Energy rebate scheme 

The Department administers six energy rebate schemes with a budget of more than $245 million. Five of the schemes are targeted towards vulnerable or low-income households. The sixth scheme, the Life Support Rebate, assists households that use specified types of life support equipment, but is not means-tested and is not included in the scope of this audit.

The energy rebate package for low-income households in NSW can be categorised broadly into two key rebate types:

1. Ongoing support
   • Low Income Household Rebate
   • Gas Rebate
   • Medical Energy Rebate
   • Family Energy Rebate
      
2. Crisis support
   • Energy Accounts Payment Assistance (EAPA)

Ongoing support

Ongoing support refers to regular payments that assist households to cope with the rising cost of energy. The package of support available to low-income households includes the following:

• Rebates funded by the NSW Government, applied directly to energy bills
• Energy Efficiency Action Plan, funded by the NSW Government, which assists households to reduce energy consumption through in-home energy assessments and subsidised energy-efficient appliances
• Energy supplement paid by the Commonwealth Government to recipients of income support payments
• Hardship programs and payment plans provided by energy retailers.

Only the first of these, the rebates funded by the NSW Government, are included in the scope of this audit.

To access the ongoing support rebates provided by the NSW Government, most households apply directly to their energy retailer, and the rebate appears as a deduction on their quarterly energy bill. Energy retailers match concession card details provided by the account holder with data held by the Commonwealth Department of Human Services (DHS) to validate eligibility. Households applying for Medical Energy Rebate must also supply an up-to-date medical certificate to prove that someone in the household suffers from an illness affecting their ability to regulate their own body temperature, such as Parkinson's Disease or Multiple Sclerosis.

Family Energy Rebate applications are more complex as the eligibility criteria is based on tax data (Family Tax Benefit status) rather than on concession cards. Most households apply online and the Department verifies eligibility with DHS before sending details of eligible households to the relevant energy retailer. Family Energy Rebates are paid as a single lump sum onto the energy bill and the household must reapply each year once their tax return and Family Tax Benefit status are finalised.  

Crisis support

Households in financial crisis that cannot pay an energy bill can approach an accredited EAPA Provider and request assistance. EAPA Providers have access to vouchers worth $50 that can be used to pay energy accounts. A household can receive up to $250 towards any single bill, with a maximum of $500 per year per energy type. In practice, the Department will provide more than the maximum if the EAPA Provider shows good cause as to why the household needs additional support. During the period of this audit, the Department moved from a system of paper vouchers to a digital system that enables the EAPA Provider to directly transfer EAPA funds to an energy retailer for payment of a bill.

Administrative framework

Partnership arrangements

Energy rebates are administered by the Energy Operations group within the Department of Planning and Environment, Division of Energy, Water and Portfolio Strategy (Department). The Department partners with energy retailers to distribute ongoing rebates onto energy bills, and with charities and NGOs to assess eligibility of households for crisis support (EAPA).

Energy retailer responsibilities are documented in the NSW Social Programs for Energy Code, 2017, which is incorporated in legislation through the Electricity Supply (General) Regulation, 2014. The National Energy Retail Rules recognise the role of energy retailers in dealing with customer hardship, including informing customers about rebate programs.

Responsibilities of EAPA Providers are documented in the EAPA Delivery Guidelines, updated in 2017 to recognise the replacement of paper vouchers with digital vouchers on 1 July 2017.

Embedded network households

Approximately 28,000 households receive energy supplies via more than 230 embedded networks², supply arrangements where a residential manager purchases energy in bulk and on-sells it to residents. Embedded networks are typically found within caravan parks and retirement villages, although a more recent trend is for the managers of residential developments to take on the role of supplying energy to residents. As these households have no relationship with an energy retailer, the Department pays rebates directly into the bank accounts of around 10,000 households that are connected to embedded networks and eligible for rebates. We estimate these payments represent fewer than one per cent of rebate payments.

Budget and expenditure

More than 27 per cent of NSW households receive one or more rebates. Expenditure on rebates is increasing annually.

The schemes have a total budget in excess of $245 million. The budget is consistently underspent, due in part to contingency included in budgets to ensure the appropriation does not run out, and also to a range of factors discussed elsewhere in this report. These factors include some households not knowing about rebates and others finding them difficult or onerous to access.

About the audit

The audit objective was to assess whether the energy rebate schemes are effective. In making this assessment, the audit examined whether:

• the rebate schemes are structured to most effectively achieve their objectives in a changing energy market
• the system adopted by the Department for informing consumers and distributing rebates is effective
• the Department is effectively partnering with service partners to deliver rebates to consumers.

