Annual Report 2018-19

The Victorian Energy Upgrades (VEU) program aims to reduce greenhouse gases by making energy efficiency improvements more affordable for consumers, and reducing their long-term energy consumption. We regulate the creation of Victorian energy efficiency certificates within the program. We do this under the Victorian Energy Efficiency Target (VEET) Act 2007.

Our year in review

We registered 4.9 million Victorian energy efficiency certificates

During the 2018–19 financial year, we accredited 7 businesses, expanded the accreditation of 16 businesses, re-approved 33 businesses as a result of new regulations, and approved 1,757 new products. 

Accredited businesses created certificates after completing over 200,000 installations across residential and non-residential premises under the VEET regulations, as well as project-based activities (which allows businesses to undertake complex energy efficiency projects within the program).

This resulted in the creation of 5.9 million certificates during the financial year and a total of over 59 million certificates throughout the program’s ten-year history. 

We maintained our focus on consumers and compliance

As part of our focus on consumers, we resolved 90 per cent of consumer complaints.

We completed 348 field audits and 191 desktop audits, plus 13 audits of accredited providers responsible for the majority of certificates created during the financial year, and four investigations.

We checked over 17,000 activities and identified over 2,700 compliance issues that led to the withdrawal of 137,270 certificates (some of these may have been registered correctly at a later date). 

Our compliance activities led to participants surrendering over 70,000 certificates. 

We revised how we administer 30 activities

The government introduced new regulations in December 2018 during the program’s 10-year review. 

We reviewed and refined the regulatory and administrative framework for over 30 revised prescribed activities in the program (including water heating, space heating and lighting), and developed new frameworks for six new gas efficiency activities. 

We also implemented the framework to introduce the benchmark rating method for project-based activities, using the National Australian Built Environment Rating System (NABERS) rating in buildings.

Progress report, 2018–19

Key focus: new regulations
Status: Complete

• Deliver the framework to support the implementation of new regulations.

Outputs    

• Published revised guidance documents to ensure program participants understood their regulatory obligations under the new 2018 VEET Regulations and amended project-based activities regulations.
• Published updated website content when we migrated our guidance documents to the main commission website, www.esc.vic.gov.au.
• Delivered IT system changes to support the creation and registration of certificates under the regulations.

Outcomes

• An informed market and improved IT systems that support the new regulations and enhance the integrity of the program.

Key focus: stakeholder engagement
Status: Ongoing

• Expand our engagement with stakeholders to help ensure we minimise administrative risks and meet program objectives.

Outputs

• Organised two forums and 11 workshops with program participants to receive their feedback.
• Embedded engagement opportunities in the continuous review and improvement of our operational framework for a number of activities and regulatory requirements.

Outcomes

• Business, government partners and the community helped us safeguard the integrity of the program and their input was used to improve our operations.

Key focus: IT upgrades
Status: On track

• Progress the upgrade of the VEU registry IT system to meet business and stakeholder needs for the next phase of the program.

Outputs    

• Established a team, undertook technology research, decided on platform technology and finalised a ‘business requirements’ document to support a targeted tender selection process. The new IT system will be fast, secure, intuitive, versatile and future-ready.

Outcomes

• Our Victorian Energy Upgrades team has an improved understanding of the technical capabilities of the future platform and integration with other work streams and packages to maximise synergies.

Key focus: risk management
Status: Ongoing

• Use our data to more effectively inform, improve and expand our risk-based approach to all our regulatory activities.

Outputs    

• Expanded our risk rating approach across the program with the launch of a data analytics and business intelligence pilot to better inform audits and certificate validations.
• Created a project team to integrate the management of risks associated with the new activity 21A (the replacement of incandescent lightbulbs or compact fluorescent lamps).

Outcomes

• Resources are targeted more effectively and deliver superior compliance outcomes.
• Received positive feedback from participants due to performance and risk-based incentives and increased strengthening of the program’s integrity.

Key focus: our regulatory framework
Status: Ongoing

• Review and update our regulatory framework, in consultation with stakeholders, to ensure a balanced, transparent and efficient program for participants.

Outputs        

• Updated training and licensing requirements for new activities to ensure the safety of installers, consumers and building assets.

Outcomes

• Received positive feedback from stakeholders on our consultation and engagement practices to inform regulatory decisions and the implementation of the new framework.

Key focus: advising major stakeholders
Status: Ongoing

• Continue to provide practical advice to government and industry about our experience in administering the VEU program.

Outputs    

• Provided advice to the department on opportunities to maximise regulatory outcomes that align with policy outcomes.
• Provided advice to the department on risks associated with regulatory settings and industry performance trends.
• Liaised with industry on performance trends.
• Provided advice to the department and industry on the regulatory approach and measures we adopted to safeguard the integrity of the VEU program.

Outcomes

• The government received the necessary information to have a good understanding of emerging regulatory risks and opportunities for improvement.
• An industry that understands we are monitoring their performance and is encouraged to improve their systems to better comply with our requirements.

Measuring our success in 2019–20

Goal	Objective	What outputs do we intend to produce?	What outcomes do we intend to achieve?
Goal 4	Improve stakeholder engagement processes.	Develop a new stakeholder engagement plan. Implement three new engagement initiatives in consultation with the sector. Hold forums in May and November each year (indicative timing).	More engaged stakeholders that better understand their obligations under the program. Increased understanding of energy efficiency issues for industry and business. Increased understanding of accredited providers and their operational constraints.
Goal 1	Optimise integration of our compliance activities for our pre and post-registration processes.	Alignment and integration of internal risk-based frameworks.	Increased efficacy of our validation checks pre-registration and audit and compliance functions post-registration.
Goal 2	Develop the division’s data analytics and business intelligence capabilities.	Implement data analytics capabilities to efficiently manage high risk activities. Embed data analytics into the new IT system solution.	Improved effectiveness as a regulator through improved data analytics capability. Reports that lead to actionable intelligence and better inform policy decision making.
Goal 4	Upgrade to a new IT system to improve processing times.	Complete design and development by October 2020. Deploy the upgrade by December 2020.	A modern VEU registry system that is fast, secure, intuitive, versatile and future-ready. A system that creates efficiencies for stakeholders and our internal processes. A system that enables the integration of stakeholder engagement and data analytics and intelligence.

Environmental factors

The main environmental factors influencing our work are: 

• increased expectations around enforcement and compliance, which places additional demands on the certificate-validation process 
• additional resourcing demands around validation and auditing due to the popularity of residential lighting upgrades among participating businesses 
• the speed of technological change and the increased technological complexity of the energy efficiency products installed under the project which requires us to have higher levels of expertise to ensure registration and compliance remains efficient 
• challenges related to how we manage high-volume, low-cost activities (such as lighting) with more complex and low-volume activities (such as project-based activities).

We will review our operational and regulatory framework to reflect policy developments in Victoria. In doing this, we will seek to safeguard the integrity of the VEU program, ensuring energy consumers continue to benefit from energy efficiency upgrades through a balanced, transparent and through a balanced, transparent and efficient framework.

Cost of our VEU activities

In 2018–19, the total cost of our Victorian Energy Upgrades regulatory activities was $8.21 million. The cost includes the direct costs incurred by the team plus an allocation for overhead costs.