In this edition of EWOV News, we put the spotlight on affordability in Victoria. The cost of living is increasing in Australia, with inflation rising and interest rates going up as a result of macroeconomic measures to tackle inflation, and wages remaining stagnant. In the short to medium-term, households will face challenges as their bills rise faster than their income.
In the January to March 2022 quarter, we saw Credit cases (such as debt collection, disconnection and payment difficulties complaints) increase by 24% compared to the October to December 2021 quarter, despite overall case numbers declining by 6%. This may prove to be the start of an increase in credit-related complaints, which are typically closely related to affordability issues in the community.
There are some steps customers can take to ensure that they minimise the impact of cost of living pressures. We outline some of these in the sections below, including some important steps such as being aware of ‘best offer’ information on their bills or asking their retailer about the best offer, applying for the Utility Relief Grant Scheme and concessions if they are eligible, and looking out for estimated bills. The Victorian Government is also opening up the $250 Power Saving Bonus program to all Victorian households from 1 July 2022. To access the bonus payment, customers will need to visit the Victorian Energy Compare website or engage with an energy affordability service through a participating community outreach partner.
As always, customers who have an enquiry or complaint about a dispute with their energy or water providers can come to us for free, independent help. We remain committed to ensuring Victorian customers can access their consumer protections at a time when cost of living pressure is increasing across the state.
We hope you enjoy this edition of EWOV News. If you have any feedback, please let us know.
Acting Energy and Water Ombudsman (Victoria)
In Victoria, the Essential Services Commission recently announced that the Victorian Default Offer (VDO) for electricity will increase by an average of 5% for residential and small business customers from 1 July 2022. The VDO is the electricity price set by the Commission for customers unable or unwilling to engage in the retail market. The rise is less than in some other markets, with the similar Default Market Offers for some distribution zones increasing by as much as 14%, as announced by the Australian Energy Regulator. The increases can largely be attributed to the surging wholesale power prices.
The VDO creates a virtual ceiling for electricity prices, as consumers not on a market offer can instead be on the VDO. We sometimes receive complaints from customers, advising that they are being billed in excess of the VDO, particularly from customers of small embedded network operators. These issues are often investigated as a potential systemic issue, as they could affect multiple customers at the site. It is important that customers check their rates carefully, to make sure they are not paying tariffs in excess of the VDO and that the market offer they are interested in is competitive against the VDO.
With prices of goods and services increasing, affordability is likely to be a key issue for energy and water customers going forward. We are aware of reports of smaller energy retailers contacting customers about impending large price increases and suggesting that their customers consider moving to another retailer. The communication is symptomatic of crises taking place in the global energy market, triggered by rising wholesale prices for energy.
We are starting to receive complaints about the above communication from retailers as well as some customers reporting that market offers are being withdrawn by other retailers. In one recent complaint we received, a customer reported that they received a notice from their current retailer about finding a new energy plan with another provider. The customer found an offer with another retailer but, when they called the retailer, it advised that it was withdrawing its deals, was not taking on new customers and would not honour the advertised offer.
While much is beyond the control of customers, there are several things customers can do now, in a market where prices are increasing:
- Best offer notices – energy retailers must put best offer notices on customers’ bills, at least once every 3 months for electricity bills and once every 4 months for gas bills. These notices help customers determine if they are on an affordable offer. Customers can also call their energy retailer and ask for its best offer.
- Victorian Energy Compare – the Victorian State Government operates a price comparison website. Concession recipients can currently apply for the $250 Power Saving Bonus on the Victorian Energy Compare website and, from 1 July 2022, the program expands to all Victorian residential energy consumers.
- Delayed and catch-up bills – in some cases, bills can be delayed due to issues such as problems with an energy company’s billing system. It’s important for customers to keep an eye on the frequency of their bills, to make sure they are in line with their contract. If bills are delayed, customers could receive a large bill for an extended period, making affordability issues more significant. Customers can also receive a ‘catch-up’ bill if there was an error in a previous bill or if previous usage was estimated. An estimated bill can happen if an energy company is unable to read a customer’s meter. Estimated bills can be particularly difficult for customers who are facing rising living costs. There are rules energy companies must follow for catch-up bills, including only issuing a catch-up bill going back a maximum of four months, unless a customer was at fault, and offering a customer an equal time to pay.
Credit complaints are on the rise, reflecting the affordability issues in the community. Payment difficulties complaints increased 12% in the January to March quarter of 2022, compared to the last quarter of 2021. Disconnection and restriction cases, often an indicator of serious cost pressures in Victorian households, rose 57% in the January to March quarter, compared to the final quarter in 2021. High bill cases are also ticking up, increasing from 79 cases in April 2022 to 117 cases in May 2022, a jump of 48%. Given this trend, and the report of cost of living difficulties in mainstream media caused by rising inflation and interest rates, we anticipate more complaints reaching us related to customers having trouble paying energy and water bills.
At this time, it’s important to remind customers of the assistance that is available:
- Utility Relief Grant Scheme – a grant program run by the Victorian Government, the Utility Relief Grant Scheme (URGS) is a payment of up to $650 for electricity, gas or water bills, or $1300 for electricity for customers without gas. Applications can be made through a customer’s electricity, gas or water company, and can be granted every two years. Under the Payment Difficulty Framework, energy companies have to remind customers of URGS and help them complete the application.
- Concessions – the Department of Families, Fairness and Housing has a range of concessions available for customers on low income with a relevant concession card, including the Annual electricity concession and the Winter gas concession.
- Payment difficulty assistance – by law, electricity, gas and water providers have to offer customers assistance if they are having trouble paying their bill. It’s important that customers stay in touch with their companies, rather than ignoring the issue. Some of the assistance methods include providing practical advice on how to reduce usage, offering payment plans and giving more time to pay the bill.
For more information about what assistance companies can provide when customers are having payment issues, visit our Trouble paying a bill page.
As we enter winter, Victorians are at an increased risk of being affected by extreme storm events and associated outages. On 29 October 2021, a severe storm caused the state’s largest electricity outage event on record, with almost a quarter of all Victorian homes left without power. The event had a wide impact across the state, impacting all five electricity distributors and resulting in more than 1,000 wires down. The storm event followed another severe event in June 2021, which also resulted in a significant number of Victorian customers being off supply.
In the October to December 2021 quarter, our electricity supply complaints increased by 53% when compared to the previous quarter. This was following increases in the previous two quarters, after the June storm event. We are assessing unplanned outage complaints on a case-by-case basis to work out if Guaranteed Service Level (GSL) payments or compensation for losses apply. Generally, customers can’t claim losses for unplanned outage events and claims must go through a customer’s insurance instead. GSL payments are applied automatically and, from 1 July 2021, have to be calculated by the electricity company quarterly and applied within 60 days of the end of the quarter. If a GSL payment hasn’t been applied correctly, we can investigate. We’ll also be looking at our cases for any trends in terms of issues such as customer service that we can communicate to the industry and regulators in order to improve the service for customers.
In May, we released the latest edition of Reflect, our regular quarterly report featuring case data and insights. We highlighted the increase in disconnection cases in the first quarter of 2022 as well as some issues we’ve seen in customer service cases. You can also read past editions of Detect, our systemic issues report, where we highlight systemic issues we have detected in our case data and trends.