Regulatory Audit of (AGL) Performance Audit...Regulatory Audit of AGL Sales Pty Ltd (AGL) & AGL...

Regulatory Audit of AGL Sales Pty Ltd

(AGL) & AGL Retail Energy Pty Ltd

(AGL)

Performance Audit - Part II Obligations

On behalf of the

Independent Pricing and Regulatory Tribunal

March 2011

This document has been prepared for AGL Sales Pty Ltd (AGL) and AGL Retail Energy Pty Ltd (AGL) for the purposes of reviewing compliance with the provisions of various Codes and Guidelines, as detailed in the Scope of Work specified by the Independent Pricing and Regulatory Tribunal (IPART). Protiviti takes no responsibility for any reliance placed upon this report by any external party.

Table of Contents

1 Executive Summary .............................................................................................................. 1

1.1 Introduction ....................................................................................................... 1

1.2 Overview of Audit Results ................................................................................. 2

1.3 Compliance Gradings – Operating Statistics ..................................................... 3

1.4 Compliance Gradings – Other Obligations ........................................................ 4

2 Scope and Methodology ...................................................................................................... 7

2.1 Audit Scope ...................................................................................................... 7

2.2 Period Subject to Audit ..................................................................................... 7

2.3 Methodology and Approach .............................................................................. 8

2.4 Grading of Compliance Controls ....................................................................... 9

2.5 Other License Obligations ............................................................................... 10

2.6 Regulatory Information ................................................................................... 11

2.7 Overview of Core Systems ............................................................................. 12

3 Operating Statistics ............................................................................................................13

3.1. Customers ...................................................................................................... 13

3.2. Telephone service for account inquires ........................................................... 14

3.3. Supply discontinuance .................................................................................... 15

3.4. Supply Recontinuance .................................................................................... 16

3.5. Complaints ..................................................................................................... 17

3.6. Marketing ........................................................................................................ 19

3.7. Transfers ........................................................................................................ 20

3.8. Security Deposits ............................................................................................ 21

3.9 Payment Methods ........................................................................................... 22

3.10 Electricity Sales Volumes ................................................................................ 23

4 Other Licence Obligations .................................................................................................24

4.1 Electricity Supply Regulation (ES) .................................................................. 24

Gas Supply Regulation (GS) ........................................................................... 24

4.2 Licensee Billing Obligations ............................................................................ 25

4.3 Transfers and Cooling-Off Period Requirements ............................................ 30

4.4 Discontinuance of Supply ............................................................................... 32

4.5 Marketing Code of Conduct (MCC) ................................................................. 35

Appendix A – Reported Operating Statistics ................................................................................39

Appendix B – Scope of Work ..........................................................................................................43

AGL Regulatory Audit on behalf of IPART March 2011

1

1 Executive Summary

1.1 Introduction

Under the terms of their licences, each Electricity retailer in New South Wales is required to undertake an audit of its compliance with licence conditions, including obligations to comply with relevant codes and guidelines. Under the authority of the Independent Pricing and Regulatory Tribunal (“IPART”), AGL has been requested to undertake an audit which is to be conducted by an independent party nominated by the holder of the retail licences and approved by IPART.

The audit is comprised of two [2] phases:

� Phase 1: A system compliance audit of obligations as listed in Part 1 (completed July 2010) � Phase 2: A performance audit of a sub-set of obligations listed in Part 1 and an audit of

AGL’s 2009/10 Operating Statistics listed in Part 2 (completed in February 2011).

This report deals with the audit procedures associated with Phase 2. Specifically, the auditor is required to conduct sufficient procedures to form and express an opinion on the robustness of AGL’s electricity licence/gas systems for ensuring compliance with key licence conditions listed in Part 1 of the audit scope determined by IPART. The audit should examine the operation of the systems for ensuring compliance and accurate reporting of the extent of compliance. The extent to which the business encourages a climate of full compliance should also be reviewed.

Protiviti has been engaged to undertake the audit as outlined above.

Our report is structured as follows:

1. Section 1 of the report summarises our key findings in relation to the matters subject to audit. This section also details a number of suggestions for improvement that should be considered by AGL management.

2. Section 2 of this report contains details of the scope and methodology applicable to our work including details of our approach to compliance grades.

3. Section 3 provides the findings from our audit of the Operating Statistics provided to IPART and detailed in Appendix A. Specifically, this section provides compliance grades for each individual operating statistic and related commentary. Our review covered Operating Statistic data submitted for the year ended 30 June 2010.

4. Section 4 provides the findings from our audit of AGL’s compliance with other obligations as specified in the AGL Follow-Up Audit Scope. Specifically, this section provides compliance grades for each individual compliance obligation identified by IPART along with any relevant commentary. Our review assessed compliance over the period commencing as per the AGL Follow-Up Audit Scope to the date of the audit (“current compliance”).


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1.2 Overview of Audit Results

AGL management places a high degree of importance on effective regulatory compliance and has taken a proactive approach to managing its compliance obligations and improving the quality of performance reporting. This is reflected in the compliance grading results for Operating Statistics and Other Obligations respectively.

The results of our audit indicate that for the majority of Operating Statistics reported, AGL has documented policies, practices and procedures in place that are consistent with the requirements and definitions that have been outlined by IPART.

However, there are some areas where compliance processes can be further strengthened.

� Source documentation and an adequate audit trail should be maintained to support data generated at the time of reporting to IPART. We recommend that annual files be created to coincide with IPART reporting, which retain hard and/or soft copy information to supported reported data. As an example, copies of system reports and records of any manual adjustments should be retained.

� Regular training and refresher courses should be provided to staff to reiterate AGL's policies, processes and procedures. This further provides an opportunity to advise staff of any changes or updates to regulatory requirements. As an example, marketing staff should be subject to regular training to reinforce the requirements of the Marketing Code of Conduct.

Section 1.3 and 1.4 below summarises the compliance gradings determined for Part 1 and Part 2 of the Audit Scope.


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1.3 Compliance Gradings – Operating Statistics

The data reported by AGL to IPART for the audit period July 2009 to June 2010 is set out in Appendix A. The results of our assessment of the reliability and accuracy of these indicators are detailed in the table below:

Compliance Description Compliance Grading

Operating Statistics Electricity Gas

A Customers

1 How many customers did the Licence Holder have as at 30 June 2010? A1 A1

2 How many residential small retail customers did the Licence Holder have as at 30 June 2010?

A1 A1

3 How many non-residential small retail customers did the Licence Holder have as at 30 June 2010?

A1 A1

4 How many small retail customers did the Licence Holder have as at 30 June 2010?

A1 A1

B Telephone service for account inquiries

1 How many calls were made to the Licence Holder’s account inquiries telephone service during 2009/10?

B1 B1

2 How many calls dropped out or were abandoned? B1 B1

3 How many calls to this service were answered by a human operator within 30 seconds?

B1 B1

C Supply discontinuance

1 How many residential small retail customers had their supply discontinued during the period for failing to pay an amount due to the Licence Holder?

