Engaging consumers in regulatory decision-making
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Engaging consumers in
regulatory decision-making
Mark McLeish, Director, Consumers and Markets, Australian Energy Regulator
Tom Hallam, General Manager, Regulation, AusNet Services
Tony Robinson, Chair, AusNet Services Customer Forum
Roger Witcomb, Chair, Ofgem RIIO-2 Challenge Group
Panel Chair: Calum Gunn, Principal Adviser, Regulation, Commerce Commission
The evolution of consumer
engagement in energy
network regulation in
Australia
Mark McLeish, Director, Consumers and Markets Branch
Competition Matters Conference, July 2019
aer.gov.au
Timeline – evolution of process for consumer
engagement in regulatory determinations
Pre 2012 2012 2013 2014
State of play 15 November - AEMC final Jan to December - AER Application of new rules –
rule determination ‘Economic implements new rule 2014-19 NSW / ACT resets
• Formal consultation Regulation of Network framework in better regulation
processes in rules Service Providers’ work program
• Public forums
• Submissions • New benchmarking
20 November - SCER
models, incentive schemes
• Funding via consumer ‘Putting Consumers First’
and guidelines
advocacy panel • Consumer Challenge
Panel
July 2013 - AER establishes
• National Energy Advocacy
first Consumer Challenge
body
September 2011 – AER Panel
seeks changes to energy
network regulation November 2013 - AER
releases Consumer
Engagement Guideline
aer.gov.au
The Consumer Challenge Panel (2013)
• Design strongly influenced by models used by Ofgem and Ofwat
• Objective
– Advise on:
• if revenue proposals are in the long term interests of consumers
• effectiveness of network customer engagement
• Role
– input and challenge the AER on key consumer issues
– facilitate the consideration of the consumer perspective
– not a decision-making forum, nor is its role to negotiate or
advocate on behalf of consumers or industry
aer.gov.au
Energy Consumers Australia (2015)
National voice for residential and small business customers
Work to promote the long term interests of end users
A number of activities, including:
• Participate in National Electricity Market issues and influence regulatory
activities and energy market reform to benefit consumers
• Engage with consumers and consumer advocates
• Build national and jurisdictional expertise and capacity through research,
knowledge development and educate consumers in energy markets
• Fund and manage grants to build knowledge and sectoral capacity supporting
policy development and consumer education in the national market
aer.gov.auTimeline continued…
2018
2015 2016 2017
onwards
February – Tribunal asks May – Federal court upholds March - New Reg directions
April – AER releases final AER to remake NSW/ACT most of tribunal’s decision and approach papers publicly
decision on 2014-19 NSW / 2014-19 decision released
ACT proposals June - First meeting AER,
March – AER seeks judicial ECA and Energy Networks March – First meeting of
May – Networks apply to review of Tribunal’s decision Australia exploring Customer Forum
Australian Competition opportunities to work together
Tribunal for merits review May - AER releases NOUS November – Essential
review of first Consumer July 2017 - AER 2.0 speech Energy wins ECA / ENA
May – Public Interest Challenge Panel ‘working together to restore consumer engagement award
Advocacy Centre (PIAC) join confidence in energy
appeal September – Second CCP regulation’
• ECA provides funding for established
PIAC participation in October – Limited merits
appeal review abolished
November – ElectraNet wins
first ECA / ENA consumer
engagement award
December – AusNet
commences trial of New Reg
process
aer.gov.auCollaboration with consumers and networks
Context: Regulatory process perceived as adversarial, complex, issues not
narrowed, unclear if proposals adequately reflect consumer interests
New Reg – enabling consumers to shape the regulatory proposal
Joint program board – CEOs of AER, ENA, ECA and AEMC and an
independent member
aer.gov.auWhat is the New Reg process?
1. The Plan
- Agreement to AusNet’s Early Engagement Plan
2. Credible counterparty
3. Governance
- A MOU was signed by the AER, AusNet and the Customer Forum
4. The Consumer Perspective
5. Reaching Agreement
aer.gov.auVision and trial objectives
Overall vision - for energy consumers’ priorities to drive energy
network business proposals and regulatory outcomes.
Trial objectives
• Can the AER substantially agree with the proposal?
• What are pre-requisites for a successful negotiation?
• How much of this needs to be specified?
• What is the right role for the AER?
aer.gov.auOutcomes
• Focus on outcomes rather than inputs
• Understanding and evidencing the customer perspective
• Testing of positions with stakeholders
aer.gov.auNegotiating meaningfully with customers The Network Perspective Tom Hallam, General Manager Regulation Competition Matters Conference July 2019
Industry Background:
Retailers were split from distributors post industry restructuring in the
1990s, taking customers with them
Retailers “own” the customer relationship in Australian energy
regulation. Distributors encouraged to deal with retailers not customers
Sector as a whole losing public trust, consistent with decline in trust for
many other large organisations
Past regulatory processes setting prices and service levels “secret
expert business” separate from direct customer input
12Volunteering for the NewReg Trial
What were our objectives:
Help drive culture change
Cultural change underway but needed a big statement from leaders
Explore practical ways our staff could respond
Highlight and recognise customer knowledge in the business
Public accountability on commitments at all levels of the business
A Proposal that reflects what customer want
What customers want, not what we think they want or should have
Encourage iterative processes – an ongoing conversation
13Volunteering for the NewReg Trial
What were our objectives:
Open and transparent process
Clear line off sight between feedback and business decisions
Negotiation outcomes subject to review and scrutiny by stakeholders
Successful negotiation outcomes
Demonstrate customer facing experts and not just industry insiders can play a
constructive role, with regulator support, as credible counterparty for negotiation
Demonstrate complex trade-offs can be successfully explained and debated
Demonstrate outcomes with broad customer and stakeholder support to facilitate
light handed review
Customer experience discovery process, uncovers and measures material issues
for the business
14Using the Customer Forum/engagement What did we find out about ourselves? Customers value things we weren't recognising adequately › Convenience, avoiding disruption, information, advice, community outcomes, local economy, retailer/distributor processes working We are to difficult to deal with › Bureaucratic and complex › Multiple uncoordinated entry points – difficult to speak to the right person or the same person › Difficult to understand public documentation, too technical › Poor institutional memory Communications have been poor › Too much or not enough information › Not provided at the right time or on the right medium › Don’t have the right customer information › Do not sell the good things we do 15
What are we doing about it?
