Recovery ‘leaves some behind’ as energy debt and disconnections increase
11 June 2021
Energy businesses say short term household debt has increased following the winding back of pandemic-related government financial support, but say they’re committed to helping customers stay connected.
More than 30 energy industry representatives told the state's essential services regulator they’re using a range of strategies to engage with customers who are struggling to pay their bills.
Commission chair Kate Symons told the group she was encouraged to hear about initiatives like a ‘knock before you disconnect’ trial among some gas distributors.
“It is good to hear about initiatives that are aligned with the main objective of the payment difficulty framework – that disconnection should only ever be a measure of last resort,” she said.
Commissioners were told that while disconnection rates are almost back to pre-pandemic levels, most customers are reconnected quickly.
Ms Symons says retailers should consider ‘better ways’ to connect with customers before moving to disconnect.
“It’s clear energy businesses see disconnection as an effective prompt to get customers to engage with their retailer to discuss payment options, but I would encourage the sector to consider what impact this has on the trust relationship with customers,” she said.
Please note, this is a summary not a verbatim transcript.
Good afternoon everyone and welcome to today’s energy leader’s roundtable.
To start, I’d like to acknowledge the Traditional Owners on all of the lands wherever you are today.
For me, I am speaking from the lands of the Bunurong People and I wish to acknowledge them as Traditional Owners.
I would like to pay my respects to their Elders, past, present and emerging, and Aboriginal Elders of other communities who may be here today.
For anyone who hasn’t been here before, my name is Kate Symons and I am the chairperson of the Essential Services Commission – and this is our second energy leader’s roundtable for this year.
I would like to welcome you all to today’s meeting.
I hope everyone is keeping well and I know many of your businesses will have been extremely busy particularly over the past 24 hours with the wild weather we are experiencing – thank you for all your efforts given the current outages that are being experienced across Victoria.
It’s hard to believe it’s been more than three months since we last met on 4 March - and yet, given the developments of the last few weeks, not a lot has changed.
We have had some good signs of recovery but there is also evidence some were being left behind - and then, another lockdown.
In March our focus was on how you were preparing for the end of JobKeeper and the winding down of JobSeeker.
We are very keen to hear more from you on how your businesses are engaging with customers who have debt.
We were very pleased with the turnout of more than 100 of your staff at our recent forum on debt collection best practice – and we are keen to continue working with you on this front.
We are also keeping a close eye on increasing disconnection numbers – and do have concerns on that front.
Update on data and disconnections (Sarah Sheppard, executive director energy)
Thank you, Kate, and thank you to everyone who is here today.
As Kate said, we have been collecting data on disconnections for non-payment over the past year.
There were virtually no disconnections from April to November last year through the various lockdowns brought on by coronavirus pandemic.
Over the past six months however disconnections have increased significantly - with more than 2,000 residential electricity disconnections for non-payment in March, exceeding the 2019 monthly average of 1,820.
And while the overall number of disconnections in April was lower, when you remove the protected Easter holiday periods, the daily average was higher in April than in March.
The number of gas disconnections for non-payment is also rising.
As we head into winter – and with the sudden drop in temperatures over the past two weeks – this could be a major concern for consumers who have gas as their only source of heating.
Debt levels are increasing
The second main trend to emerge over the past 12 months is an increase in average debt (arrears) for households on payment plans who can pay for ongoing energy use.
This reached its highest level in March 2021 and is 21 per cent higher for electricity and 15 per cent higher for gas than the 2019 average.
Average arrears for those who cannot pay for ongoing use also increased by 35 per cent for electricity and 27 per cent for gas compared to 2019 levels.
We would be interested to hear your experience of customer debt when we go around the room.
Now to our preliminary thinking on our disconnections’ advice after June 30.
Last week we spoke with community sector groups as part of our usual broad engagement – this time focusing on what they are seeing in terms of disconnection, debt, customers getting assistance and the broader economic context.
They told us there were some good signs, but much like the overall economic outlook – the positive trend is not being felt across the whole community.
They raised a number of concerns around energy consumers being able to access their entitlements under the retail energy code. We have asked for further information on these complaints so we can follow up.
Meanwhile, we are preparing our recommendations to the commission on its decision regarding the disconnections’ advice post June 30.
To date, we have factored in a range of inputs from economic, health and community circumstances and the data trends on disconnections and debt I just talked about.
At this stage, it is likely that staff will be recommending to the commission that the disconnections advice as it currently stands not be continued after 30 June 2021 but would be maintained for snap lockdowns, but of course we are turning our minds to the events in Victoria over the past couple of weeks.
If we go ahead with lifting the advice, we would be relying on the payment difficulty framework to protect customers to ensure disconnection is a measure of last resort.
We will continue to closely monitor how businesses are supporting customers with their entitlements to protection under this framework.
At this time, we are likely to recommend ending the temporary measures to provide tariff checks for customers receiving tailored assistance and support for small business customers.
The requirement to continue to support customers completing utility relief grant application forms is an ongoing obligation.
We have had broad feedback that this has been effective in targeting customers who are experiencing difficulty.
As we were preparing for this roundtable there was the snap lockdown – and then an extension.
It is a stark reminder of the fragility of the conditions in which we are living, and the dynamic environment in which we are regulating.
Consequently, we expect to maintain the advice around not disconnecting through stage 4 lockdowns that we issued in February.
Given the potential for more lockdowns and other ongoing impacts from the pandemic, we will continue to look for proactive ways to support customers and encourage industry to do the same.
Now I’ll hand back to Kate.
Roundtable feedback session –
Thank you for that input Sarah, and can I say, those numbers around disconnection and debt are sobering and we are paying close attention.
As always with these roundtables – our main aim is to hear from you – about what is happening within your businesses and with your customers.
We want to hear your thoughts about the current settings in terms of our disconnections’ advice and help settings.
The energy businesses provided an update on what is happening for them and their customers, and gave feedback on the current rules in place to protect customers affected by the pandemic.
As I reflected earlier, it has been a difficult 15 months but what has stood out for me is the genuine willingness of many of you to sit around this virtual table and focus on what matters – our community.
Today we heard about:
The challenges in terms of managing debt and keeping customers connected.
An increase in short term debt as financial support has fallen away and the challenges faced putting customers on sustainable payment plans while managing the impact of growing debts.
A discussion around the potential role for additional government support to help customers.
Thank you again for your time today. As always, we are keen to continue these conversations to ensure we are fully aware of what’s happening for you and your customers.