A1 A1

2 How many non-residential small retail customers had their supply discontinued during the period for failing to pay an amount due to the Licence Holder?

A1 A1

3 Of those small retail customers in C.1 and C.2, how many had their supply discontinued on a Friday, Saturday, Sunday, public holiday, a day preceding a public holiday, or after 3.00pm on a day other than the days just mentioned?

A1 A1

4 Of those residential small retail customers in C.1, how many were on a payment plan (within a period of 12 months) prior to having supply discontinued?

A1 A1

5 Of those residential small retail customers in C.1, how many were pensioners?

(Audit for electricity only)

A1

6 Of those residential small retail customers in C.1, how many had supply discontinued at the same address for non-payment of an account on one or more other occasions within 2009/10?

A1 A1

D Supply recontinuance

1 Of those residential small retail customers in C.1, how many subsequently had supply re-continued by the Licence Holder in that customer’s same name?

B1 B2

2 Of those non-residential small retail customers in C.3, how many subsequently had supply re-continued by the Licence Holder in that customer’s same name?

B1 B2

E Complaints

1 How many complaints did the Licence Holder receive during 2009/10 from small retail customers in relation to retail supply matters?

A1 A2

2 Of the complaints reported under E.1, how many were from: a. residential small retail customers? b. non-residential small retail customers?

A1 A2

3 Of the complaints reported under E.1, how many were primarily about: a. Billing?

A1 A2


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Compliance Description Compliance Grading

Operating Statistics Electricity Gas

b. Marketing? c. Other matters?

F Marketing

1 How many direct marketing contacts to small retail customers did the Licence Holder make during 2009/10?

A1 A1

G Transfers

1 How many customers did the Licence Holder transfer to itself during 2009/10? (Audit for electricity only)

A1

H Security deposits

1 How many residential small retail customers had lodged security deposits with the Licence Holder as at 30 June 2010?

A1 A1

2 Of the security deposits from residential small retail customers that the Licence Holder held during 2009/10, how many had the Licence Holder held for longer than 12 months?

A1 A1

3 How many non-residential small retail customers had lodged security deposits with the Licence Holder as at 30 June 2010?

A1 A1

4 Of the security deposits from non-residential small retail customers that the Licence Holder held during 2009/10, how many had the Licence Holder held for longer than 24 months?

A1 A1

I Payment methods

1 How many of the Licence Holder’s residential small retail customers were paying their bills under a direct debit arrangement from the customer’s bank account as at 30 June 2010?

A1 A1

2 How many of the Licence Holder’s residential small retail customers were paying off billing arrears under any instalment payment plan operated by the Licence Holder as at 30 June 2010?

A1 A1

3 How many of the Licence Holder’s residential small retail customers were using Centrelink’s Centrepay facility to pay their bills with the Licence Holder as at 30 June 2010?

A1 A1

J Electricity Sales Volumes

1 What were the Licence Holder’s NSW electricity sales (in GWh) in the financial year? (Audit for electricity only)

A1

1.4 Compliance Gradings – Other Obligations

We reviewed and assessed compliance with the obligations as outlined in the IPART scope (refer Appendix B). We have used the grading methodology outlined in Section 2.4 for each obligation. The results of our assessment of compliance are detailed in the table below:

Compliance Grading

Licence Conditions (Including Codes & Guidelines) Electricity Gas

Electricity Supply General

Gas Supply General

Elec Supply (General) Reg cl 11(3)

Gas Supply (NGRC) Reg cl 11(4)

A+ A+

Elec Supply (General) Reg cl 42(2A)

Gas Supply (NGRC) Reg cl 50(2A)

A+ A+

Elec Supply (General) Reg cl 42(2)


A+ A+


5

Compliance Grading


Licensee Billing Obligations

ES (General) Reg cl 22(1)


A+ A+



A+ A+



A+ A+



C C



A+ A+



A+ A+



Market Operations Rules (MOR)

ES (General) Reg Schedule 2, cl 7(1)

Gas Supply (NGRC) Reg Schedule 1, cl 12(1)

A+ A+

ES (General) Reg Schedule 2, cl 7(1A)

Gas Supply (NGRC) Reg Schedule 1, cl 12(1A)

C C

MOR (TRRES) cl 4.1 A+ A+

MOR (TRRES) cl 12.1 A+ A+

Discontinuance of Supply

ES (General) Reg cl 16

Gas Supply (NGRC) Reg cl 15

A+ A+

ES (General) Reg cl 13AA(1)(a)

Gas Supply (NGRC) Reg cl 13AA(1)(a)

A+ A+

ES (General) Reg cl 13AA(1)(c)

Gas Supply (NGRC) Reg cl 13AA(1)(c)

B B

ES (General) Reg cl 13A(1)(a)

Gas Supply (NGRC) Reg cl 13A(1)(a)

A+ A+

ES (General) Reg cl 13A(1)(b)

Gas Supply (NGRC) Reg cl 13A(1)(b)

A+ A+

ES (General) Reg cl 13A(2)

Gas Supply (NGRC) Reg cl 13A(2)

A+ A+

ES (General) Reg cl 13A(3)

Gas Supply (NGRC) Reg cl 13A(3)

A- A-

Marketing Code of Conduct (MCC)

Marketing Code of Conduct, section 5.1.2 A- A-

Marketing Code of Conduct, section 5.2.1 A+ A+




6

Compliance Grading




Marketing Code of Conduct, section 6.3.1 A A





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2 Scope and Methodology

2.1 Audit Scope

The areas subject to review during the course of our audit are contained in IPART’s Scope of Work. This document is included in Appendix B to this report.

The areas identified for review are:

� Electricity Supply (General) Regulation

� Gas Supply (NGRC) Regulation

� Market Operations Rules

� Marketing Code of Conduct

Our work does not guarantee that errors, irregularities or instances of non-compliance will not occur and may not detect errors, irregularities or instances of non-compliance should they occur. Further, the internal control structure within which the control procedures that we have reviewed operate has not been reviewed, and no opinion is expressed on its effectiveness. Our work is not designed to detect all weaknesses in the system of internal control because it is not performed continuously during the period subject to review, and the tests performed are on a sample basis.

