Financial Hardship – Reflections of a Melbourne Pilot Project 2003-04

1. Financial Hardship – Reflections of a Melbourne Pilot Project 2003-04 Utility Debt Spiral Project and its subsequent spheres of influence Gavin Dufty Manager Policy and Research St Vincent de Paul Society

2. The Issue The lead up to the debt spiral project a number of factors heightened the communities awareness and discussion regarding energy issues including: • Expectations versus the impacts of the privatisation of Government owned energy companies • Introduction of “competition” - is this what customer focus is? • Changes in consumer protections in particular terms and conditions eg late fees • Increasing threats of and actual disconnections - change is utility behaviour towards low income / disadvantaged groups • Increasing demand for assistance at ER outlets and financial councillors.

3. The Project • Within this context the CFM Debt spiral brought together representatives of the gas, water, electricity industries, energy regulators, government departments, consumer groups, social welfare organisations and the industry dispute resolution scheme. • With the specific purpose of starting a discussion of the role of utilities and their place in the broader household “debt spiral” facing many low income / disadvantaged households. • A number of working groups were formed these worked though various issues associated with specifically utility debt but more broadly the issue of household hardship and its relationship to Utility service providers (essential services).

4. What made it a success? • The process was critical the focus on the journey rather than the the outcome got us there took longer but more meaningful. • Important that gas electricity and water companies involved (both in terms of different learning's BUT also realisation that cant compete in this space need to work together - your problem is my problem OR poor people are poor for all utilities cant force a prioritisation of payment) • Non business reps started to get an understanding of what were business concerns and visa versa ( WE all stand to win OR loose) • Understanding that everybody wanted to the right thing but we all had pieces of the solution

5. What made it a success? • Information - All stakeholders got a good understanding of the impact through reports and conferences that were carried out during this time including EWOV conference on hardship (and the stories of those impacted) and reports from CALC and CUAC report on the impact of hardship, interviews etc. • Resulted in the shared understanding of the impact of energy hardship, disconnection etc on vulnerable households. • This understanding created the impetus for both the affirming strengthening of regulatory framework and industry initiatives like hardship policies.

6. What made it a success? • Industry buy-in at a senior level - it was a energy industry CFM member who nominated utilities debt as a topic worthy of investigation (due largely to perceived political/reputational risk), which in effect launched the process.  • Everyone's openness to the process (despite some initial suspicion around its objectives), and particularly the capacity to reach consensus quickly among all stakeholders that a rising level of debt and disconnection was a Bad Thing and therefore to be avoided - I'm not sure you'd see industry admit that as quickly in other sectors; and • By that stage, there was sufficient hard evidence around on hardship problems to convince other key players, particularly government, that it should also be involved at an appropriately senior level; and

7. What made it a success? • The degree of agreement between community and industry, at a very early stage of the process, convinced govt of the need for action, and was integral to launching the hardship inquiry; • great value in a neutral area for discussion to occur - CFM involvement meant that the organizer had no particular agenda other than getting the project to work, and so its main role was driving progress • CFM didn't usurp other's expertise, but provided process for it to emerge (not in fact always true, but their role only worked well when that's what they did)

8. The Challenges • That the Vic regulatory framework was right, but there was no overarching policy framework for action - govt responses weren't well coordinated.   • The project approach did rely heavily on significant voluntary work from those involved - the $ cost of the project would be a very small proportion of the actual cost in terms of time contributed by stakeholders (costly for participants) • At the end, there was difficulty in getting strong endorsement from some companies who - despite overwhelming evidence to the contrary - still saw hardship programs as providing some sort of competitive advantage • Only engaged sectoral stakeholders - worked for progress of project, this meant at the end there was a lack of understanding that the project learning's applied to other sectors – not as successful as could have been hardship program principles applicable to sectors other than energy

9. The Findings That Energy and water businesses should develop hardship policies that uphold the following principles: • Assist customers manage there payments to ensure they remain connected to supply • Create informative, respectful and engaging environment where customers that need support can identify themselves to retailers • Utilise relevant industry and community expertise with respect to hardship (partnerships)

10. The Findings Four main components for optimal hardship policies are: • Information provision - ( hardship programmes transparent and accessible) • Operating protocols and customer engagement – to optimise how staff target and deliver assistance within a respectful environment • Comprehensive staff training – staff well versed in the hardship policy and deliver it in a respectful manner • An energy and water efficiency focus – help customers manage there consumption

11. The Legacy • Pushed the state government to hold the independent energy Hardship enquiry • Regulation and other protection enhanced and affirmed and UNDERSTOOD (particularly important for regulators and industry members who may have believed that limiting reducing regulation would solve these issues) • Better linking industry government and community - We can work together on common goals and we can co – operate in partnership • Understanding of where the players fit together and how we work together to achieve a positive outcome for those in hardship (and getting their bills payed!) • Still being used to inform changes to energy markets in other Australian states such as South Australia and Queensland.