More information about the audit approach is provided in Appendix 2.

Objectives for ongoing rebate schemes are not measurable

Department staff indicated that the objective of the rebates is generally understood to be helping low-income households pay rising energy bills, but this objective is not associated with outcome measures.

Distributing money to help cover the cost of energy bills undoubtedly provides assistance to low-income households, but with no stated outcome measures, the Department has no way of knowing if the level of assistance is enough to prevent households from being disconnected from services, nor whether the funds could be used in a more efficient or sustainable way. At the same time, the Department does not set the thresholds for what is an ‘eligible low-income household’ as government policy aligns these with eligibility for various Commonwealth Government concession cards.

With no measurable objectives or outcome measures the Department cannot assess whether, for example:

• particular groups in the community require more or less assistance than others 
• some geographic areas of the state require more energy assistance than others 
• the rebates budget is sufficient to meet program objectives.

The rebate is paid as a flat fee where everyone receives the same, regardless of need

Ongoing rebate schemes where every household receives the same value rebate are simple to administer, but do not target varied circumstances and need. For example, the flat fee rebate structure does not recognise different household sizes, or variations in energy costs across NSW. A pensioner living alone in a studio apartment receives the same rebate as a family with three children living in a large home. Households in rural areas experience higher network costs, which they cannot control, yet they receive the same rebate as those in urban areas who experience lower network costs. At the same time, households which share a number of characteristics may have very different incomes and, hence, need.

Other jurisdictions use percentage rebates and social tariffs

Flat fee rebates or concessions are not unusual in Australia, where most welfare payments are paid on a fixed-value basis across the country, with no cost-of-living adjustments based on geography. Other jurisdictions that distribute energy rebates have implemented more flexible models that adjust based on need. For example, the Victorian State Government pays a rebate calculated as a percentage of part of the householder's bill. The UK recognises ‘fuel poverty’ as different to other forms of poverty, defining it in terms of energy costs equal to or exceeding 10 per cent of household income. Certain rebates and concessions are available to households deemed ‘fuel poor'⁵. Governments in Belgium, Brazil and Spain all fund the difference between a ‘social tariff’ for low-income households and the market tariff offered by energy retailers⁶. A similar arrangement is in place in Tasmania, supplemented with an additional heating allowance paid during the winter months.

Households with both electricity and gas receive more assistance

The rebate structure in NSW allows households with both electricity and gas accounts to receive two rebates, the Low Income Household Rebate valued at $235 and the Gas Rebate valued at $90, a total of $325. Households using only electricity can only access the Low Income Household Rebate, with a value of $235. The mix of energy types in the home is not usually something the householder controls readily.

Family Energy Rebate is a two-tier payment that can be difficult to access

The Family Energy Rebate is designed as a stand-alone rebate for families that do not have concession cards but are eligible for Family Tax Benefit, and a ‘top up’ for households that have concession cards. The result is that families with greater means receive a Family Energy Rebate of $150 while lower-income households, if eligible for Low Income Household Rebate, receive a Family Energy Rebate of $15, even if they have not actually applied for Low Income Household Rebate.

As the Family Energy Rebate is based on Family Tax Benefit status, eligible recipients must have a DHS Customer Reference Number (CRN) in the same name as the energy account. Blended households, divorced households, multi-generational households and many traditional households may not meet this criterion even though they are eligible for the rebate based on Family Tax Benefit status. More than 3,000 applications for Family Energy Rebate, or 4 per cent of applicants, were declined in 2015–16 due to names not matching. In some cases, DHS cannot release Family Tax Benefit status to the Department because customers have withheld their consent for privacy reasons, meaning that some eligible households may miss out on the rebate.

The structure of ongoing rebates is complex

Prior to 2010, the Department administered two rebates that provided ongoing support: Energy Rebate and the Life Support Rebate. Medical Energy Rebate was introduced in 2010 for DHS health care card holders with specific medical conditions that affect the regulation of body temperature. 

In 2011, the Energy Rebate was replaced by the Low Income Household Rebate, with the rebate extended to all low-income households. Eligibility is based on Commonwealth definitions of low income: recipients must have a Pensioner Concession Card, DHS Health Care Card or a DVA Gold Card marked War Widow or Widower, TPI or EDA⁸. At the same time, eligibility for Medical Energy Rebate was also expanded to include those same low income groups, although the DVA Gold Card need not be marked for this rebate.