AGL management is fully and solely responsible for applying independent business judgement with respect to the contents of this report, to make implementation decisions, if any, and to determine further courses of action with respect to any matters addressed in any advice, recommendations, services, reports or other work products or deliverables produced as a result of our review.

2.2 Period Subject to Audit

The period subject to audit is detailed below and has been agreed with IPART.

Audit Phase Period Subject to Audit

� Phase 1 – System Compliance Audit (Report dated July 2010)

- As at 30 April 2010

� Phase 2

– Operating statistics

– Other regulatory obligations

- Period 1 July 2009 to 30 June 2010

- Current compliance assessed for the period between 1 May 2010 to 31 October 2010


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2.3 Methodology and Approach

The methodology and approach to the conduct of our work is specified below:

Specifically, to the extent considered appropriate, we:

1. Analysed documented policies and procedures to assess whether they were consistent with the regulatory definition of the obligation. If changes occurred in documented policies and procedures during the audit period, the sample included cases or data from before and after the date of the change to gauge if accuracy or reliability had significantly altered;

2. Interviewed responsible staff to assess whether they understood and complied with the documented procedures;

3. Analysed information systems to assess the extent to which they produced information that complied with regulatory definitions;

4. Analysed quality controls to identify whether non-compliance was detected and fed back through appropriate channels for correction;

5. Identified changes in systems and documented policies and procedures which may indicate that data accuracy or reliability had varied significantly over the audit time frame, and may lead to the conclusion that the current compliance level is not representative of compliance over the entire time frame;

6. Analysed relevant data in the licensee’s information systems to:

I. assess whether the data in the system matched the data previously reported to the IPART; and

II. attempt to identify any missing data or unusual figures or trends that might have suggested errors in data entry or manipulation;

7. Analysed a sample of cases or data. We established the extent to which the obligation has actually been delivered (for example, to assess the accuracy of the reported data). Our approach to conducting sample testing is set out in Section 2.4 below; and

8. Assessed the licensee’s plan to ensure compliance, where cases of significant non-compliance were detected. In particular, we assessed whether the plan was adequate and effective. Significant non-compliance has been defined by the IPART as:

I. for regulatory information – a confidence grade less than B or an accuracy grade less than 2; and

II. for any other licence obligation – a compliance grade less than B.

In certain circumstances, testing was performed as at the date of our audit work, particularly in relation to observing AGL personnel undertaking certain procedures. In these circumstances, we have relied upon representations to us that consistent procedures were adopted throughout the period (unless otherwise noted). To validate these representations we would have required a significant amount of further work and, unless we had reason to believe they are incorrect, we did not obtain evidence to further corroborate these representations.

The importance of the above steps has varied according to the nature of the obligation. We have undertaken a critical but co-operative examination of the possible causes of non-compliance. This was undertaken through the review of both obligation specific and generic compliance questions.


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2.4 Grading of Compliance Controls

The compliance grades used to assess regulatory information focused on the:

� reliability of the procedures for generating information; and � accuracy of the data itself.

Data accuracy was determined by:

� the measurement systems used to generate the data; and � the methods used, if any, to extrapolate or estimate data.

A two-part confidence grade (e.g. B2, DX) was assigned to each operating statistics, as follows:

Grade Reliability Assessment

A All data is based on sound information systems and records, and on documented policies, practices and procedures which are:

� consistent with IPART’s definitions as outlined in the explanatory notes and

� fully understood and followed by staff.

B Most data conforms with grade A. Data which does not have a minor impact on overall data integrity. For example, a minority of data may be based on:

� definitions which are significantly, but not substantially different to those published by IPART; or

� procedures which are not fully understood by staff; or ;

� minor variations from documented procedures; or

� estimation or extrapolation of data which conforms with Grade A; or

� reliance on unconfirmed reports.

C In many cases, but not all, data is based on:

� definitions which are significantly, but not substantially, different to those published by IPART; or

� procedures which are not fully understood by staff; or

� estimation or extrapolation of data which conforms with grade A or B; or

� reliance on unconfirmed reports.

D Other data

Grade Accuracy Assessment (% error)

1 +/- 1%

2 +/- 5%

3 +/- 10%

4 +/- 25%

5 +/- 50%

6 +/- 100%

X For small samples where an accuracy cannot be calculated or error would be more than 100%


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2.5 Other License Obligations

Compliance with other licence obligations, including codes and guidelines, was assessed using the following grading system (which uses the same categories as the reliability grading system for regulatory information):

Grade Compliance level

(% - estimated or actual)

A+

A

A-

99+ - 100

95+ - 99

90+ - 95

B 80+ - 90

C 50+ - 80

D 0+- 50

The determination of compliance gradings relevant to each obligation requires consideration of generic compliance issues as outlined in the audit scope. In practice, this involves the consideration of the results of sample testing and the qualitative measures relevant to generic compliance issues. We have utilised the following grading model in preparing our report:

Preliminary Grading A+ A A- A- B B B C

Obligation reflected in documented policies and procedures

� � � � � � � �

Obligation understood by staff � � � � � � � �

Obligation subject to effective compliance monitoring

� � � � � � � �

� - indicates that the Licensee meets the generic compliance requirements � - indicates that the Licensee does not meet the generic compliance requirements

We have used the model described above as a guide to determining final compliance grades based on an assessment of generic and specific compliance issues, including results of sample testing. The preliminary grading is the indicative grading that would be achieved if sample testing did not identify any exceptions and the circumstances noted applied. Therefore, if our sample testing identified a level of compliance that warranted an A- grading, and there were no documented policies and procedures that reflected the obligation, then the final compliance grading would likely be a “B”.

In many cases, it was not possible to directly calculate the level of compliance from sample testing; hence, we addressed the generic and specific compliance issues and assigned a compliance grade using the above model and our professional judgement.


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2.6 Regulatory Information

The majority of Operating Statistics submitted by AGL are obtained from business warehouse (“BW”) reports. AGL extracts information from SAP system which is then manually entered into a reporting format consistent with the IPART’s information specifications and templates.

AGL have a documented policy and procedure that addresses the process for collation, review and submission of data to the IPART. AGL have also developed a high level process flowchart which provides an overview of the process for generating Operating Statistic data. These documents have facilitated AGL’s ability to achieve an “A” rating for reliability and is reflected in our reliability gradings in Section 3.

We identified in limited instances, that manual data manipulation is undertaken by AGL in MS Excel spreadsheets based on data obtained from business units within AGL. In some circumstances, data is manually transposed from source documents (e.g. CPM Reports indicating the number of ‘direct marketing contacts made to small retail customers’, reports from EWON indicating the number of complaints for the period).

