Impacts of Network Regulation Rule Change Proposals on Customers

1. Network Regulation Rule Change Proposals The impacts on your customers…. Janine Rayner November 2011

2. Consumer Action Who we are • Melbourne based organisation • Funded largely by Victorian Legal Aid and Consumer Affairs to provide free legal advice and financial counselling advice, to vulnerable consumers. • Energy policy work funded by Consumer Advocacy Panel

3. Consumers Basically – consumers want: • To be able to turn their lights on • To pay a fair and reasonable price for their energy use • For their energy bills to be manageable within their household budgets • To be protected from predatory or unfair behaviour

4. State of the current regulatory framework • The current regulatory framework is failing consumers. • The rules and their application are too weak to counter the power and superior information position of the huge energy network businesses. • Consumers are paying too much.

5. Where are consumers? • The cost of energy is rising and a significant component of this is distribution prices • Over $55 billion of charges from consumers – flying under the radar • Consumers are facing difficulty with the broader cost of living – this includes energy bills

6. Prescription or discretion • A balance needs to be struck in the context of access to merits review. • Focus must be on discouraging distribution businesses engaging in the expensive and time consuming process • Refocus the debate on the AER process – not the merits review

7. The Rule change proposals • Evidentiary burden needs to be placed on the businesses to prove that the proposed forecasts do reasonably reflect prudent and efficient costs. • The Rules need to more fully ensure network expenditure is carried out when and where it is necessary rather than based on how businesses can further profit from it. • Changes need to reduce incentives to over invest by limiting what gets rolled into the regulatory asset base.

8. The Rule change proposals • There is currently a significant amount of time, energy and ultimately consumer’s money focused upon increasing the WACC to maximise the returns to business • This requires more scrutiny by the policy makers to ensure that the AER has significant power to ensure that the returns to businesses capture the needs of consumers in lower prices (rather than lining the pockets of a few).

9. The Rule change proposals • Available resources • Contrasts to the time the AER or other stakeholders can input into the process. • A need for more onus to be placed on distribution businesses to substantiate their claims • Information is opaque and overwhelming in amount • This precludes the necessary scrutiny to ensure a balanced process. 

10. Are the rule changes enough? Need to go further than the rule changes proposed • The merits review process • Seek much more input from consumers earlier in the process, to demonstrate that business proposals are in the interests of consumers. • The adequacy of the NEO

11. Consumer Action Law Centre Level 7, 459 Little Collins Street Melbourne VIC 3000 www.consumeraction.org.au Tel: 03 9670 5088