The Australian Energy Regulator (AER) has released a draft guideline which will require energy retailers to simplify energy bills to improve outcomes for customers experiencing vulnerability.
The draft Better Bills Guideline sets out the new requirements, and is part of the AER’s draft Consumer Vulnerability Strategy, which aims to address issues faced by those who are unable to pay for energy usage.
The term ‘consumer experiencing vulnerability’ refers to someone who is significantly more likely to suffer detriment or find themselves unable to pay for energy usage, whether from market complexity or personal circumstances such as low income, low literacy, disability or poor mental health.
Many such consumers, however, struggle to self-identify as being ‘vulnerable’, whether due to shame, embarrassment or simply believing the term ‘vulnerable’ is too permanent for their individual situation.
AER Chair, Clare Savage, said, “In the past, the energy sector has been focused mainly on addressing payment difficulties, but our research has helped us to understand that this is just the tip of the iceberg when it comes to improving outcomes for consumers experiencing vulnerability.”
The bill has been informed by testing with more than 14,000 consumers, as well as input from retailers, consumer groups, and energy ombudsman schemes.
“Over time, energy bills have become more complex and detailed in the level of information and usage calculations they provide, and our consumer research reveals this can turn customers off to seeking the help they need,” Ms Savage said.
“We know, for example, that low-income households spend up to 6 per cent of their disposable income on energy, twice the amount of average income households.
“We also know that people who have experienced financial hardship are more likely to find their bills difficult to understand.
“At the same time, our research shows that these consumers rely on their bills for information about how to access financial help or make a complaint.
“Our Better Bills Guideline and the changes we are proposing are aimed at helping consumers make choices that are right for their inpidual circumstances.”
The draft guideline was created in response to a rule change proposed by the Federal Minister for Industry, Energy and Emissions Reduction, Angus Taylor.
When finalised, it will require retailers to provide essential information upfront, to help consumers understand their plan, compare offers and consider switching to a better deal.
“Bills play an important role in supporting switching,” Ms Savage said.
“Through our research, we heard that people want their retailer to tell them about cheaper plans, and for it to be easier to compare their plan with other offers.”
The research also showed that simple plan summaries in bills helped consumers better understand their plan. Specifically, a higher proportion of respondents who saw the plan summary (62 per cent) correctly understood the time of peak and off-peak periods compared to those who did not.
The guideline proposes that energy retailers provide a short plan summary in a standardised format to help consumers understand their energy plan.
“People across Australia lead busy lives and have limited time to understand their energy bills, let alone check if they are on the best plan,” Ms Savage said.
“We want to do whatever we can to make life easier for all consumers, while assisting them to save money where possible.”
The Better Bills Guideline proposes a tiered approach to billing information, to ensure consumers can easily access essential information.
The guideline sets out what is classified as Tier 1 information, which must be on the front page of a bill or the most prominent billing information seen online or on an app.
The AER is proposing that this will include essential items such as name, address, payment amount, retailer contact details, a ‘better offer’ message, and a reference to the AER’s bill comparison service, Energy Made Easy.
Tier 2 information must be included next, including a standardised plan summary to help customers easily understand the key features of their plan, information about how their bill was calculated, comparing their previous usage, and where to get help.
The draft guideline also outlines five design principles that retailers would be expected to follow, and applies to all billing information:
- Use simple language
- Make the bill easy to understand
- Make the most important information most prominent
- Order the bill to make it easy to understand
- Design with practices proven to enhance customer comprehension
Consultation is open until 31 January 2022, with the guideline to be finalised by 1 April 2022, for retailers to begin implementation starting 4 August 2022 to 31 March 2023.
The Better Bills Guideline is a key action in the AER’s draft Consumer Vulnerability Strategy, which has been released for consultation.
Stakeholder feedback will be collated for inclusion in the AER’s three-year Consumer Vulnerability Strategy, expected to be published mid-2022.