Manual data manipulation or reliance on reports that are not generated directly from AGL systems is used for the following Operating Statistics:

1. Electricity Customer Numbers 2. Complaints 3. Marketing 4. Telephone Service for Account Inquiries 5. Security Deposits

An overview of the information systems used to report Operating Statistics data is set out in Section 2.7 below.


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2.7 Overview of Core Systems


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3 Operating Statistics

3.1. Customers

Electricity Gas

A.1 How many customers did the Licence Holder have as at 30 June 2010?

A1 A1

A.2 How many residential small retail customers did the Licence Holder have as at 30 June 2010?

A1 A1

A.3 How many non-residential small retail customers did the Licence Holder have as at 30 June 2010?

A1 A1

A.4 How many small retail customers did the Licence Holder have as at 30 June 2010?

A1 A1

The AGL definition for customer numbers refers to the number of National Metering Identifier (NMI)s and Metering Identification Registration Number (MIRN)s where AGL records the customer's status as 'Active' which is consistent with the requirements of IPART.

Our testing identified that data reported to IPART matched the reports generated from BW.

Compliance Grades:

Reliability – Refer to process outlined in Section 2.6. On this basis we have assigned a reliability rating of "A".

Accuracy – We did not identify any inaccuracies in the Operating Statistics reported for Customers. As a result, we have assigned an accuracy rating of "1".


14

3.2. Telephone service for account inquires

Electricity Gas

B.1 How many calls were made to the Licence Holder’s account inquiries telephone service during 2009/10?

B1 B1

B.2 How many calls dropped out or were abandoned? B1 B1

B.3 How many calls to this service were answered by a human operator within 30 seconds?

B1 B1

AGL defines an account inquiry as a request for information about AGL’s products or services that does not reflect dissatisfaction and is generally any question or concern that is addressed through customer’s initial contact with an AGL call consultant. This is consistent with the definitions that have been outlined by IPART.

Telephone source data is obtained directly from the Business Intelligence Competency Centre (BICC) Team. Data is exported directly from the Avaya system that records telephone source data.

Our testing identified that data for telephone service account enquiries cannot differentiated between gas and electricity enquires. Therefore, an estimated percentage is used to apportion total enquiries between gas and electricity for reporting purposes.

Compliance Grades:

Reliability – We have reviewed the process used to populate information reported to IPART, and identified that information is extracted from the source system. However, we noted that a detailed breakdown of the data is based on estimates as the system does not have the functionality to differentiate between gas and electricity enquiries. On this basis we have assigned a reliability rating of "B".

Accuracy – We did not identify any inaccuracies in the Operating Statistics reported for Telephone Service for Account Inquiries. As a result, we have assigned an accuracy rating of "1".


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3.3. Supply discontinuance

Electricity Gas

C.1 How many residential small retail customers had their supply discontinued during the period for failing to pay an amount due to the Licence Holder?

A1 A1

C.2 How many non-residential small retail customers had their supply discontinued during the period for failing to pay an amount due to the Licence Holder?

A1 A1

C.3 Of those small retail customers in C.1 and C.2, how many had their supply discontinued on a Friday, Saturday, Sunday, public holiday, a day preceding a public holiday, or after 3.00pm on a day other than the days just mentioned?

A1 A1

C.4 Of those residential small retail customers in C.1, how many were on a payment plan (within a period of 12 months) prior to having supply discontinued?

A1 A1

C.5 Of those residential small retail customers in C.1, how many were pensioners? (Audit for electricity only)

A1

C.6 Of those residential small retail customers in C.1, how many had supply discontinued at the same address for non-payment of an account on one or more other occasions within 2009/10?

A1 A1

AGL defines supply discontinuance as an instance where a customer is disconnected after they have failed to pay an amount that is due after the final stage of the collections process. Customers who are on AGL’s financial hardship program, Staying Connected, are removed from the normal disconnections process, as they would be classed as customers on a ‘payment plan’ per IPART definitions.

We compared the data reported to IPART to a re-run BW report and noted no exceptions.

Compliance Grades:


Accuracy – We did not identify any inaccuracies in the Operating Statistics reported for Supply Discontinuance. As a result, we have assigned an accuracy rating of "1".


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3.4. Supply Recontinuance

Electricity Gas

D.1 Of those residential small retail customers in C.1, how many subsequently had supply re-continued by the Licence Holder in that customer’s same name?

B1 B2

D.2 Of those non-residential small retail customers in C.3, how many subsequently had supply re-continued by the Licence Holder in that customer’s same name?

B1 B2

AGL defines supply recontinuance as an instance where a customer’s supply was reconnected in the same name and at the same address following disconnection for non-payment of an amount owed and who have been disconnected for non-payment of an account on one or more occasions. This is consistent with the definition that has been provided by IPART.

Our testing identified the following:

Operating Statistic Data Reported Data Identified Variance % Error

Electricity Gas Electricity Gas Electricity Gas Electricity Gas

Of those residential small retail customers in C.1, how many subsequently had supply re-continued by the Licence Holder in that customer’s same name?

413 3,202 413 3,355 0 153 0% 4.5%

Of those non-residential small retail customers in C.3, how many subsequently had supply re-continued by the Licence Holder in that customer’s same name?

19 21 19 22 0 1 0% 4.5%

Reports generated by AGL for supply recontinuance are ‘point in time’ reports which are not retained on file. We agreed the figures reported for supply recontinuance to BW reports that were run at a later point in time, and identified variations in the data reported. These variations are a result of additional supply recontinuance notifications that were received after the data had been reported.

Compliance Grades:

Reliability – Refer to process outlined in Section 2.6. On this basis we have assigned a reliability rating of "B".

Accuracy – We identified inaccuracies of less than 5% in the figures reported for non-residential small retail customers who have had supply re-continued by the Licence Holder for gas. We note the low volume of transactions for this operating statistic and acknowledge system limitations in SAP to reproduce historical data. As a result, we have assigned an accuracy rating of "2".


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3.5. Complaints

Electricity Gas

E.1 How many complaints did the Licence Holder receive during 2009/10 from small retail customers in relation to retail supply matters?

A1 A2

E.2 Of the complaints reported under E.1, how many were from: a. residential small retail customers? b. non-residential small retail customers?

A1 A2

E.3 Of the complaints reported under E.1, how many were primarily about: a. Billing? b. Marketing? c. Other matters?

A1 A2

Complaints have been defined by AGL as a customer’s ‘written or verbal expression of dissatisfaction' made to the Retailer about an action, or a failure to act in respect to a product or service offered or provided by the retailer, where a response or resolution is explicitly or implicitly expected. Within customer complaints, AGL has categorised complaints into billing, marketing, and other complaints. Complaints reported to IPART include complaints that have been referred to AGL by EWON. Details of complaints made to EWON are provided to the Customer Advocacy business unit, where it is further investigated. This definition of complaints is consistent with the definition provided by IPART.

