Productivity Commission reconfirms need for national consumer advocacy and research

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The Productivity Commission’s report on its Inquiry into Australia’s Urban Water Sector  is a mixed bag for water consumers, but it strongly endorses the need for consumer advocacy on water policy and on consumer policy generally.

The PC’s report into water advocacy was released on 12 October 2011. The report recognised that arrangements for consumer participation in regulatory processes are currently “unsatisfactory. The PC took the opportunity to restate a recommendation it made in the 2008 Review of Australia’s Consumer Policy Framework, that the Commonwealth should fund a national generalist consumer peak body, assist the networking and policy functions of consumer groups and create a National Consumer Policy Research Centre and contestable grants program. Recommendation 8.3 of the Water Inquiry report stated,

COAG should progress implementation of measures to support consumer advocacy and research consistent with recommendation 11.3 of the Commission’s 2008 Review of Australia’s Consumer Policy Framework.

The Consumer Utilities Advocacy Centre has long advocated for implementation of this recommendation, including in our 2009 Treasury submission on Australia’s consumer policy framework. We re-iterated this support in our second submission to the PC urban water inquiry.

The Inquiry

The Terms of Reference for the inquiry required the PC to investigate the scope for efficiency gains in the urban water sector’s structural, institutional, regulatory and other arrangements, and to identify and assess options for achieving these efficiency gains.

An Issues Paper (September 2010) and Draft Report (April 2011) formed the basis for consultations. In total, the inquiry garnered 167 submissions, including two submissions put byCUAC.

In an early meeting at the inception of the inquiry, in both of its submissions to the PC, and in its public hearing appearance, CUAC argued that there was an immediate need for a stronger consumer voice in national urban water reform processes. CUAC drew attention to the lack of resources for consumer advocacy in water, particularly when contrasted with the resources available for energy sector consumer advocacy.

Consumer policy framework

The PC affirmed the importance of the consumer policy framework, recognising the essential nature of water services, the fact that inadequate service can cause major harm, and that monopoly provision of water services means that consumers typically cannot choose to go elsewhere.

The PC identified the central goals for consumer policy as securing an ‘acceptable’ level of access for all consumers, offering effective dispute resolution and ensuring that that the sector ‘serves the interests and preferences of consumers.’ The PC identified licensing, industry codes and dispute resolution schemes (all of which are present in Victoria) as tools to achieve these goals.

Recommendation 8.2, of the final report states

Governments should develop best practice consumer protection principles for

retail–distribution utilities in consultation with consumer advocacy bodies and other interested parties. At a minimum, the guiding principles should include:

  •  retail–distribution utilities having clearly defined service standards and provisions to assist consumers facing hardship
  • rights for tenants that are commensurate with those of owner occupiers
  • access to an independent dispute resolution process, preferably by a specialist utilities industry ombudsman.

CUAC supported this recommendation in the draft report, and in particular its focus on ‘best practice.’ As we have seen with the development of a National Energy Customer Framework, a risk in the development of national consumer protection mechanisms is that protections in some areas and jurisdictions are weakened in the convergence to a common standard. CUAC’s submission also highlighted the need for any such principles to be developed with thorough, meaningful consultation with consumers.

Narrow role

While highlighting the importance of consumer policy advocacy, however, the Commission’s finalreport adopted a fairly narrow view of its role: limited to  providing ‘an informed and impartial account of each consumers groups’ specific interests.’

Researching and conveying the views of consumers is an important task for consumer advocates, but so too is the detailed analysis of government policy and industry practices. At the same time, just as certain values and assumptions underlie the PC’s analysis of urban water issues, consumer advocacy is necessarily underpinned by principles.

Interestingly, the PC also implied in its report that better-resourced consumer groups might change their policy positions and be less inclined to advocate for what it described as ‘inefficient pricing and non-price demand management policies.’

Disadvantaged and vulnerable consumers

In line with its view that consumer advocacy groups are the main or sole mechanism for revealing consumer preferences in the absence of a competitive market, the PC also argued that  consumer advocacy presently focuses too heavily on vulnerable and low-income consumers rather than the ‘vast majority of users of water …. who are not disadvantaged’. Related to this, the PC suggested that any consumer advocacy arrangements funded by government ‘should include governance arrangements that ensure that the interests of all consumers are represented in a balanced way.’

While CUAC believes that generalist consumer advocacy is important, we had also highlighted in our submissions the particular value of advocacy that focuses on disadvantaged consumers. Such consumers are more likely to have difficulty maintaining their access to essential services. They are also less likely to have the knowledge, confidence and resources to ensure that their interests and rights are protected, both in interactions with service providers and though input into policy and regulatory processes. For these reasons, CUAC maintains that it is critical that consumer policy advocacy continues to pay specific attention to the interests of disadvantaged consumers.

Consumer involvement

The PC’s draft report gave consideration to the potential place of a new consumer advocacy body to ensure consumer views were represented in the implementation of urban water reform and sought views from stakeholders on the desirability of establishing such a body, and on its scope, funding and governance model.

In our submission responding to the draft report, CUAC welcomed the Commission’s consideration of the issue. We proposed two possible models for support of consumer advocacy and representation.

Under the first model, a small National Water Consumer Advocacy Centre would be established to undertake  research, policy development and advocacy, support information-sharing, networking and joint advocacy among state and territory advocates, develop consumer information and education and identify research priorities to guide a grants program administered by the Consumer Advocacy Panel. Both the Centre and the grants program would be funded initially from consolidated revenue, with a view to levy funding at a later stage.

The alternative model CUAC suggested was creation of a grants program offering contestable grants for consumer research and advocacy projects, administered by either the Consumer Advocacy Panel or by the Federal Government’s Department of Sustainability, Environment, Water, Population and Communities.

In its final report the PC stated that it considers there is merit in looking at the formation of a body, independent of decision makers, to give voice to consumer preferences. Were such a body to be created, it stated that it would be important that it was “truly representative of all consumers” Ultimately the PC supported the view that governments should further consider options for the formation of a representative consumer body.

Where to from here?

The Federal Government has yet to provide its views on the PC’s findings and recommendations. CUAC views this period as a crucial time to advocate together for the adoption of the PC’s recommendation on the establishment of a national consumer research and advocacy body and for resources to support consumer participation into urban water reforms.

Jo Benvenuti

Executive Officer

Consumer Utilities Advocacy Centre

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