Customers
Energy
prices and
affordability
Material issue

Provide affordable energy solutions for all our customers (households and businesses), and in doing so, minimise bill stress arising from energy prices.

FY18 targetFY18 performanceStatus

Develop a Social and Economic Inclusion Policy.

AGL has commenced, but not finalised, its Social and Economic Inclusion Policy. As indicated in the Energy prices and affordability section, we are committed to finalising and complying with the policy by the end of FY19.

Target not met
FY19 target

Financial Inclusion Action Plan: 100% completion of commitments.

Renew AGL's Affordability Initiative by allocating a further $6 million over three years.

Completion of the NSW Solar Power for Community Housing Partnership.

Energy regulation and pricing

AGL acknowledges that not all customers are able to access the full range of products and services that we offer, nor to derive the benefits that a competitive market should offer. AGL is turning its focus to addressing these issues.

Further, we understand that energy bills can comprise a major proportion of some households’ living expenses. In June 2018, AGL announced that prices for FY19 for customers in New South Wales, Queensland and South Australia will be going down – albeit very modestly – but that this is a change welcomed by our customers following the price increases seen in recent years. These price changes are part of a downward trend that is emerging as more investment in new sources of supply comes into the market – particularly renewable energy.

Price changes

Electricity
(Residential)

Gas
(Residential)

Electricity
(Small business)

Gas
(Small business)

NSW

-0.3%

1.8%

-0.1%

2.5%

QLD

-1.6%

No change

-1.0%

No change

SA

-0.4%

2.1%

-0.3%

4.6%

However, at the start of FY18 there were increases in wholesale market prices due to factors such as: the closure of ageing, low-cost, coal-fired generators; high gas prices and limited gas availability for gas-fired generation; and an uncertain policy environment impacting investment in new capacity. In July 2017 we increased electricity and gas prices for our residential and small business customers in New South Wales, South Australia and Queensland.

The price changes varied by state and distribution network, and bill impacts depended on a customer’s tariff type, usage, and their existing energy plan. The average price increase (including GST) across AGL’s residential electricity customers was estimated at $5.70 per week in New South Wales, $2.00 per week in Queensland (in the Energex area), and $6.70 per week in South Australia. In January 2018, Victorian customers’ electricity and gas prices also increased with AGL’s residential electricity customers' prices increasing by $3.70 per week on average.

We recognise that these retail price increases can represent an additional financial stress to customers already facing cost of living pressures. We have focused on customer affordability through our launch of A Fairer Way in 2017 and by introducing loyalty discounts for longstanding Standing Offer customers during FY18. Both are discussed below.

In response to previous increases in energy prices, we have seen increased government scrutiny of energy markets, which has led to some improved consumer outcomes. The Victorian Government commissioned a review (Thwaites review) of the electricity and gas retail markets in Victoria and its recommendations were released in August 2017. The Victorian Government’s preliminary response was released in 2018 and although AGL welcomed many of the recommendations aimed at improving the Victorian retail energy market, we were concerned that consideration is being given to re-regulation of prices. We continue to be a strong supporter of price deregulation because competition delivers innovation, investment, and improved consumer choice. For more information, refer to the Public policy engagement section of this report.

Other states, including New South Wales and Queensland, have released reports during FY18 that have focused on retail energy prices but they have found that retail competition was active and recent retail price changes largely reflected changes in costs.

In addition, on 27 March 2017 the Treasurer directed the Australian Competition and Consumer Commission (ACCC) to hold an Inquiry into the supply of retail electricity and the competitiveness of retail electricity prices. The review looked at the reasons behind energy price changes with the aim of restoring electricity affordability and Australia’s competitive advantage. AGL made several submissions to the inquiry and provided significant amounts of documents and information to the ACCC. The ACCC released a preliminary report on the 16 October 2017, and the final report on 11 July 2018 with 56 recommendations that the ACCC believes will boost competition, lower costs, and deliver better outcomes for consumers. We support the ACCC’s view that the industry must focus on addressing issues of affordability, particularly for vulnerable customers, and we agree that more needs to be done to increase transparency and comparability. AGL believes that investment in more generation supply is the key to driving down prices for customers.

Electricity network pricing reform

As a significant component of the customer’s overall bill, consideration of network prices is critical in addressing energy affordability. As some customers are increasingly relying on distributed generation to meet their energy needs, we consider that tariff reforms that drive equitable outcomes in network cost recovery must continue. We consider that reforms would be best achieved by a transition from average-cost volumetric pricing to more cost-reflective tariff structures.