Culture
› Dedicated GM responsible for customer experience
› Regular contact between leaders and customers
› More customer focused training, reward and recognition
Customer Engagement
› Ongoing customer research and satisfaction tracking
› Dedicated customer relationship managers for business, councils and community groups
– single entry point for large organisations
Better Processes
› Customer involved in improving key processes – complaints, connections, outages
› Quicker and cheaper
Different trade off decisions reflecting research
› Better information rather than expensive improvements to service levels
› Short term price relief prioritised for upcoming period
16Is it being noticed?
“The Customer Forum has probably spent more time considering the
regulatory proposal than any previous consumer focused group in
Australia”
“We are impressed by the impact which the Customer Forum has already
had in realigning AusNet Services business towards a more customer-
centric mode of operation”
Customer Challenge Panel Report for the Australian Energy Regulator
“AusNet is taking part in an AER trial to allow a small customer group to
collectively bargain on tariffs ... we see two advantages offsetting tariff
risk: 1) reduced regulatory risk given AusNet will be directly driving more
affordable outcomes for consumers, and 2) building trust in the community
so that AusNet have a social license to operate with respect to being a
facilitator of distributed energy resources.”
Citibank Investor report
17Conclusion
Our Customer Forum invited customers into our thinking in a
credible, strategic and respectful way
This was different to BAU customer engagement
While potentially confronting, their advice was evidence
backed, actionable and has strengthened our commitment to
improve customer outcomes
We are pleased to share our lessons with the industry and
believe this will benefit all customers
18Tony Robinson, Chair AusNet Services Customer Forum Competition Matters Conference, July 2019
Consumer engagement in UK
network price control (RIIO-2)
Roger Witcomb
Chair, Ofgem RIIO-2 Challenge Group
23Issues for Ofgem
1. Outputs – ie what do users/consumers want?
2. Costs and returns
3. Whole system considerations
4. Energy transition
24Consumer engagement usually concentrates
on Outputs
1. Safety
2. Reliability
3. Customer service
4. Treatment of consumers in vulnerable circumstances
5. Environmental performance
6. Value for money
Consumer engagement groups have had some success in assessing value for
money at the margin, eg cost benefit analysis of improving customer service
or system reliability
25And RIIO-2 has a full suite of traditional
user/consumer engagement groups
• A group for each company
• Selected and resourced by the company
• Remit is to challenge every aspect of its company’s plan (except
WACC and financial outcomes)
26But for many network regulators the biggest issue
has been high ex post returns to the companies
• Companies have underspent their cost allowances (both opex and
capex)
• And where there are specific incentives they tend to come out on the
positive side
• WACC has been set “too” high
27Chronic problems for all network regulators
• Asymmetry of information – the companies always know more than
the regulator
• Imbalance of resources – the regulator has fewer resources and its
staff are less experienced
• The companies have significant political clout
• Generally the appeal option is a one-way bet for the companies
28Ofgem has sought to address some of these
issues by setting up a RIIO-2 Challenge Group
• Appointed and resourced by Ofgem
• No statutory basis - purely advisory
• 12 members – experienced and expert across the whole range of
issues
• Reasonably well paid
• Free rein to go anywhere
• Able to challenge both the companies and Ofgem
29Challenge Group membership
• Former General Counsel at the Competition Commission
• Project finance expert from a major investment bank
• Chief economist at the National Infrastructure Commission
• Senior associate of Sustainability First
• Senior executive from Citizens’ Advice
• Former director of Consumers’ Association (Which?)
• Former Engineering Director of an electricity network company
• Experienced specialist in gas networks engineering
• Former senior executive at Ofgem
• Experienced regulatory accountant
• Professor of Energy Networks at Imperial College
• Energy network business entrepreneur
30Ofgem has also introduced a Business Plan
Incentive into the process
• Up to 2% of totex available for a “high quality” plan, including:
• Responding constructively to Challenge Group requests
• Producing full Business Plan drafts and generally making information available
in a timely way
• proposing ”sensible” expenditure plans
• etc
• And up to 2% penalty for a “poor quality” plan
31Process is quite demanding
• Challenge Group requested historical data on costs (now received)
• Companies produced first drafts of their Business Plans on 1st July
• CG meetings with companies next week
• Feedback to companies mid-August
• Companies produce 2nd draft on 1st October
• Same process (hopefully less intense)
• Final business plans by 9th December
• Open hearings with companies in Q1/Q2 2020
• Ofgem draft determination in June 2020
• Ofgem final determination in November 2020
• Start of new price control 1st April 2021
32Will it work?
• Who knows? But it’s worth a try
33You can also read
