Annual Report 2019-20

We license Victorian gas and electricity businesses.

We also publish codes and guidelines that regulated businesses must follow, and conduct reviews and inquiries to promote the long term interests of electricity and gas consumers. We publish regular reports on the performance of the energy market to keep the community informed and supported.

Our year in review

We've implemented reforms to make contracts clearer and fairer and updated the electricity distribution code

We are implementing a range of reforms to the retail and distribution rules to improve outcomes for customers.

From 1 July 2020, a suite of reforms came into place to ensure clear and fair contract periods, practices and variations are in effect. These changes include limiting price increases to once a year, capping pay-on-time discounts on new contracts so customers who miss a bill payment will not face a large increase in costs, and ensuring that benefits offered on new contracts last the entire duration of a contract.

From 1 September 2020, all households and most business customers in embedded networks will benefit from a new maximum price, equal to the 2020 Victorian default offer prices. From 1 January 2021, the amount of time a customer can be back-billed for when they are not at fault will reduce from nine to four months.

We have also strengthened protections for Victorian customers who require life support equipment and modernised technical standards applying to electricity distributors. We also progressed reforms to improve how electricity distributors communicate with customers about planned outages and how customers are recognised for low reliability.

We’ve taken more enforcement action than ever before

We actively exercise our legislative powers to ensure compliance with the regulatory framework in the energy sector.

This includes using compulsory information gathering powers to complete detailed investigations, which may in turn lead to enforcement action. The commission has established its Enforcement Committee to oversee the quality and conduct of its investigative and enforcement functions.

We publish our compliance and enforcement priorities each year. In 2019–20, these priorities included overcharging, failure to obtain the explicit informed consent of consumers and wrongful disconnections.

This year, we issued more than 150 energy industry penalty notices relating to misconduct by energy retailers in relation to these priority areas.

We’re supporting Victoria’s growing need for energy by issuing new energy licences

Between 1 July 2019 to 30 June 2020, we issued 12 new energy licences. These included:

• six electricity generation licences
• two electricity retail licences
• two gas retail licences
• one electricity wholesale licence
• one electricity transmission licence.

These additional licences mean in the future, Victorians will have access to an extra 690.1 MW of electricity capacity, and an increased choice of energy retailers. We’re also supporting Victoria’s diversifying electricity production. Most of our licences this year were for renewable-based electricity production, including:

• The Kiamal solar farm, which is the first major solar farm in Australia with a synchronous condenser to be licensed. It is a large and complex piece of machinery that will play a crucial role in strengthening and stabilising Victoria’s electricity grid.
• Dundonnell wind farm, one of the largest in Victoria at a total capacity of 336 MW, was licensed in 2020. When it is fully operational, it will deliver clean energy to approximately 245,000 homes.
• Two generation projects that will assist in achieving the Victorian Renewable Energy Target were licensed in 2019–20.

Progress report, 2019–20

Objective: Retail reform – Status: Complete

Promote customer engagement and trust in our market by creating new consumer entitlements in our energy codes.

Outputs

• Implementing recommendation on fairer contracts.
• Strengthening our life support rules.

Outcomes

• The cost to customers of missing a bill has been capped since 1 July 2020 – meaning energy retailers are prevented from imposing excessive charges for missing a bill.
• Life support customers will receive more comprehensive information about their rights and the new processes to help ensure they receive protections when they need it.
• More support will be available to some of Victoria’s most vulnerable customers.

Objective: Compliance and enforcement capability – Status: On track

Improve the quality, timeliness and impact of our enforcement response.

Outputs

• Recruitment - engage skilled staff to support enforcement capability.
• Investigations training provided to staff.
• Existing compliance processes reviewed.
• Compliance and enforcement committee created to improve the overall impact and response of the commission’s enforcement.

Outcomes

• We engaged five new starters to support the enforcement capability.
• We issued $2,080,000 in penalties in 2019–20, ensuring that energy companies work in the best interest of customers and uphold their rights.

Objective: Systems capability – Status: Complete

Routinely make operational decisions based on data about customer experience and market performance.

Outputs

• We have scoped ways to improve our systems to support our compliance, enforcement and monitoring activities.
• We have updated our Memorandum of Understanding with Energy and Water Ombudsman (Victoria).

Outcomes

• Improved ways to monitor licensees and the information provided to us to inform our actions.

Objective: Distribution reform – Status: On track

Help customers benefit from new energy technologies and innovative service models by changing our distribution rules.

Outputs

• New technical standards as part of the Electricity Distribution Code.
• We are consulting on proposed changes to improve customer service standards when it comes to the distribution of electricity.

Outcomes

• The technical standards of the energy distribution code reflected past technologies, by updating the technical standards, we are enabling new technologies as choices for customers (like solar generators and batteries) as they connect with the network.
• Our audit program focused on customer entitlements to ensure Victorians get fairer outcomes in the energy market.

Objective: Licensing process reform – financial viability panel – Status: Complete

Improve efficiency and quality of our application process by establishing a financial viability panel.

Outputs

• Reviewed our licensing process.
• Revised and documented processes by August 2020.

Outcomes

• New processes make licensing more streamlined and easier to understand.

Objective: Monitoring and reporting of the energy market – Status: Ongoing

Regularly report on the performance of the market to support improved industry performance, better customer decisions, and informed government policy.

Outputs

• We published three Victorian energy market updates (November and March 2019 and June 2020) and one Victorian Energy Market Report (October 2019).
• We updated the compliance and performance reporting guideline.
• We completed the final approach paper for the 2021 competitiveness review.

Outcomes

• Provide consumers with easy access to performance information about their retailer and distributor – empowering them to make more informed choices about their electricity and gas providers.
• Ensure the energy industry designs processes and programs that comply with key regulatory focus areas.

Objective: Embedded networks – outreach and independent review – Status: Ongoing

• Help exempt sellers to understand their obligations to better serve their customers.
• Identify risks and solutions with government to strengthen the regulation of embedded networks.

Outputs

• We had an independent review to provide relevant and timely information into review of embedded networks.
• Provided advice to government on proposed options to reform embedded seller’s framework.
• Developed a mailout to reach embedded network customers.
• This work will continue into 2020–21.

Outcomes

• Work will continue into 2020–21, with our embedded networks campaign that will aim to inform consumers of their rights and remind operators of their obligations.

Measuring our success in 2020–21

Strategy objective	Objective	What outputs do we intend to produce?	What outcomes do we intend to achieve?
Objective 1	Upgrade our supporting systems	To deliver enhancements for our case management system (known as CRISP) and improve our data handling capability.	To provide organisational and user benefits for our compliance, enforcement, licensing, communications and our intelligence functions.

Environmental factors

The main environmental factors influencing our work are:

• Victorian Government policy and budget. The government’s energy fairness plan has had a significant impact on our work by providing us with new powers, responsibilities and funding to deliver significant reforms and enforcement activity.
• Financial services royal commission. The findings and recommendations of the royal commission have increased expectations on regulators to be active in enforcement, and to litigate where appropriate.
• New energy technologies. The introduction of new energy technologies into our market is reshaping how energy is generated, supplied and sold to consumers.

Cost of our energy industry activities

In 2019–20, the total cost of the energy team was $11.99 million. The cost includes the direct costs incurred by the team plus an allocation for overhead costs.