Cost-reflective tariffs ensure that customers contribute more equitably to the cost of the delivery of shared network services, reducing cross-subsidies between customers. Current flat energy tariffs can result in unequal outcomes and inefficiencies, as all energy customers pay the same tariff for all energy use throughout the year, despite system costs being primarily driven by demand during peak times.

AGL is a strong advocate of demand tariffs at a network level, as these tariffs price electricity more efficiently, and provide customers with opportunities to manage costs through different energy choices, and provide opportunities for savings as a result of changes to customer behaviour at peak times. This incentivises demand response in a way that benefits individual customers as well as the wider system including through the use of new products and technologies, such as smart appliances and battery storage, to manage demand peaks. We will continue to work with our customers and other stakeholders to promote the benefits of network tariff reform.

Refer to the Public policy engagement section for more information on pricing access to the network and how it promotes more efficient investment in and use of distributed energy resources.

Energy affordability programs and plans

We support a shared-responsibility approach to addressing energy affordability issues across the community, which takes into account the responsibilities and strengths of customers, industry, government and the community sector. In recognition of this, in FY18 we became a founding partner of the Thriving Communities partnership, a cross sectoral collaboration that aims to ensure that there is universal accessibility to the modern essential services that are needed to thrive in contemporary Australia.

In FY18 we launched our Financial Inclusion Action plan. The plan, endorsed by Good Shepherd Microfinance, sets out 15 initiatives that AGL will complete to increase the financial resilience of our customers, people, suppliers and within the local communities in which we operate. We are proud to be one of 30 organisations to make this commitment.

Our A Fairer Way package continued to be on offer for our vulnerable customers in FY18 and delivers a fairer deal for households who rely on affordable and secure energy supplies as they deal with the full spectrum of cost of living pressures. It ensures that:

  • customers participating in our hardship program, Staying Connected, will be offered guaranteed (non-conditional) discounts
  • concession card holders and hardship program customers are not charged late fees
  • we will write to customers with a registered concession card who remain on ‘old’ standing offers, offering to assess their needs and move them to a better plan, and
  • Victorian customers on a Standard Retail Contract who receive a government energy concession will also automatically receive a 15% discount off their electricity usage charges1.

We encourage our customers to regularly engage with us to ensure they are on the best deal for their personal circumstances and have recently introduced an online bill comparison tool to make this easier.

Throughout FY18, we continued to implement program improvements to support vulnerable energy consumers, which were established in our $6.5 million Affordability Initiative which was launched in FY15. From an operational perspective, we have expanded the channel, range and flexibility of our payment arrangements, recognising that each customer scenario is unique. Payment arrangements can be established through a variety of channels with tailored amounts and durations and we are working with our customers to ensure they are back on track with their energy costs as soon as possible.

In FY19, we will be revitalising the Affordability Initiative to focus on energy literacy and social and economic inclusion, with a new allocation of $6 million in funding over three years.

More broadly, and as discussed in our 2017 report Social and Economic Inclusion: An important issue for an essential service provider, AGL is committed to developing a Social and Economic Inclusion Policy. The policy will encompass the actions AGL will take to address inadequate societal and economic structures that contribute to exclusion. These actions will demonstrate how we will provide avenues for improved inclusion for our customers and employees, and also how we will work with government and regulators to ensure basic needs such as income adequacy and housing standards are supported.

New products and services to assist customers in minimising energy costs

We understand that every household is different and that situations change. As an energy company, we are putting in place mechanisms to better identify, respond to, and change to meet the needs of our customers.

We are committed to consistently improving our products, services and engagement with all our customers, including our vulnerable energy customers, by delivering a suite of products and services that are affordable and that empower them to take control of their energy consumption.

As outlined in the Product innovation section, in FY18 we launched Energy Insights, a tool which will enable our customers with smart meters to take more control over their energy use. Customers receive a personalised email which breaks down energy use into categories such as heating/cooling, standby and hot water, and which provides relevant energy efficiency advice, thereby enabling customers to be more empowered to take action to reduce their energy costs.

Recognising that historically, one of largest drivers of customer complaints has been estimated billing, we now offer Self Service Meter Reads. This process allows the customer to provide us with an actual read of their meter and allows an accurate bill to be produced, or an existing bill that is based on an estimated read to be adjusted. Our customers can then pay for what they have actually used.

