Executive summary

The Financial and Consumer Rights Council (FCRC) seeks to provide a voice for Victorian consumers of essential services, in particular customers affected by fuel poverty. Fuel poverty affects consumers who experience periods where they are unable to pay their utility bills and hence face the risk of accumulating debt and/or having essential services disconnected. They may also be forced to forego other essential household items in order to secure electricity or gas supply. It is the view of FCRC that the cost of essential services to domestic households should be determined by a consumer’s capacity to pay, as access to essential services is a fundamental right of citizenship.

The term ‘safety net’ is used by FCRC to describe the set of legislative and regulatory tools intended to maintain electrical supply to vulnerable sections of the community. This project provides a critique of the current safety net by examining the experience of the fuel poor – as evidenced through financial counselling casework – since the introduction of full retail competition in electricity.

The report finds, that notwithstanding the existence of the current safety net, substantial numbers of households are disconnected, threatened with disconnection and/or possess arrears that cannot be paid without detrimental welfare outcomes. As utility payments are prioritised by most households, disconnection of this essential service represents a household without options and in extreme circumstances. FCRC believes that the legislated demise of the obligation to offer that forms the basis of the current safety net will result in a significant proportion of Victorian households experiencing disconnection and subsequent reconnection difficulties.

Accordingly, FCRC argues that the current obligation to supply should be made permanent, and be supported by the insertion of a ‘social’ objective into the Essential Services Commission Act 2001 equal to the current ‘economic’ objective. Such a legislative framework would support the retention of the current Retail Code modified to incorporate the development of a legally binding ‘hardship’ guideline that contains protocols for determining incapacity to pay. A hardship guideline would provide legal rights to customers with demonstrated incapacity to pay, preventing disconnection and inappropriate legal action.

After eight years ‘self-regulation’ has failed to ensure fundamental consumer protections and this failure has established the need for formal legal rights as a necessary condition to guarantee essential supply to vulnerable households. A hardship guideline would function to prescribe the structure of tariffs and tariff rates to ensure affordability. Furthermore a hardship guideline could be linked to a hardship program, in which a whole of government response would foster broad scale energy efficiency retrofit programs, and secondly, bring about reform of tenancy laws which are currently so disadvantageous to tenants as consumers of energy. FCRC notes that these changes would bring the energy sector into closer alignment with the Victorian government’s commendable proposals for reform of the water sector.