Our testing identified the following:

Operating Statistic Data Reported Data Identified Variance % Error

Electricity Gas Electricity Gas Electricity Gas Electricity Gas

How many complaints did the Licence Holder receive during 2009/10 from small retail customers in relation to retail supply matters?

9,154 8,778 9,208 8,945 54 167 0.59% 1.87%

Of the complaints reported under E.1, how many were from:

Re

sid

en

tia

l S

ma

ll R

eta

il C

usto

mers

8,562 8,308 8,619 8,467 57 159 0.66% 1.88%

No

n-

resid

en

tia

l sm

all

reta

il cu

sto

me

rs 592 470 589 478 3 8 0.51% 1.67%

Of the complaints reported under E.1, how many were primarily about:

Bill

ing 5,503 5,328 5,520 5,432 17 104 0.31% 1.91%

Ma

rke

tin

g 826 420 836 424 10 4 1.20% 0.94%

Oth

er

Ma

tte

r 2,825 3,030 2,852 3,089 27 59 0.95% 1.91%

Reports generated by AGL for complaints are ‘point in time’ reports which are not retained on file. These variations are a result of complaint classification changes that were made after the data had been reported.


18

Compliance Grades:

Reliability – Complaints data is obtained through a BW report, which extracts the data directly from SAP. A report containing complaints referred to from EWON is obtained from the Customer Advocacy team. This information can be traced back to reports sent to AGL from the Ombudsman. As a result, we have assigned a reliability rating of "A".

Accuracy – Our testing identified inaccuracies of less than 1% for all electricity operating statistic tested and have therefore determined an overall accuracy grading of “1”. In relation to gas complaints, our testing identified inaccuracies no greater than 2% in the reported operating statistics. As a result, we have assigned an accuracy rating of “2” as per the compliance grades set out in section 2.4.


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3.6. Marketing

Electricity Gas

F.1 How many direct marketing contacts to small retail customers did the Licence Holder make during 2009/10?

A1 A1

AGL defines a direct marketing contact as an activity arising from:

� inbound contact such as incoming call or letter � outbound contact such as telemarketing or field sale presentations.

This definition is consistent with that of IPART.

AGL has outsourced their Marketing function to CPM, a third party who carries out marketing activities through Outbound Telemarketing and Field Marketing, and obtains reporting data from them.

We identified that operating statistics reported to IPART matched the source reports maintained by CPM which forms the basis of the operating statistic calculation.

Compliance Grades:


Accuracy – We did not identify any inaccuracies in the Operating Statistics reported for Marketing. As a result, we have assigned an accuracy rating of "1".


20

3.7. Transfers

Electricity Gas

G.1 How many customers did the Licence Holder transfer to itself during 2009/10? (Audit for electricity only)

A1

Transfers are defined by AGL as the total active National Metering Identifiers (NMIs) which are transferring out and the total non-active NMIs which are transferring in. This is consistent with the definition provided by IPART.

An overview of the reporting process for customer numbers is included in Section 2.6 and 2.7.

Our testing identified that data reported to the ESC matched the reports generated by BW.

Compliance Grades:


Accuracy – We did not identify any inaccuracies in the Operating Statistics reported for Transfers. As a result, we have assigned an accuracy rating of "1".


21

3.8. Security Deposits

Electricity Gas

H.1 How many residential small retail customers had lodged security deposits with the Licence Holder as at 30 June 2010?

A1 A1

H.2 Of the security deposits from residential small retail customers that the Licence Holder held during 2009/10, how many had the Licence Holder held for longer than 12 months?

A1 A1

H.3 How many non-residential small retail customers had lodged security deposits with the Licence Holder as at 30 June 2010?

A1 A1

H.4 Of the security deposits from non-residential small retail customers that the Licence Holder held during 2009/10, how many had the Licence Holder held from longer than 24 months?

A1 A1

AGL defines security deposits as an amount of money or other arrangement acceptable to the retailer as security against a customer defaulting on a bill. This definition is consistent with IPART.

An overview of the reporting process for customer numbers is included in Section 2.6 and 2.7.

Our testing identified that data reported to IPART matched the reports provided by BICC.

Compliance Grades:


Accuracy – We did not identify any inaccuracies in the Operating Statistics reported for Security Deposits. As a result, we have assigned an accuracy rating of "1".


22

3.9 Payment Methods

Electricity Gas

I.1 How many of the Licence Holder’s residential small retail customers were paying their bills under a direct debit arrangement from the customer’s bank account as at 30 June 2010?

A1 A1

I.2 How many of the Licence Holder’s residential small retail customers were paying off bill arrears under any instalment payment plan operated by the Licence Holder as at 30 June 2010?

A1 A1

I.3 How many of the Licence Holder’s residential small retail customers were using Centrelink’s Centrepay facility to pay their bills with the Licence Holder as at 30 June 2010?

A1 A1

AGL customers are able to pay for their energy bills through a number of methods. For reporting purposes, AGL have defined:

� A direct debit arrangement as customers who choose to pay AGL energy bill through their credit card or bank account

� An instalment payment plan as an arrangement between AGL and a small retail customer where the customer will pay in arrears in accordance with an agreed payment schedule while having continued usage on their account. This operating statistic does not include customers using a payment plan as a matter of convenience of for flexible budgeting purposes.

� The number of customers who use Centrelink’s Centrepay facility to pay their bill or bills as a count of one, regardless of how many accounts they may have during the reporting period.

These definitions are consistent with that of IPART. Our testing identified that data reported to IPART matched the reports generated by BW.

Compliance Grades:


Accuracy – We did not identify any inaccuracies in the Operating Statistics reported for Payment Methods. As a result, we have assigned an accuracy rating of "1".


23

3.10 Electricity Sales Volumes

Electricity Gas

J.1 What were the Licence Holder’s NSW electricity sales (in GWh) in the financial year? (Audit for electricity only)

A1

AGL defines Electricity Sales Volumes as the quantity of electricity billed to customers during a quarter in MWh. For IPART reporting purposes, we have noted that AGL has applied the measures outlined by IPART in their reporting by converting MWh to GWh by dividing the MWh by 1000.

Our testing identified that data reported to IPART matched the reports generated by BW.

Compliance Grades:


Accuracy – We did not identify any inaccuracies in the Operating Statistics reported for Electricity Sales Volumes. As a result, we have assigned an accuracy rating of "1".


