rosemary sinclair - energy consumers aus

WA Power and Gas Conference 2017

Rosemary Sinclair

CEO Energy Consumers Australia

What I’ll cover today

1. Consumers are talking…and walking

2. The Finkel Review and NEM 2.0

Interim Report Launch October 2016 2

Our objective: the LTIC

To promote the long term interests of consumers of energy with respect to the price, quality, safety, reliability and security of supply of energy services by providing

and enabling strong, coordinated, collegiate evidence-based consumer

advocacy on National Market matters of strategic importance or material

consequence for Energy Consumers, in particular Residential Customers

and Small Business Customers.

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1. What consumers are telling us

Building an evidence base

5

Energy Consumer

Sentiment Survey (Aug-

Sept 2016)

Australia-wide, electricity and gas trailing other markets on value for money

6

42

53

63

70

58

70 69

49

41

30

24

35

2427

96 8 7 7 6 5

0

10

20

30

40

50

60

70

80

Electricity Gas Internet Mobile Phone Insurance Banking Water

Value for money against other services

Positive (7-10) Neutral (4-6) Negative (0-3)

WA rates electricity low on value for money

4245

40 3844

31

46 484945 43

49

41

5246

43

9 9

1713 15 17

8

0

10

20

30

40

50

60

NSW VIC QLD WA SA TAS ACT Business(All)

Overall value for money - electricity

Positive (7-10) Neutral (4-6) Negative (0-3)

7

Energy Consumer

Sentiment Survey

(Aug-Sept 2016

WA highest rating for gas value for money

53 55 5766

5953

46

61

4137 37

29 3037

47

33

6 7 7 511 10 8 6

0

10

20

30

40

50

60

70

NSW VIC QLD WA SA TAS ACT Smallbusiness

(All)

Overall value for money - gas

Positive (7-10) Neutral (4-6) Negative (0-3)

Interim Report Launch October 2016 8

Energy Consumer

Sentiment Survey

(Aug-Sept 2016

WA most confident about future technology

5146 44

52

4336

50 51

3745 42

3743 45

39 39

12 915

11 1420

10 10

0

10

20

30

40

50

60

NSW VIC QLD WA SA TAS ACT Smallbusiness

(All)

Confidence in future technology

Positive (7-10) Neutral (4-6) Negative (0-3)

9

Energy Consumer

Sentiment Survey

(Aug-Sept 2016

ECA Solar and Battery

Research (May 2016)

Manage my costs and give me control – solar

10

60

32

34

27

26

17

6

3

24

30

28

27

24

22

11

5

8

20

18

20

22

27

16

10

0 10 20 30 40 50 60 70 80 90 100

Reducing household energy bills

Becoming less dependent on mains electricity

Being able to get a feed-in-tariff for feeding …

Government grant schemes for installing…

Protecting the environment

Adding to the house's resale value

Recommendation by a friend or family

The fact that your neighbours had it

How much have the following factors contributed to your decision to install a solar electricity system?

Strongly agree Mostly agree Mildly agree

ECA Solar and Battery

Research (May 2016)

Manage my costs and give me control – batteries

11

41

43

39

29

25

18

11

7

6

21

19

22

14

15

18

12

13

8

14

11

11

14

15

17

16

11

11

01020304050607080

Becoming less dependent on mains electricity

Reducing household electricity costs

More efficient use of my solar panels

Don't get a high enough feed-in tariff

Protectng the environment

Adding to the houses's resale value

Being an early adopter of new technology

Recommendation by a friend or family member

The fact that your neighbours had it

Factors contributing to you considering installing battery storage

Strongly agree Mostly agree Mildly agree

Australian Energy Regulator

State of the Market 2015

Keeping people connected

Interim Report Launch October 2016 12

“I would prefer my six cents of

power, sorry my units of power,

which aren’t six cents, to go into

my community. I get six cents

from [energy retailer], but if I get

25 cents because I gave it to you

because you have fallen on hard

times, well I’m delighted.”