Family Energy Rebate was added in 2012, with eligibility based on Family Tax Benefit status. Due to the complex and private nature of tax records, the Department plays an intermediary role, administering eligibility checks for around 85,000 Family Energy Rebate applicants each year, involving a substantial administrative burden and requiring between three and five additional full-time staff between April and July each year. Around one third of recipients do not reapply for Family Energy Rebate each year. The Family Energy Rebate budget was $8 million in 2016–17 and was underspent by 46 per cent. The budget has been adjusted to $7 million for 2017–18, well in excess of the $4.3 million spent in 2016–17.

Gas rebate was added in 2015 and extended to LPG in 2016, with eligibility criteria matching that of Low Income Household Rebate.

Increasing use of embedded networks presents an administrative risk to the Department

Around 28,000 households receive their energy supplies through embedded networks. These households typically reside in caravan parks or retirement villages, and energy is purchased in bulk by the facility manager, and distributed to each caravan or retirement unit without the involvement of an energy retailer. The Department administers rebates directly to around 10,000 of these households, with two payments a year sent to bank accounts via direct deposit. 

The quality of marketing and information about rebates is variable and some is poor

The Department relies on retailers to inform eligible consumers about rebate schemes and distribute rebates. Retailers are bound by the National Energy Retail Rules to inform new customers about rebate schemes in their state of residence. In addition, the NSW Social Programs for Energy Code requires all retailers to inform NSW energy consumers about energy rebates on the retailer website, on the household bill and when speaking to energy consumers on the phone.

In practice, energy consumers learn about rebate schemes through a mix of communication channels: retailer websites and call centres, Department websites, Centrelink, financial counsellors, EAPA Providers, the Energy and Water Ombudsman and Service NSW.

The Department conducts a small amount of marketing each year, usually for the Family Energy Rebate (which is underspent) and for any new initiatives. The Department also provides Service NSW with call centre scripts that are reviewed on a regular basis.

The Energy and Water Ombudsman conducts an outreach program that includes informing energy consumers about the availability of rebates and EAPA vouchers for crisis support.

We reviewed campaign materials from the 2014–15 Family Energy Rebate marketing campaign and found it was developed using sound marketing principles including: clear and measurable objectives, segmentation based on demographic data and choice of communication channels based on perceived channel performance in prior campaigns.

We also reviewed other marketing materials that used innovative communication channels to reach the intended target audience, such as school newsletters and websites, although the performance of those channels is not monitored or measured.

The Gas Rebate was extended in 2016–17 to include LPG, but some information leaflets included complex and formal language that may have been difficult for many households to understand. The Gas Rebate was underspent in 2016–17 by 36 per cent. 

Differences between jurisdictions leads to misinformed consumers

Each jurisdiction in Australia supports slightly different rebate schemes. Differences occur in the names of rebate schemes, value of rebates and eligibility criteria. Victoria is the only state to deliver a percentage-based rebate. National energy retailers do not typically review their call-centre scripts with the Department, and the variability in schemes across jurisdictions means they may find it difficult to provide accurate information to households.

Some low-income groups are not well-informed about rebate schemes

Around 22 per cent of people in NSW speak a language other than English at home and around four per cent of people in NSW speak English poorly or not at all. While we have no information about how many of these households are eligible for energy rebates, non-English speaking households tend to be over-represented in lower income brackets.

Recent research into the energy market knowledge of linguistically-diverse groups reveals that some groups do not know about assistance available for energy bills¹⁰. The National Energy Retail Rules require retailers to promote an interpreter service on their bills, but non-English speakers are unlikely to call an interpreter service to ask questions about energy rebates if they have not heard about them in the first place.

Households living in caravan parks or retirement villages have no direct relationship with an energy retailer and must rely on other communication channels to learn about energy rebates. The Department provides rebate information directly to the operators of caravan parks, but has no way of knowing if the information is passed on to residents. 

Householders with low levels of literacy may also find it difficult to learn about or apply for rebates. Around 44 per cent of Australians do not have literacy levels required to meet the demands of everyday life, rising to 78 per cent amongst people aged over 65.

Results from a survey of low-income households¹¹ published during the period of this audit found ‘a universally low level of awareness’ about available financial support for energy bills.

Responsibilities of energy retailers are well-documented and understood

Energy retailer responsibilities are documented in the NSW Social Programs for Energy Code. While the Department does not require retailers to formally sign up to the code, representatives from energy retailers that we spoke to all understand that they are bound by the code and may be audited for compliance.

