6 minute read

Effective support for vulnerable households – closing the gap between capacity to pay and cost of consumption – Part 2

light grey logo
AGL Energy
28 September 2015

In Part 1 of this series, we established that a significant proportion of customers participating on hardship programs live in public and private rental properties. Today's post looks at energy consumption and payment plans to quantify the financial impact that this is having on customers.

Factor 2: High consumption – customers participating on hardship programs generally consume more energy than the average consumer


The literature explaining the energy consumption profiles of vulnerable customers is mixed, with some groups consuming low amounts of energy^ and others demonstrating consumption far above the average household. This is not unsurprising perhaps, given the diversity of different kinds of customers that one day might find themselves experiencing financial difficulty.

AGL using demographic tool Mosaic^^, has analysed customer data from customers participating on the Staying Connected hardship program as at April 2015 and found that on average, these customers (thatched grey) are consuming 40% more per year than the average customer base (orange line) as exemplified below for Victorian electricity customers in Figure 1. This research also found that the Mosaic customer segments who were over-represented in participation on the hardship program in all cases, consumed greater than average annual consumption of AGL customers. This contrasts to concession card holders (dark grey), who on average were found to consume below the average annual electricity consumption of residential customers.

Figure 1 – Annual average consumption of Victorian electricity customers participating on hardship program Staying Connected – by segment (AGL Energy customer data, April 2015)

Consump

This fact is important when you consider the often limited capacity to pay for customers experiencing financial difficulties. If customers have both a limited capacity to pay, in addition to high energy usage and associated ongoing costs – this clearly means there is likely to be a gap between the two, with costs outweighing capacity to pay. This gap manifests in energy debt, which customers then accrue and can often find difficult to pay off without supplementary assistance.

Factor 3: Capacity to pay & payment plans


AGL has compared payment plans of customers participating on the hardship program to ongoing energy costs. These payment plans are often set at low levels, below the cost of consumption due to the limited capacity to pay of the customer. Table 4 highlights that more almost half of the customers participating on AGL’s Staying Connected program are unable to meet the costs of ongoing energy consumption let alone address any outstanding debt.

Table 4 -Proportion of Staying Connected customers with payment plans set below ongoing cost of consumption (AGL customer data, August 2015).
Tablespayment1

In some instances, despite energy concessions, energy home visits, financial counselling and other support being provided – these customers accrue debt for many years. Essentially debt is accrued for however long customers continue to engage and make the payments as per the payment plan according to their capacity to pay. The current regulatory and policy framework has no solution for how collectively – individuals, industry or governments - we can break this cycle, the costs of which are currently being incurred and result in higher energy costs for all customers.

Addressing energy consumption and therefore ongoing cost, should be a central focus for policymakers along with addressing capacity to pay through the income support and concessions framework.

The last post in this series will take a look at the technology solutions and potential policy changes which would enable access for public and private housing tenants.

 


^ Chester, (2013), The impacts and consequences for low-income Australian households of rising energy prices
^^ Mosaic Experian—using ABS, and Census data Mosaic splits the Australian community into 13 groups and 49 different demographic segments
Part 1 - /articles/2015/09/effective-support-for-vulnerable-households-closing-the-gap-between-capacity-to-pay-and-cost-of-consumption-part-1/
Part 3 - /articles/2015/10/effective-support-for-vulnerable-households-closing-the-gap-between-capacity-to-pay-and-cost-of-consumption-part-3/