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Energy payment plans: one-size-fits-all approach fails customers in financial distress

9 Dec 2020: Energy was unaffordable for many Australian households before the global pandemic. Now it is even more critical that the energy sector plans for the inevitable COVID-19 related affordability crisis predicted for 2021.

The latest report from the Energy & Water Ombudsman NSW (EWON) highlights potential solutions for addressing one of the systemic issues EWON has been investigating for 6 years, affordability, and calls for collective industry action.

The National Energy Affordability Framework – it’s time for change report outlines gaps in the National Energy Customer Framework (NECF), particularly how the current structure of payment plans often sets customers up to fail.

In 2019-20, seven years after the establishment of NECF, almost 58% of standard electricity payment plans were cancelled rather than completed. In the same period, only 32% of customers successfully completed a retailer affordability program.

“The current framework has a one-size-fits-all approach,” said Janine Young Energy & Water Ombudsman NSW. 

“The stark truth is the affordability protections in the NECF currently rely on a single cliff-hanger – how effectively a customer completes their first two payment plans. There is little protection for individuals experiencing a variety of complex affordability problems including circumstantial, cyclic and permanent financial distress,” said Ms Young.

The report suggests a review of the “two strikes and you’re out” rule which restricts customers from accessing further payment assistance if two payment plans have been failed in the previous 12 months. This approach can result in disconnection, but most critically, often renders customers ineligible for re-entry into retailer affordability programs. 

“It is essential that customers impacted by COVID-19 are offered an open door to retailer affordability programs,” said Ms Young.

Other discussion points in the report include the introduction of; more flexibility in the payment plan framework, an industry standard for the use and regulation of automated payment plans, and better retailer guidance for both cancelling and estimating usage for payment plans. 

“Retailers are currently very committed to supporting consumers at risk of vulnerability,” said Ms Young. “A review of the current affordability framework could provide retailers with a more flexible range of tools to continue this approach.”

Industries have been quick to respond to the initial COVID-19 crisis. In NSW, the AER’s Statement of Expectations for energy retailers has kept energy consumers protected from disconnection and this will continue until 31 March 2021.

Ms Young said this is the perfect time to take similar steps towards strengthening the current affordability framework so that it is fit for purpose in a new economic reality.

“We’re calling on the energy sector more broadly: regulators, state and commonwealth governments, energy ombudsman and peak bodies to collectively consider the benefits of a system that provides affordable energy to customers experiencing long-term financial vulnerability.”

Read the full report

To request an interview with the Ombudsman contact: Fran Strachan  Ph 0429 416 070.

This article was featured in today's Sydney Morning Herald.