24

4 Other Licence Obligations

4.1 Electricity Supply Regulation (ES)

Gas Supply Regulation (GS)

Electricity Gas

Obligation Identifier

ES Clause 11(3) – General

GS Clause 11(4) – General

A+ A+

The regulations stipulate that for a customer under a negotiated supply contract, the supplier must provide notice no less than 21 days preceding the end date of the contract.

Notices provided to customers are automatically generated in the SAP system, which identifies energy plans that are set to reach expiry.

A sample of fifty [50] customers that had negotiated customer supply contracts were selected to identify whether customers were provided with a notice from AGL informing them that their energy plan was due to expire.

Our testing identified no instances where a customer was not provided with a notice at least 21 days prior to the end of the period of supply under a negotiated supply contract.

Compliance Grades:

We have also noted that the obligations have also been recognised by AGL in the “General Terms” document under Section 3.2. Our testing did not identify any instances where customers were not provided with sufficient notice of the expiry of their negotiated supply contract as stipulated in the obligations. Based on our assessment, we have assigned a grading of “A+” for this obligation.

Electricity Gas


ES Clause 42(2A) – General

GS Clause 50(2A) – General

ES Clause 42(2) – General

GS Clause 50(2) – General

A+ A+

The regulations stipulate that a retailer must provide certain information in their disclosure notice to the customer within 2 business days of the negotiated contract being entered into in relation to details surrounding:

We have performed a review of the AGL Product Disclosure Notice provided to new customers as part of the ‘Welcome Pack’ and identified that it contains the information requirements that have been outlined in the obligations.

A sample of fifty [50] customers that entered into a negotiated contract with AGL were selected to check that ‘Welcome Packs’ had been provided to customers. Our testing identified no exceptions.

Compliance Grades:

Our testing did not identify any instances where customers were not provided with a copy of the contract and disclosure notice after entering into a negotiated supply contract with AGL. Based on our assessment, we have assigned a grading of “A+” for this obligation.


25

4.2 Licensee Billing Obligations

Electricity Gas



GS (NGRC) Reg cl 22(1)

A+ A+

The regulations outline that any variation in the rates of charges of energy supplied under a negotiated supply contract must not be imposed by the supplier unless a written notice setting out the particulars of the variation has been provided to the customer.

Notices provided to customers are automatically generated in the SAP system, which identifies customers that will be affected by price changes.

A sample of fifty [50] customers that were impacted by price variations on their gas and electricity account were selected to check that a written notice setting out the particulars of the variation was provided, prior to the variation taking effect. Our testing identified no exceptions.

Compliance Grades:

AGL’s process for ensuring that customers are provided with a notice outlining the variation in rates of charges of energy is automated on SAP. Our testing did not identify any instances where customers were not provided with written notice of a variation in the rates of charges for connection services provided or electricity supplied by AGL, prior to variation actually taking effect. Based on our assessment, we have assigned a grading of “A+” for this obligation.


26

Electricity Gas


ES Clause 27(2) & 27(3)

GS Clause 27(1) & 27(2)

A+ A+

As outlined in the regulations, in the event of an overcharge, the energy supplier must pay interest on the overcharged amount and depending on value of the overcharge, the retailer must inform the customer no greater than 10 business days and credit the amount to the customer.

The procedures followed by the billing team at AGL have been outlined in a process document titled ‘AGL – Calculate Adjustment Amount’ that is available to AGL staff in the billing team. Customers will be credited with the difference of the overcharge including any interest owed on the overcharged amount in their next energy bill. This process is managed through the SAP system.

A sample of fifty [50] customers who had made a complaint to AGL regarding billing overcharges was selected to identify whether the customer had been charged more than they should have been under the contract, with no exceptions noted.

Compliance Grades:

We did not identify any exceptions during testing. On this basis we have assigned a compliance grading of “A+”.


27

Electricity Gas


ES Clause 29(1)

GS Clause 29(1)

C C

The regulations require that a supplier must issue a bill to a customer under a customer supply contract no less than once every 3 months.

AGL has outlined the frequency in which it issues bills to customers in its ‘General Terms’ document and ‘AGL Customer Charter’.

A sample of fifty [50] small retail customers who were receiving an electricity or gas supply during the audit period were selected to identify whether a bill was issued at least once every three months.

Testing identified eleven [11] instances where customers were not billed within the timeframes that have been specified under the regulations.

These were attributed to the following:

� Ten [10] instances where AGL experienced delays in obtaining meter reads from energy distributors, resulting in a billing delay.

� One [1] instance was a result of meter data failing to load into SAP, resulting in a billing delay. This issue was identified in the unbilled billing report.

Compliance Grades:

Our testing identified eleven [11] instances from a sample of fifty [50] customers where customers did not receive bills within the aforementioned time periods.

As a result, a compliance grading of “C” has been assigned for the current period.


28

Electricity Gas


ES Clause 30(3)

GS Clause 30(3)

A+ A+

The regulations outline that that date of payment for a bill must be no less than 12 business days after it has been sent out to the customer. The supplier must also accept payment by a customer through a number of payment methods, and not impose a charge in connection with any of the payment methods used by the customer. A customer also has the right to provide the energy supplier with a payment in advance if required.

As outlined on the back of bills sent to both gas and electricity customers, AGL accepts payments through direct debit, post by means of cheque, telephone by credit card, BPay and also through authorised agents (e.g. Post Office).

A sample of fifty [50] small retail customers who were receiving an electricity or gas supply during the audit period were selected at random. We tested to check that these customers had not been imposed with a charge in connection to the method of payment used to pay their energy bill. No exceptions were noted.

Compliance Grades:

We did not identify any instances where customers were charged a connection fee. Based on our assessment, we have assigned a grading of “A+” for this obligation.


29

Electricity Gas


ES Clause 31(2)

GS Clause 31(2)

A+ A+

As outlined in the regulations, when a customer is issued with a bill, the bill must contain particulars of meter readings and consumption (both current and average).

Bills are generated from the SAP system. The contents of a customer bill were reviewed, which highlighted the following:

� Estimated or measured quantity of gas / electricity supply in mega joules / kilowatt hours � Particulars of any tariffs codes and rates of charges applicable to the supply � Particulars of the average daily consumption � The extent to which the price offered is inclusive of all costs � Particulars of the average daily consumption for the previous billing period � Particulars of the quantity of supplied for the billing period

This is consistent with the requirements that have been outlined in the regulations.

Compliance Grades:

Customer bills are generated automatically through the SAP system, which populates a fixed template with data relating to each customer. From our review of the billing template used by AGL, we identified that it contains the information requirements that have been specified by the regulations. As a result, a compliance grading of “A+” has been assigned for the current period.