As outlined in the Customer-led approach and delivery section, we acknowledge that our customers who experience difficulty paying their energy bills are often unaware of government benefits that they are entitled to, such as concessions and grants. Information is often not easy to find and application forms can be difficult to complete. We want to make it easier for our customers to obtain the assistance that they are entitled to, so we’ve launched Here to Help, an online tool that allows customers to answer a simple set of questions to determine their eligibility for government support. We also assist our customers by pre-populating application forms as far as possible, for our customers to verify and sign, with the aim of simplifying the process for our customers. Through engagement with our customers about this product, we are aiming to enhance Here to Help over FY19 to provide further functionality.

In addition, in FY18 we launched two new simple and low-cost products:

  • AGL Essentials, a no-frills product with 12-month, low, fixed rate pricing that removes discounts and provides pricing certainty to customers, and
  • AGL Prepaid, which rewards customers who pay their bill in advance, and minimises the risk of surprise when the bill arrives.

Further information about these products is available in the Product innovation section.

Further, in recognition that not all customers choose to or are able to engage in the market and receive the benefits of doing so, we have introduced a loyalty discount for our customers who have demonstrated loyalty to AGL but remain on a standing offer. This bonus was rolled out to our Victorian customer base on 1 January 2018 with eligible customers automatically receiving a 10% discount off their 2017 electricity usage and supply charges. AGL has also implemented a loyalty discount for eligible standing offer customers in South Australia and is providing a 5% discount off usage charges. This commenced in March 2018.

Commitments made to the Prime Minister

Following several reviews into the electricity market and external commentary regarding electricity prices, the Prime Minister, Malcolm Turnbull, requested a meeting with the Chief Executive Officers of several energy companies, including AGL’s CEO Andy Vesey, in August 2017. A series of commitments were made to the Prime Minister, and AGL is delivering on these commitments. As a result of AGL proactively writing to all our customers on standing offers, or base tariffs, inviting them to seek a better deal, today, almost 90% of our customers are on competitive market offers and eligible for discounts and incentives. Since July last year, 2 million AGL customer accounts have switched to a new deal.

In addition, a number of the commitments that we made to the Prime Minister were already part of our retail operations. For example, AGL was already writing to concession customers on standing offers, offering to assess their needs and put them on a better energy plan. We also have in place support such as A Fairer Way which helps hardship customers access guaranteed discounts.

AGL continues to work with the Australian Energy Regulator on implementation of these commitments including through our customer research into the design of the energy price fact sheet. Further information is contained in the Public policy engagement section.

Financial counselling resources

We continue to fund financial counselling resources in the community sector and in FY18 have helped over 400 of our vulnerable customers obtain support to manage and take control of their energy costs. The funding is a three-year investment in Queensland, New South Wales, Victoria and South Australia. We have established partnerships with YFS Logan, Wesley Mission, Kildonan UnitingCare and Uniting Communities, to ensure that additional resources are dedicated to supporting vulnerable consumers, and connecting them wherever possible with appropriate support services.

Integrated partnerships to assist vulnerable consumers with high energy consumption

Research that we released in 2015 highlighted that customers participating in our energy hardship program, Staying Connected, consumed, on average, around 40% more grid-connected electricity per year compared to an average customer base. High energy consumption can be driven by a large number of factors including poor building fabric, many people in the one home, additional time spent within the home, and home appliances that have a relatively lower upfront capital cost, but are less efficient resulting in greater energy use.

We have been working with community organisations and state governments to develop targeted and integrated pilot programs to help vulnerable customers reduce energy consumption and costs. These programs involve the installation of solar panels and efficient appliances, combined with education programs which target behaviour change to encourage greater energy efficiency. In FY18 we commenced a partnership with Uniting Communities SA funding appliance replacements for customers unable to reduce their consumption. The program involves an in-home energy consultation with Uniting Communities which includes advice on how to reduce use, while also recommending the replacement of inefficient appliances. This program builds on the $1.5 million of energy saving partnerships in South Australia and Victoria that were established in FY16.

Support for customers impacted by domestic violence

AGL’s integrated domestic violence policy supports our people and customers who are impacted by domestic violence. Our customer support policy ensures calls are transferred to hardship specialists, ensures the availability of flexible payment arrangements and debt relief on a case-by-case basis, and provides for additional steps being taken to protect account privacy.

For information on how we support our people who may be impacted by domestic violence, visit the Workplace culture and talent section.

FY18 performance

We closely monitor data reflecting key affordability indicators in order to gain insight into our customers’ experiences in paying their energy bills, and in order to most effectively structure our customer support programs. Visit the data centre to view or download information on metrics including:

Related information

  1. 1. The discount applied from 5 March 2017.