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Energy retailers need to lift their game to prevent disconnections

Today, more than 300 people will phone the Energy and Water Ombudsman Victoria (EWOV) with a complaint about their energy retailer. Sixty of them will be calling about a payment issue, and 35 of them will have been threatened with disconnection or already been disconnected.

Energy retailers tell us, time and time again, that the main reason people get disconnected is because they don’t actually tell the retailer that they are having trouble paying, or respond to reminder or disconnection notices.

Sixty per cent of people do not engage at all with the retailer before being disconnected” a retailer representative said at a recent forum. I thought at that time that the 40 per cent who therefore do engage but still get disconnected were deserving of some recognition – and an explanation. It also suggests that the story of disconnections is a little more complex than lack of customer engagement. EWOV’s data underlines this: almost four in every five customers with credit-related issues tried two or more times to sort it out with their retailer first; and almost a third tried five or more times.

To its credit, the Victorian Government is paying attention: the Minister for Energy recently instructed the Essential Services Commission (ESC), regulator of the energy industry, to investigate the problem of rising disconnections. The ESC, to its credit, had already started doing so. And it must be said that the Energy Retailers Association of Australia (ERAA) had also started looking at the problem, holding the aforementioned forum a few months back and asking the industry to work together with consumer advocates, ombudsman schemes and regulators to figure out what’s going on and what can be done.

But the answer is largely staring us in the face. Ten years ago, consumer advocates identified many deficiencies in law and industry regulation that asked little of retailers in their dealings with customers in hardship. But now the regulations are much stricter and the customer protection framework more robust than ever. The weak link is compliance.

EWOV 2014 Annual Report

EWOV’s case studies are full of stories of retailers flagrantly ignoring their obligations. But the extent and growth of non-compliance is demonstrated best by one particular dataset – the monthly totals of wrongful disconnection payments (WDPs). Before disconnecting a customer for non-payment, retailers are supposed to follow a documented process that includes making several attempts to contact them, sending a certain number of warning notices according to a certain timeline, offering them a negotiated payment plan, and so on. WDPs are made by retailers to customers if they are caught out disconnecting them without following the process. VCOSS has been tracking WDPs since 2010, and our latest figures, from June this year, show a sixfold increase over that period. Like much of the other data in the EWOV Annual Report, this indicates an increasingly cavalier attitude by energy retailers to people in hardship.

Wrongful Disconnections Payments per month

VCOSS calls on energy retailers to lift their game in this area. As sellers of a non-substitutable essential service, energy retailers have a captive market – but they also have a social obligation. And recent analysis by both the Essential Services Commission and the St Vincent de Paul Society indicates they have big enough retail margins to be able to afford to take a little more care when dealing with Victorian households doing it tough.