Consumer Information Requirements for the Energy Retail Market in SA – Draft Decision
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- Added:Tuesday, September 14th, 2010
- Writer(s):The Essential Services Commission of South Australia
- Publication Date:September 2010
- Publisher:The Essential Services Commission of South Australia
- Abstract:The energy retail sector in South Australia is contestable, meaning that all electricity and gas consumers are able to enter into retail market contracts with a licensed retailer of their choice. Consumers play an important role in encouraging the efficient operation of markets. Through their choices, consumers encourage businesses to compete and innovate. To promote competitive and fair market conduct in the energy retail market, the Commission must ensure that its regulatory framework establishes and maintains a market environment in which consumers are not only aware of their ability to choose their electricity and/or gas retailers; they must also be confident to actively engage with and participate in those markets. An important factor for facilitating the ongoing competitiveness of the energy retail market is ensuring that consumers have access to relevant information necessary to allow them to actively participate in the market. In an effectively competitive market, the Commission would expect to see energy retailers actively producing and providing market information that allows consumers to readily understand the energy products they have on offer. The Commission notes, that contrary to this expectation, some retailers have demonstrated reluctance to make key energy product information, such as the prices and price structures of its energy products, publicly available. While it is widely accepted that electricity and gas are “lowinvolvement” products, it does not mean that information should not be available to those consumers who do seek it out. Some retailers currently licensed to operate in South Australia have recently observed that while consumers are unlikely to accept a higher price than the standing offer when they switch to a new retailer, once they have switched, consumers appear to accept increases which result in their tariff being above the standing offer tariff. While this may be a rational decision in light of the consumer’s preferences and the cost of search, the Commission is concerned that it may also reflect the complexity of the energy market and consumers’ inability to protect their own interests. The Commission’s regulatory response to overcome the inherent information asymmetries in the energy retail market must balance the need to make accurate and accessible market information available, while recognising that providing irrelevant information can be detrimental to the overall welfare of consumers. It is the purpose of this review to understand South Australian consumers’ information needs to ensure that the Commission is, through its regulatory regime, providing the best opportunities for consumers to access the benefits of the competitive electricity and gas retail markets. The specific objectives of this review are to: determine the nature, form, timing and availability of market information required by South Australian consumers to allow them to confidently engage with the market and make an informed decision about their electricity and gas arrangements; determine whether or not the information requirements of South Australian consumers differ on the basis of their stage of behaviour (level of engagement with the market); and propose amendments to the Commission’s regulatory framework consistent with the expressed needs of South Australian consumers. The Commission engaged a market research company to elicit the requirements, expectations and preferences for information for both residential and small business consumers within South Australia. The findings of the market research highlight the importance of ensuring that the Commission’s consumer protection framework allows consumers to easily access price information and have confidence in the accuracy and comparability of that information. On the basis of the preferences for market information expressed by consumers through the market research, and weaknesses identified with the current price disclosure arrangements, the Commission is proposing a series of amendments to its consumer protection framework. The Commission’s proposed regulatory response is comprised of three main areas: increasing energy price transparency; enhancing the Commission’s price comparison services; and reviewing the Commission’s consumer information website. The nature of the Commission’s regulatory response should be seen as complementary to the Commission’s new approach to setting standing contract prices for AGL SA. As efficient market outcomes result from the interaction of suppliers and consumers, the Commission must ensure that its consumer protection framework allows consumers to confidently engage with the energy retail market in the future. Comments on this Draft Decision paper should be provided to the Commission by close of business 5 October 2010. Following its consideration of these submissions, the Commission will prepare a Final Decision (and amended regulatory instruments) for release in November 2010.
- Tags:australia, competition, customer loyalty, customer switching, Regulation