Retailers need to step up affordability support for customers

Over the past ten years, the cost of energy has increased well beyond Consumer Price Index and wage growth, and payment difficulties, debt and disconnection of supply are now the norm for many consumers. Not surprisingly, in 2017/2018 complaints to EWON relating to energy affordability increased by 12% and were present in 21% of all complaints received during the period.  

This indicates that retailer affordability programs — most often referred to as ‘hardship programs’ — are not as effective as they should be. Many customers do not get referred to specialist support teams when they seek help, and our complaints indicate that there is little evidence of retailers proactively contacting these customers offering affordability program support. 

Two years after the Australian Energy Regulator (AER) released the Sustainable Payment Plan Framework to help retailers address this issue, EWON identified the following ongoing problems with energy retailers’ affordability programs:

• payment arrangements being refused
• unclear payment arrangements being offered, with terms not explained to customers
• unaffordable, sustainable payment plans being offered
• requirements for upfront large lump sum or complete debt payment, including up to 50% of arrears before retailer agreement to reconnection
• payment of large instalments in order to qualify for hardship program eligibility
• access or referral to hardship programs refused
• payment plans refused on closed accounts
• refusal to continue agreed payment arrangements

We have even had complaints where a retailer suggested customers transfer to another retailer to solve an affordability issue, as well as offers to waive arrears if a customer transferred to another retailer.

Customers need clarity and consistency 

All customers are entitled to the same level of affordability support! This is why I welcome the Australian Energy Market Commission’s (AEMC) recent rule change aimed at strengthening protections for customers experiencing financial disadvantage. The new rule requires the Australian Energy Regulator to develop Hardship Guidelines that contain consistent and specific statements that retailers must include in their hardship policies. In its determination the AEMC referred to the following statement from EWON’s submission to its review:

“While many retailers have improved their policies, the accessibility and deliverables of all hardship programs fall short of what is required to address energy affordability in today’s market.” 

The Guidelines will be introduced on 1 April 2019. Retailers will then have two months to submit their updated policies to the AER for approval. 

In order to truly address affordability, the new Guidelines need to focus on the following key principles:

• accessibility to affordability programs
• flexibility based on individual customer circumstances and not a one size fits all approach
• equity in outcomes– consumers are entitled to the same level of consumer protection, regardless of their retailer noting that retailers will develop affordability programs to suit their products, services and customer base.

Most importantly, implementation of the Guidelines needs to be accompanied by behavioural and process change by energy retailers that ensures frontline staff know when to refer customers for affordability support; and specialist hardship teams provide solutions tailored to each customer’s particular circumstances. 

Terminology and culture needs to change

One final point — the term ‘hardship’ has stigma associated with it which acts as a disincentive for customers requesting affordability support.  It could also have a negative impact on retailer staff who liaise with customers who require affordability assistance.  The words ‘hardship program’ should be replaced with less loaded terminology such as ‘affordability program’ or ‘affordability assistance’, including in legislation. For the moment though, let’s welcome the AEMC’s rule change as an important step towards improving retailer support for customers who need help with unaffordable energy costs.