Attendee, ECA Regional Listening

Tour April-June 2016

Consumers driving change

Interim Report Launch October 2016 14

2. Networks and NEM 2.0

Designing NEM 2.0 – structural considerations

1. Where are consumers heading?

2. Where is the technology heading?

3. Who will pay for it?

4. The policy environment.

Interim Report Launch October 2016 17

Network Transformation Roadmap

Business model

$ Value

Market

Mass

Me

Passive Technology Interactive

Regulated $

Low

Making NEM 2.0 work for everyone

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Small business Households

WA leading the way on market transformation

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Energy market governance: from hub and spoke to co-design

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ECA vision for NEM 2.0

1. A national energy system that is secure and reliable, that balances a fleet of lowest cost, low emissions generation technologies with large-scale storage and local loads supported by dynamic ‘smart’ control.

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ECA vision for NEM 2.0

2. A sophisticated market for energy services for households and small

businesses providing:

‐ Access to rooftop solar PV, battery storage, insulation, energy efficient

appliances and other technology;

‐ Information and tools to allow consumers to manage their energy

consumptions in a way that is easy and convenient i.e. set and forget;

‐ Comprehensive, contemporary consumer protection framework; and

‐ Electricity distribution networks supporting trading in electricity and related

services at the local level to fully realise the value of consumer investment

in generation and storage

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ECA vision for NEM 2.0

3. An agreed national integrated energy and emissions reduction policy framework, given effect through sector governance that aligns market and consumer interests to drive efficiency, facilitate innovation and deliver value.

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Networks’ Janus moment: resolve LMR impasse, reset relationship and focus on NEM 2.0.

Disagreement about review

mechanism for WACC Guideline is

undermining trust in networks, is

inconsistent with the role networks

will play in the new market and

exposing networks to political and

regulatory risk.

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Networks are talking about the future

and innovating. The Energy Network

Transformation Roadmap is a visionary

document and the ENA’s Finkel

submission is positive and looks to the

long-term.

Networks N-powering consumers: from managing outages to helping consumers save money through the transition

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Networks N-powering consumers: standardised, near real-time third party access

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Enlivening retail markets – in focus for ECA

• New focus on structure and performance of retail market – Victorian Retail Review, Grattan Report, Rod Sims comments.

• Can second and third tier retailers overcome Big 3 cost advantages e.g. hedging and large scale generation certificates? ACCC inquiry

• Looking beyond switching – UK Prime Minister Theresa May, “relying on switching to keep prices down is clearly not working”.

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2. Resetting relationships -LMR

ECA view

LMR framework not working as intended by ministers in 2013 reforms:

‐ Legalistic not investigative

‐ Endless loop problem

‐ Misunderstanding LTIC

‐ Still in error correction mode

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0

50

100

150

200

0

400

800

1200

1600

2000

2400

2800

3200

3600

4000

4400

4800

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Sydne

y R

eal P

rice I

ndex (

June 2

005 =

100)

NS

W D

NS

P A

nnual R

evenue (

$2013/1

4,

mill

ion)

NSW DNSPs Annual Revenue & Sydney Real Price Index

Final determinations (IPART and AER) Revenue post appealAER final determination (forecast) Post tribunal revenue (ECA estimate)Sydney Real Price Index (Right Hand Axis)

Weighing the options

ECA position:

‐ Accountability important – retain enhanced LMR for non-WACC matters; and

‐ Binding guideline for WACC, with enhanced consumer participation up front and judicial review only.

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Energy Council’s December 2016 decision

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1. Tighten and clarify the grounds for review

2. Higher financial thresholds for leave which apply to

individual grounds for review

3. Reviews to be conducted on the papers, rather than through

expensive and adversarial oral hearings

4. Reviews to be conducted within a strict timeframe

5. A strengthened requirement for review appellants to

demonstrate that overturning the regulator’s decision would

not be to the serious detriment of the long-term interests

of consumers

6. More flexible arrangements for consumer participation

in reviews

7. Introduction of a binding rate-of-return guideline, with

relevant elements of the regulator’s decision not subject to

merits review

8. Remove opportunities for gaming by limiting the timeframes

in which material can be submitted to the regulator

9. Costs of reviews, including those of the AER, to be borne by

network businesses

ECA’s implementation principles

1. Ensure the long term interests of consumers are paramount

2. Strengthen and empower the regulator

3. Ensure consumers have a voice

4. Make appeals the exception not the rule

5. Provide for a speedy and straightforward appeals process

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Back to the Future: Commonwealth Minister on 2013 reforms

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