Energy watchdog to force retailers to offer struggling customers help in overhaul

Electricity retailers would be compelled to offer struggling customers help in paying their bills under a shake-up of hardship rules flagged by the country's top energy watchdog.

Energy companies would also be banned from asking vulnerable consumers for proof of their circumstances as part of efforts to strengthen safeguards for power users.

The proposed changes are among a raft of reforms submitted by the Australian Energy Regulator (AER) to the body that sets the rules in the national electricity market.

Clare Savage, the AER's chair, said the revamp was a "recognition by us that we think the system can do better" at protecting consumers who were languishing or otherwise reticent to engage with their retailers.

The proposed overhaul was welcomed by consumer advocates, who said they should ensure some disadvantaged customers could stay afloat.

But they also warned the reforms would not deal with the underlying causes of energy hardship, such as soaring prices and inequitable access to efficient appliances and homes.

As part of the changes, power retailers would identify customers falling behind with their payments and offer them help.

According to Ms Savage, current arrangements put the onus on consumers to "find the magic words" before they can get help.

"This rule change is really about making sure that customers themselves are not having to find the magic words," Ms Savage told the ABC.

"Just say you've just lost your job … and you're needing to ring the retailer.

'Don't ask, just help'

At the same time, Ms Savage said the regulator wanted to make it less stressful for customers to seek help by banning retailers from asking for evidence of their financial difficulties.

"Currently, they might ask to see everything from, I guess, a table of your income, how much you spend on Uber, do you get Uber Eats," she said.

"That's the sort of stories we hear.

"The rules don't specify what [retailers] can ask for, but there's nothing that precludes them from asking for proof at this point in time."

She said the regulator was seeking other changes that would make it harder for energy companies to disconnect customers who had unpaid bills.

Minimum disconnection thresholds had recently risen from $300 to $500 of debt, she said, but retailers could still take action unless the customer formally agreed to repay the money.

Under the proposed new rule, Ms Savage said retailers would no longer be able to suspend anyone who owed less than $500, regardless of whether they were on a payment plan.

Similarly, she said retailers would also be required to notify customers through at least two "communication channels" before they could be disconnected.

"At the moment, warnings can rely on a single channel," she said.

"So, whether that's a letter in the bill, if that's your chosen method of communication, or an email or whatever.

"What we're clarifying is that … at least two communication channels are required.

"So before you disconnect someone, you might have had to have sent them a letter, but also have tried to ring them, or you might have sent them a letter or also sent them a text."

Hardship numbers rising

The moves by the AER come amid a general rise in the number of electricity customers on hardship programs around the country.

In its most recent retail markets report, the regulator found that while the proportion of customers getting help fell from 1.9 per cent to 1.7 per cent in the 12 months to June 30, hardship levels were elevated.

Compared with 2021, when they were 1.1 per cent, hardship rates were significantly higher in spite of subsidies by state and federal governments to ease the pain.

More than 3 per cent of residential customers had an energy debt older than 90 days, an increase from 2024, while average amounts owed jumped from $1,148 to $1,367 over the same period.

Ms Savage said the numbers might not look huge in the context of the overall market, but they were telling because electricity was an essential service.

What's more, they included about 1 per cent of vulnerable customers who were not receiving any help at all.

Adding to the pressure has been the sharp rise in electricity prices.

Since 2020, benchmark power prices set by the AER have jumped more than 70 per cent in New South Wales.

Across other regions, increases have been of a similar magnitude.

With the expiry of federal government subsidies at the end of last year, Ms Savage said it stood to reason consumers' bills would correspondingly rise.

The subsidies, which cost taxpayers billions of dollars, were worth about $300 a year.

But Ms Savage said there was reason to be hopeful that the worst of the power price rises was over.

Pain relief on the way?

For starters, she said spot prices for electricity had fallen markedly in recent times.

The Australian Energy Market Operator, in its most recent snapshot of the market, noted wholesale prices tumbled in the three months to the end of December.

Across the national market, wholesale power prices averaged $50 a megawatt hour for the quarter, AEMO noted, a 44 per cent reduction compared with 2024.

Following this tumble, Ms Savage said the costs to retailers of buying future supplies of power had also fallen.

She acknowledged that costs in the networks of poles and wires were rising as the firms that owned them expanded to meet growing demand.

But she also argued the costs to consumers would not necessarily rise in equal terms because people would be using the networks more intensively.

Provided the market — as well as consumers themselves — could help use the grid more efficiently, Ms Savage said price pressures could ease.

"You'll hear me talk a lot about the benefits of flattening the load shape from a system cost perspective.

"But I really want to see wholesale prices come down. I want to see our networks better utilised.

"And then I'm hopeful that we will see some of that pressure come off in energy prices."

'People are hardly coping'

Nirmal Joy from Voices for Power, a consumer group representing culturally and linguistically diverse customers in Western Sydney, applauded the AER.

Mr Joy said the electricity industry — and people's bills — were particularly complicated, and this complexity meant vulnerable consumers were more likely to be left behind.

He said anything that improved engagement between retailers and disadvantaged customers was a good thing.

"In principle, we absolutely welcome the higher-level recommendations," Mr Joy said.

But Mr Joy also warned that the tougher obligations on energy companies would not stamp out hardship, and longer-term remedies were needed.

"This is only one little step in the way because we are talking about the end of the problem, right?" he said.

"Definitely, we want to walk towards a space where energy is a fundamental right, and no one is disconnected from that fundamental right.

"We also need to structurally look at other reforms which can bring the bills down."

The Australian Energy Council, the lobby for electricity and gas providers, offered cautious support for the reforms.

Ben Barnes, the general manager of corporate affairs at the council, said the proposed changes were broadly in line with retailers' current practices.

Mr Barnes said it was in retailers' best interests to engage at the earliest stage with customers who were vulnerable and falling behind.

"The difficulty is when a customer is ingrained and entrenched in that vulnerability and they're really never going to be able to bridge that gap," Mr Barnes said.

He said the changes would add "relatively minor costs" to retailers.

The Australian Energy Market Commission is set to consider the AER's proposals over the coming weeks.