The Department has recently initiated a program of compliance audits

A first audit of energy retailers' compliance with the NSW Social Programs for Energy Code was conducted in 2016. The 2016 audit included eight of the 25 retailers and did not cover all requirements of the NSW Social Programs for Energy Code. For example, the obligation of retailers to inform households about energy rebates was limited to retailer websites. Information provided to consumers when they establish a retail contract was not audited, nor were scripts used by energy retailers. These gaps are important to address as some households do not use the internet, and others prefer to get their information by phone.

The 2016 audit was the first in an ongoing audit program, and a second round of retailer audits commenced while this audit was underway. The Department did not follow up on issues of non-compliance found in the 2016 audit, intending to do so as part of the next audit. We checked retailer websites and found that not all had implemented recommendations from the 2016 audit, and some remain non-compliant.

The Department has not audited or reviewed the accuracy of information about energy rebates provided to households through the Service NSW call centre.

Energy Accounts Payment Assistance (EAPA) is a system of $50 vouchers intended to help pay the energy bills of households experiencing a short-term financial crisis. Unlike other rebates, the household does not need to hold a concession card to access EAPA, but must be in genuine need and at risk of being disconnected from services. EAPA is not intended to be a form of ongoing support and can only be paid to a particular household twice in any year.

For many years, EAPA vouchers took the form of paper vouchers that were allocated by the Department to accredited charities and NGOs, and distributed by EAPA workers within those organisations. After applying for and receiving one or more EAPA vouchers, a householder would take the vouchers to Australia Post and use them to pay the energy bill. During the period of this audit, the Department implemented a digital EAPA system. EAPA workers now allocate vouchers electronically, and the voucher is sent directly to the energy retailer as a form of payment. The Department expects the digital system to provide greater visibility over the distribution of EAPA vouchers, and the ability to react more quickly to any problems, such as an EAPA Provider running out of vouchers.

Performance of EAPA is not monitored or measured against objectives

The objective of EAPA is to assist households in financial crisis to remain connected to essential energy services. This objective is communicated to all EAPA Providers in the EAPA Delivery Guidelines.

While the EAPA Providers we spoke to all confirmed anecdotally that EAPA makes a difference to households in crisis, the Department has no way of knowing if the scheme is reaching all those who need help, nor if the scheme is preventing disconnections. In each of the past three years, energy retailers have disconnected more than 30,000 households from electricity services. Analysing the relationship between disconnections and receipt of EAPA at a household level may provide useful insights into the performance of the scheme against its objectives.

Partnering with charities and NGOs provides benefits to households and government

EAPA is distributed by a network of more than 340 charities and NGOs. Many of these are branches of respected, well-known charitable organisations. Other EAPA Providers are smaller and relatively unknown outside their local communities.

The NSW Government Commissioning and Contestability Policy recognises partnerships as 

critical to the delivery of quality and sustainable services, whether they are public, private or NGO provided.¹²

The Policy requires agencies to put the customer (in this case the household) at the centre of service design and consider whether services are improved through the partnership arrangement. In the case of EAPA, charities and NGOs are best placed to assess households for eligibility, and they can offer additional supports at the same time to those most in need, such as financial counselling and food vouchers.

The accreditation process for EAPA Providers lacks rigour

While the partnership approach offers benefits for households, the Commissioning and Contestability Policy also recognises the need for regulation and accreditation.

EAPA Providers are handling public funds and administering a welfare scheme on behalf of the government. The Department currently lacks assurance that these organisations have good governance in place and are equipped to administer public funds in accordance with Departmental guidelines.

The process of accrediting EAPA Providers is based primarily on the need to have providers close to potential recipients across the State. EAPA Providers are not currently subject to basic assessment criteria such as criminal history checks, confidentiality training or conflicts of interest.

At the very least we would expect that EAPA Providers should be assessed for basic governance standards. At the same time we recognise the need to balance the opportunity for oversight with the capacity of smaller EAPA Providers, some of which are small, locally-based organisations reliant on volunteer staff. The Department’s approach could be informed by the Australian Charities and Not-for-profits Commission (ACNC) governance standards.

Some EAPA workers may not be adequately trained 

The Department conducts regular EAPA training and schedules training sessions in both urban and remote areas. Our review of the training schedule for 2015–16 found that most of the training scheduled for remote areas was cancelled due to lack of attendees.

The Department provides EAPA Delivery Guidelines and an assessment checklist for use when assessing households for crisis support, but stakeholders indicated that some workers may withhold information or support from eligible households in financial stress. We recognise that many EAPA workers are volunteers and not bound by employment conditions, but they still need to be trained in the correct procedures for handling vouchers, and comply with the Department's expectations regarding eligibility for support. 

