Victorian Default Offer changes should support customer engagement

AGL has recently responded to the Essential Services Commission of Victoria’s (ESC) consultation paper on consequential amendments to the Energy Retail Code (ERC) related to the Victorian Default Offer (VDO).

The VDO is a regulated price of electricity set by the ESC for customers on standard contracts.

The ESC has made a number of changes recently to align the ERC with the VDO and these proposed changes are all due for a 1 July 2019 start. In summary, the proposed changes will require retailers to inform consumers of the availability of the VDO when the consumer is making inquiries about what offers are available or if they are responding to a retailer’s advertisement of a specific offer.

Our submission calls out the increasingly late decisions being made by the ESC , which is putting both consumers and retailers at risk for a poor experience with little time to implement the necessary changes and to train staff to help customers in the way they need. We are now within 6 weeks of these reforms coming into effect and the ESC has been aware of the VDO implementation back in December 2018, when the Victorian Government asked them to set the VDO. However, they have only now released changes to the Code to align with the VDO. Further, the proposed changes will required significant changes to retailers collateral, training, processes and systems. Rushing regulatory changes without careful consideration of consumer and market impacts is fraught with regulatory risk and failure, with at stake being consumer trust and therefore their engagement with energy sector.

From the perspective of the proposed changes, our submission supports the proposal that retailers need to inform consumers of the availability of the VDO if the VDO is the best offer available to the consumer. This is an appropriate and simple requirement and ensures consumers are offered the best possible deal.

However, we are concerned by the proposed change that will require retailers to inform consumers of the availability of the VDO when it is not the best offer available to them (Draft Decision 3). It is our view to require retailers to inform customers of both the VDO and the best offer for the customer will only damage the trust and engagement in the energy market. We provided the following example of how this proposed change is likely to negatively impact consumers:

This type of experience for a consumer may lead to customer inertia, disengagement or distrust and in our submission we encourage the Commission to require the VDO to be made known to the customer only where it is the best offer, or where the customer enquires about it.

You can view our full submission here.

Our previous submission on the VDO can be accessed here.