Electricity Gas


ES Clause 36(5)

GS Clause 36(5)

- -

The regulations outline that all estimated bills must be based on the customers historical meter data, or if that information in not available, the average daily consumption for the same class of customer.

All meter readings whether actual or estimated are performed by the distributor. This information is then provided to AGL in order for customers to be billed. AGL has advised that it does not estimate customer bills.

AGL closely manages the relationship with network operators to ensure that reads are provided to allow AGL to discharge obligations under this clause. The billings team at AGL also monitors unbilled accounts on a weekly basis through exception reports. AGL provides these details to IPART on a monthly basis, and has been doing so for the past 12 months.

Compliance Grades:

AGL does not perform meter reads nor provide estimated meter reads for customers. As a result, we have not provided a grading for this obligation.


30

4.3 Transfers and Cooling-Off Period Requirements

Electricity Gas


ES (General) Reg Schedule 2, Clause 7(1)

GS (NGRC) Reg Schedule 1, Clause 12(1)

A+ A+

The regulations outline that under a negotiated customer supply contract, the customer must have a right to terminate the contract within 10 days of signing or receiving the contract (whichever is the latter).

In all forms of marketing, customers are made aware of the 10 day cooling off period prior to entering the negotiated supply contract.

A sample of fifty [50] new connections was selected and tested to check that customers were made aware of the right to terminate their contract within 10 days of signing or receiving the contract which highlighted no exceptions.

Compliance Grades:

We performed testing to check that customers were informed of their rights as outlined by the obligations and did not identify any exceptions. Based on our assessment, we have assigned a grading of “A+” for this obligation.

Electricity Gas


ES (General) Reg Schedule 2, Clause 7(1A)

GS (NGRC) Reg Schedule 1, Clause 12(1A)

C C

The regulations outline that if a customer decides to terminate their negotiated customer supply contract under a cooling off period, the retailer must supply the customer with a record of the termination to the customer.

We selected a sample of fifty [50] customers that have cancelled their energy contract to check that these customers were provided with a record of the termination under the cooling-off period.

Testing identified fourteen [14] instances where customers were not provided with a record of termination under the cooling-off period.

This is due to:

� Five [5] instances where customers were not provided with a record of termination during the cancellation process.

� Nine [9] instances where supporting documentation could not be provided to show that a customer had been provided with a record of termination under the cooling-off period.

Compliance Grades:

We identified a total of fourteen [14] instances out of fifty [50], where AGL had failed to provide customers with a record of termination under a cooling-off period. As a result we have assigned a compliance grading of “C” for the current period.


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Electricity Gas


MOR (TRRES) Clause 4.1 A+ A+

As outlined in the regulations, a retail supplier must not initiate or effect the transfer of a customer unless the customer has provided their consent.

A sample of fifty [50] customers that had transferred to AGL were selected to test that either verbal or written consent had been obtained from the customer, prior to effecting the transfer. No exceptions were noted.

Compliance Grades:

We did not identify any instances where customers had not provided their consent prior to the transfer taking effect. Based on our assessment, we have assigned a grading of “A+” for this obligation.

Electricity Gas


MOR (TRRES) Clause 12.1 A+ A+

As outlined in the regulations, a new retailer must ensure that the 10 day cooling off period has elapsed, before all approvals for transfers can be completed under the MSATS Procedures and Systems.

Transfers of customers are governed by a number of settings in SAP before they can proceed. When a transfer request is raised, the transfer is not actioned until certain parameters are satisfied including ensuring that the 10 day cooling-off period has elapsed and that consent has been provided.

A sample of fifty [50] customers that have transferred to AGL were selected to check that the 10 day cooling-off period provided to small retail customers on entering a negotiated supply contract had elapsed before all approvals for a transfer were completed. No exceptions were identified from testing.

Compliance Grades:

Our testing of fifty [50] customers did not identify any instances where the cooling-off period had not elapsed prior to the completion of the approval for transfer. Based on our assessment, we have assigned a grading of “A+” for this obligation.


32

4.4 Discontinuance of Supply

Electricity Gas


ES (General) Reg Clause 16

GS (General) Reg Clause 15

A+ A+

The regulations outline that a supplier must not discontinue the supply of energy to a small retail customer unless the supplier has complied with all requirements that have been outlined in the contract.

AGL has acknowledged that whilst they request for customers to be disconnected in accordance with the requirement of the obligations, they have no control over the actual times that customers are disconnected, as this is a service performed by the distributor.

A sample of twenty [20] customers that were disconnected during the audit period were selected to check that customers were not disconnected until AGL had complied with the requirements outlined in the negotiated customer supply contract. No exceptions were noted.

Compliance Grades:

Our test of twenty [20] customers did not identify any instances where AGL was in breach of the requirements of the negotiated customer supply contract. On this basis we have assigned a compliance grading of “A+”.

Electricity Gas


ES (General) Reg Clause 13AA(1)(a)

GS (General) Reg Clause 13AA(1)(a)

A+ A+

ES (General) Reg Clause 13AA(1)(c)

GS (General) Reg Clause 13AA(1)(c)

B B

The regulations outline that a supplier must develop and implement a customer hardship charter in respect of small residential customers. The existence of this charter should be made aware to customers, be provided at no cost where requested and made available on the suppliers website. The hardship charter must contain a number of details that are further outlined in the regulations.

A sample of twenty [20] customers that were placed on a hardship program during the audit period were selected to check that customers were provided with a copy of the customer hardship charter upon joining the program.

Our testing identified three [3] instances where customers were not provided with a copy of the customer hardship charter as part of the ‘welcome pack’ for the hardship program.

Compliance Grades:

The Hardship Charter is presented by AGL in the form of the “Staying Connected National Policy” which is available online and included as part of a new customer’s ‘Welcome Pack’. We have reviewed this policy and noted that it satisfies the requirements relating to hardship as outlined in the obligations. On this basis we have assigned a compliance grading of “A+” for Clause 13AA(1)(a).

Our test of twenty [20] customers identified three [3] instances where a customer was not provided with the welcome pack. These exceptions have been attributed to AGL customer service representative error which may indicate an inadequate level of staff understanding. On this basis we have assigned a compliance grading of “B” for Clause 13AA(1)(c).


33

Electricity Gas


ES (General) Reg Clause 13A(1)(a)(b)

GS (General) Reg Clause 13A(1)(a)(b)

ES (General) Reg Clause 13A(2)

GS (General) Reg Clause 13A(2)

A+ A+

The regulations outline that a supplier must operate a payment plan applying to small retail customers who own or occupy residential premises and who are, in the supplier’s opinion, facing financial difficulty.

