugesswathes of blurred focus, butsoonitwillbecompletely becoming alittleblurry. For now, insoft and less relevant by theday. It’s all network/retailer isbreaking down. Less But thedistinction between generator/ generator/network/retailer. network/retailer andwe regulate itasa Eg. we callsomethingagenerator/

99 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM 100 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM You already hearthisbeingtalked about. other product. Leave retail energy to theACL like any “we’re outof here” We (=regulators &policy makers) give up. services/types ofservice porviders. Too many offers/types ofoffers/types of It allbecomes too hard to regulate. Surrender” Second scenario =“Regulatory benefits andwholoses? But ifthisisthecase, we must ask:Who else to do. That’s exactly thepoint) done thesamefor lack ofknowing what (This isnotacriticism.I’d probably have multiple ‘before providers. themeter’ eg. AEMCrecent decisionto prohibit Farfetched? Maybe already seeingsigns slow itdown sothey candealwithit. It’s alltoo hard, too risky to complex. So market to slow orstop itsrapid changes. all gettingourofcontrol. Clampdown on Policy makers andregulators panic.It’s First scenario =“Regulatory Backlash” Two “bookend” scenarios… MOMENT OFTRUTH and policy makers face anEXISTENTIAL At that point(or sooner)=>regulators protections they/you expect they have. millions ofcustomers won’t have the In otherwords, over next few years, consumers. to serve thelongterm interests of of thesefutures then we willhave failed If we dounwittingly stumble into one there. then findourselves wondering how we got one ofmy two “bookend” scenarios and the future unwittingly where we end upin ourselves NOW sowe don’tstumble into only questions. Questions we must ask Today: I’mnotsuggesting answers — ToU tariffs? dispatched energy) essential? (butneutrality withcentral essential? (Butpetrol isnot) Eg. energy? essential aboutenergy? Which aspectsof What isanessential service ?What is And what’s thedebate we have to have? keep dongourjobs. NOT just because ithasbecome harder to knowingly /considered /consciously and If we gothisway, let’s make sure we doit BUT… competition may behere. Finally! Maybe it’s okay becauseitmeansreal

Do cus Is electricityfr Is electricityt tomers have rightto avoid o charge avehicle om solarpanel customer at centre) retail code down to ONEPAGE !(with For example: my goalofgettingenergy complexity. solutions rather thancreating more Surely, there must be some simpler upon review, committee uponcommittee. We have process uponprocess, review => This hasallbecome socomplicated. processes after listening to discussion ofCOAG led Additional comment inquestion time 101 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM 102 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Department ofIndustry Policy Activities Margaret Sewell, Policy Challenges for the Energy Industry: A Commonwealth Perspective

Margaret Sewell 16 March 2016 POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

103 104 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM Business modelsintheenergysectorareevolving Present Past Possible future Generation &fuels distribution Trading & Generation, fuels& Source: CSIRO, “ChangeandChoice: The Future GridForum’s analysis of Australia’s potentialelectricitypathways to2050”,2013 transmission Energy services Electricity Utility Transmission Storage Distribution Customer Retailing Metering Retailing Customer Data Analytics Electric vehicles Customer Load aggregation Changing nature of Australia’s energy market is a challenge for government, industry & consumers

• Greater renewable uptake is a potential challenge to system security and reliability of supply.

• New energy supply models are expanding options, but making decisions for consumers, industry and governments more complex. • Greater complexity presents a challenge to ensure that consumers can benefit from choice. • This rapid change necessitates a reassessment of what consumers need from governments, business and others.

Source: CSIRO & ENA, “Stakeholder visions for a ‘customer oriented’ electricity future”, Electricity Network Transformation Roadmap forum, 2015 FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

105 106 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM • • • • • South Australia’s changinggeneration High penetrationofrenewables&theNEM consumption andmaximumdemand. greater differencesbetweenaveragehourly solar createsa“peaky”energydemandprofile,with The intermittentnatureofgenerationbywindand of thegridandforsecuritysupply. operational andtechnicalissuesforthemanagement An increasingshareofrenewablespresents ensuring electricityissuppliedreliably. Thermal generatorshaveplayedanimportantrolein world standards. across theNEM remain highby reliability inSouth Australia and Power systemsecurity and intermittent generationintheNEM. set againsthigherproportionof for managingcontinuoussupply NEM todate,makingitatestcase uptake ofwindandsolarinthe South Australia hasthegreatest Wind 46% Solar 9% South Australia Projected GenerationShare2015-16 Thermal Source: BloombergNewEnergyFinance(2016) 45% Wind 6% Solar 3% Hydro Source: AEMO NTNDP (2015) 8% NEM Thermal 83% Ensuring adequate & flexible consumer protections • We need to get the right balance of consumer protections to cover customers throughout the engagement spectrum. This will better enable greater competition within the marketplace and adoption of new technologies. • Improving consumer information and decision-making tools in a rapidly changing marketplace will be an integral part of ensuring consumers are empowered to make genuine choice, and are able to comfortably adopt new technologies and new modes of energy supply.

Source: R Sinclair ECA (2015) Customer-orientation graph FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

107 108 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM • • Off-grid anddistributedgeneration – – – – – – – themselves off-gridforarangeofreasons: Some consumersmaysoonconsiderorfind Off-grid scenarioscaninclude: Increasing useofdistributedenergyandstorage Increased consumerinterestinself-sustainable Decarbonisation policiesandincentives; Emerging businessmodelslinkingproperty Reliability forfringe-of-gridcommunities;and islanded systemswithinthegeographic scopeof systems servicing individualcustomers technologies; individual customerlevels; energy solutionsatboththecommunityand developments with distributed energy sources. developments withdistributedenergysources. the gridservicingmultiplecustomers: disconnected or never connected to the grid. disconnected or neverconnectedtothegrid. • • ownership/tenancy; and supply arrangementsareaprecondition of greenfield off-gridcommunities whereenergy grid extensioniscostly;or new remoteand/orisolatedregions where Fujiwasa SmartTown Japan AGL Solar Gas supply and market reform

• In December 2014, the COAG Energy Council agreed to a gas market vision that continues recent reforms and outlines a forward agenda for gas market development.

Key components of the reform agenda:

• COAG Gas Supply Strategy • ACCC East Coast Gas Market Inquiry • AEMC East Coast Wholesale Gas Market and Pipeline Frameworks Review

• AEMO is establishing a Moomba gas supply hub and improving the ability to trade gas and services at the Wallumbilla gas supply hub POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

109 110 POLICY CHALLENGES FOR THE ENERGY INDUSTRY: VIEWS FROM KEY STAKEHOLDERS FORUM • • • • • • Government actiononemergingchallenges market structureandcompetition issues. Frameworks, andtheACCCinquiry on Wholesale GasMarketandPipeline the AEMCreviewofEast Coast Leading reformsongas,including through Productivity Plan. Implementation oftheNationalEnergy approach toenergymarketreform. Maintaining anationalcommitmentand of newandemergingtechnologies. Reviewing regulatoryframeworksinlight Australia. Establishment ofEnergyConsumers framework. Improving theenergygovernance Thank you.

Department of Industry, Innovation and Science Industry House 10 Binara Street Canberra City, ACT 2601, Australia Telephone +61 2 6213 6000 POLICY CHALLENGES FOR THECHALLENGES ENERGYPOLICY INDUSTRY: FORUM FROM KEY STAKEHOLDERS VIEWS

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