by Luke Wines, Senior Manager Data and Analytics, EY
With the recent release of the Consumer Data Right (CDR) rules for the energy sector, the Federal Government is lighting the fuse on energy retailers and their compliance with the CDR regime. With the go-live date fast approaching, retail electricity suppliers face a huge amount of work to do and little time in which to do it.
The CDR, the centrepiece of the Federal Government’s digital economy transformation, provides consumers across the economy with access to and use of the data that service providers hold about them, empowering them to make more informed choices and further promote competition in the digital age.
The premise that consumers should be freely informed of their behaviour, as highlighted by their interactions with the likes of their bank or telco, is strongly supported by consumer advocates, and examples of data access, portability and security frameworks are proliferating around the globe, including in the UK, California and Brazil.
Learnings from the banking sector
The Australian banking sector was the first to contend with the introduction of the sweeping reforms to customer information management and will be closely followed by the energy and telco sectors over the coming three years.
With the banking sector wading through rolling go-live dates over the past two years, cost and complexity are hot topics for the sector, with delivery programs requiring coordination of work across technology, risk, legal, customer and compliance domains.
Banks taking upwards of 18 months and allocating budgets in the tens of millions was the norm in delivering CDR-compliant systems and processes. On 1 July 2022, the first major go-live date for the nonmajor ADIs, nearly two-thirds of banks were non-compliant with the CDR, with this cohort immediately coming under scrutiny from the ACCC, the designated regulator of the CDR.
For some, this attention has not abated as they have subsequently missed the following go-live date of the 1 November 2021, due primarily to a lack of access to technical resources and late or no delivery from key suppliers. None of this bodes well for the incoming energy sector with not enough groundwork done to date by electricity retailers to have confidence in achieving the high compliance bar set by CDR.
The introduction of the CDR comes at a tumultuous time for the energy sector, with overarching political considerations surrounding climate change and rapidly changing consumer preferences coinciding to create an environment of rising risk and uncertain returns.
From the impairments being taken on traditional fossil fuel-fired assets, to the significant defection of customers from core electricity retail products and onto the emergence of major new competitors such as telcos, electricity retail is an incredibly complex business to be in.
Directors and management across the sector have their plates full with how they structure and operate their businesses in the face of such changes, with little apparent bandwidth left to pay attention to other concerns such as CDR. With a lack of consideration from senior leadership, implementation of the CDR is being left largely to technology teams, which, as an approach, misjudges the scope, complexity, and risk profile of, arguably, the largest element of the current regulatory reform agenda.
Early compliance is key
Despite the complexity of the changing landscape in the energy sector, organisations need to shift their attention to accounting for CDR in the immediate future.
Between the significant uplift required for technology solutions, the impacts on customer acquisition and retention, and the hefty penalties associated with a breach of the CDR, including potentially millions of dollars in fines and disqualification of corporate management, there is much to be considered by retailers, both large and small.
There is still time to prepare and deliver well against the incoming CDR obligations, but with the starting gun having already been fired, that window is rapidly closing.
Early compliance will be the most effective method of defence against the ever-vigilant regulator and the significant tools and powers they have at their disposal in their task of protecting and promoting the interests of consumers.