With the introduction of digital EAPA, the Department may have more control over which individual EAPA workers can distribute EAPA, although the Department will not be able to prevent password-sharing. 

EAPA Providers are not monitored for compliance with Departmental guidelines

Compliance with EAPA Delivery Guidelines was audited internally in 2013 but the Department has no plans for an ongoing audit program of EAPA Providers, despite this being a recommendation of the 2013 audit.

Fraudulent use of EAPA vouchers has occurred, and the Department has been advised of this by EAPA Providers. A regular audit program would have the effect of discouraging as well as detecting fraudulent activity. An audit program could also identify situations where EAPA Providers are allowing untrained workers to distribute EAPA vouchers.

Separately to an audit program, the introduction of digital EAPA will provide greater transparency of EAPA Providers' activity, including information about which energy accounts receive assistance. The introduction of digital EAPA provides an opportunity to use the electronic records to detect and flag unusual EAPA distribution patterns although the Department has not indicated an intent to use the data in this way. The Department told us it plans to monitor EAPA Providers’ behaviour for 12 months following implementation of the digital EAPA system, then adjust EAPA Delivery Guidelines or system thresholds if required.

EAPA Providers apply their own standards about crisis support

Despite Departmental guidelines, EAPA Providers at times apply their own standards about how much support to administer to a household in need. The EAPA Delivery Guidelines are clear that EAPA is capped at $250 per bill per fuel type and can only be paid twice a year onto one energy account. The Department has told EAPA Providers that they can exceed that cap in exceptional circumstances, so long as they document the circumstances. This instruction appears to cause confusion as EAPA Providers are unsure about when, how often and under what circumstances they can breach the cap, a situation exacerbated by the poor training attendance. There are advantages to giving EAPA Providers some discretion, but this needs to be supported by appropriate training and oversight.

At other times, EAPA Providers may withhold available support. For example, one EAPA Provider told us that it is their policy not to pay an entire bill so that the household feels some responsibility to contribute to their own energy consumption.

The Department could consider capturing the total bill amount as an additional piece of information in the digital EAPA system. This would allow the Department to identify EAPA Providers that appear to be holding back on support and not making full use of the funds available to households in crisis.

The structure of EAPA leads to inequity

EAPA vouchers are only available in multiples of $50 and cannot be used to put an energy account into credit.

EAPA assistance is provided per fuel type, meaning that households with a mix of electricity and gas can receive twice as much as households with electricity alone. Low income households often cannot control the mix of energy types in the home.

Introduction of digital EAPA provides an opportunity to shift from a fixed value voucher to a more flexible payment based on need. The digital system may also provide an opportunity to move away from a per-fuel system so that all households in need can access the same level of support regardless of the energy types used in the home.

Some households do not find out about EAPA when they need support

Energy retailers are required to inform households about energy rebates, but not necessarily about crisis support. Crisis support is administered differently in each jurisdiction in Australia, with NSW the only state distributing crisis support through charities and NGOs. These crossjurisdictional differences lead to confusion within national retailer call centres, and households may receive incorrect information.

Results from a recent survey of low-income households found that more than 44 per cent of those surveyed were unaware of EAPA¹³.

Some households find it hard to gain access to EAPA Providers

Prior to July 2017, the Department required EAPA Providers to conduct face-to-face interviews with households seeking support. This requirement was difficult for some households, especially those in remote areas. EAPA Delivery Guidelines have been updated in conjunction with the introduction of digital EAPA, and the requirement for face-to-face interviews has been removed, although reference to ‘interviews’ remains within the 2017 EAPA Delivery Guidelines and may cause confusion for some EAPA Providers.

Stakeholders report that some households find it difficult to make an appointment with an EAPA Provider, due to EAPA Provider capacity, geographic distance or lack of phone credit to make an appointment. For example, some EAPA Providers only perform EAPA assessment services once a week. Others conduct home visits, and can only see a few households when a volunteer worker is available. As a result, some households in need may be unable to access support.

The introduction of digital EAPA provides an opportunity for EAPA Providers to consider offering telephone-based interviews. One EAPA Provider we spoke to has been offering telephone interviews for some time, although this model of support may not suit all EAPA Providers.

While households should make every attempt to contact their local EAPA Provider, capacity or other constraints at the local provider should not prevent a household in crisis from receiving support. The Department should also consider establishing a ‘Provider of Last Resort’ to whom householders can turn when they are unable to gain access to other EAPA Providers.