Where a customer is faced with a payment difficulty, the customer must inform the retailer of their circumstance. The retailer then assesses the customer’s capacity to pay and offers assistance where required. The retailer does not have a separate process to identify customers who may be facing payment difficulties.

A sample of twenty [20] customers who have been registered on AGL’s hardship program were selected to check that AGL performs an assessment of the customer's capacity to pay, records the assessment as well as the amount and frequency of each instalment. No exceptions were identified.

Compliance Grades:

Our testing did not identify any instances where a customer’s capacity to pay was not assessed or documented. As a result, a compliance grading of “A+” has been assigned for the current period.


34

Electricity Gas


ES (General) Reg Clause 13A(3)

GS (General) Reg Clause 13A(3)

A- A-

Clause 13A(3) of the regulation outlines that a supplier must not discontinue the supply of gas or electricity to a small retail customer who has failed to pay an amount due if the customer has accepted financial assistance or an alternative payment plan from the supplier, and not cancelled due to failure to make due payment in accordance with the new payment plan.

AGL defines a Disconnection for non-payment as an event where a standard customer, that is, not on a hardship program, has been disconnected for failure to pay an amount owed within a defined period of time and respond to any alternative payment plans offered by AGL.

A sample of twenty [20] customers who were disconnected and then reconnected were selected to identify whether AGL had made best endeavours to contact the customer by written notification and/or phone calls.

Our testing identified:

� One [1] instance where a customer has been wrongfully disconnected due to a system error. � One [1] instance where a customer had been wrongfully disconnected while meeting alternative

payment plan agreements.

Compliance Grades:

We identified two [2] instances from a sample of twenty [20], where a customer was wrongfully disconnected. As a result, we have assigned a compliance grading of “A-”.


35

4.5 Marketing Code of Conduct (MCC)

Electricity Gas


MCC – Section 5.1.2 A- A-

As outlined in the Code, a supplier must ensure that persons employed or authorised to carry out marketing activities on behalf of the supplier must comply with the Code.

Training is provided to all marketers to comply with the code. In addition, quality and coaching assessments are performed for each marketer. A customer call back service to obtain customer feedback on experience is also conducted.

We selected a sample of fifty [50] customers that have been contacted by AGL marketers and tested to check that marketers have been provided with training on the requirements of the Code, and that they have been subject to quality assessments. We identified three [3] instances where marketers had not been subject to training updates, or quality reviews in over 12 months.

Compliance Grades:

We have performed testing and identified three [3] instances where marketers were not subject to training updates or quality reviews in over 12 months. On this basis we have assigned a compliance grading of “A-” for the audit period.

Electricity Gas


MCC – Section 5.2.1 A+ A+

The Code outlines that a marketer must keep a record of complaints made in relation to the marketing activities of the marketer, conduct audits on an annual basis to verifying compliance with the Code, and provide the Code Administrator with information relating to Code compliance where requested to do so.

All complaints made to AGL are recorded in SAP as notes and also in the SharePoint system. Complaints from AGL’s legacy system, CIS can still be extracted.

A sample of 50 customers that made a complaint regarding the marketing activities of AGL were selected and no instances were identified where AGL had not kept records of, or monitored the nature of the customer complaint.

Compliance Grades:

We did not identify any exceptions in our testing. Based on our assessment, we have assigned a grading of “A+” for this obligation.


36

Electricity Gas


MCC – Section 6.1.1 A- A-

The Code outlines that a marketer must not engage in misleading, deceptive or unconscionable conduct whether by act or omission when carrying out marketing.

A sample of fifty [50] customers that have been contacted by AGL marketers were selected to check that marketers have been provided with training on the requirements of the Code and have been subject to quality assessments. We identified three [3] instances where marketers were not subject to training updates or quality reviews in over 12 months.

Compliance Grades:

We have performed testing and identified three [3] instances where marketers were not subject to training updates or quality reviews in over 12 months. On this basis we have assigned a compliance grading of “A-” for the audit period.

Electricity Gas



The Code requires that prior to a customer entering into an electronic transaction, the Marketer must explain that; the customer is bound by the electronic transaction, and that the customer is recognised as having received the information contained in the electronic transaction.

A sample of fifty [50] new connections were selected to check that the marketers had explained the obligations as outlined in Code with no exceptions noted.

Compliance Grades:

Our testing did not identify any instances where the marketer did not explain to the customer that the acceptance of an offer over the telephone constitutes an electronic transaction. On this basis we have assigned a compliance grading of “A+” for the audit period.


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Electricity Gas


MCC – Section 6.2.5


A+ A+

The Code requires that records of telephone calls made in relation to marketing be kept for at least one year. Specifically, details of the marketer, time and date of calls, as well as the names and telephone numbers of customers contacted must be maintained.

A sample of twenty [20] sales records were selected to check that AGL had maintained the information requirements that have been outlined in Code with no exceptions noted.

Compliance Grades:

Testing of twenty [20] telemarketing sales has identified that the information required under the code has been recorded in SAP. Based on our assessment, we have assigned a grading of “A+” for this obligation.

Electricity. Gas


MCC – Section 6.3.1 A A

The Code requires that where a marketer engages in marketing at a customer’s premise, the marketer must produce an identification card that identifies the marketer, retailer, Australian Business Number, and also the marketers contact number. They must advise the customer of the purpose of the visit and ask whether the customer wishes to proceed further. All field agents conducting sales on behalf of AGL are required to provide at the earliest opportunity:

� Their name � Who they are representing � The purpose of their visit � Their identification badge

A sample of fifty [50] records of sales were selected to check that AGL field agents provided the information and identification as required by the obligation during the point of sale, which highlighted one [1] instance where the customer could not provide a clear indication, that the Field Agent presented their identification badge at the commencement of marketing.

Compliance Grades:

Our testing identified one [1] instance where the customer was not able to provide a clear indication, that the field agent presented their identification badge. As a result, we have assigned a compliance grading of “A“.


38

Electricity Gas




A- A-

The Code requires that records of marketing conducted at a customer’s premise must be kept for at least one year. Specifically, records of the marketer, time, date and details of the addresses visited must be maintained.

A sample of twenty [20] customers that had been engaged by telemarketing agents were selected to check that AGL had maintained the information requirements that have been outlined in the Code. We identified:

� One [1] instance where there was no evidence of a CC walksheet; and � One [1] instances where the time of visit was not recorded on the CC walksheet.

Compliance Grades:

We identified two [2] instances where AGL was not able to provide adequate documentation to demonstrate compliance to the Code. Based on our assessment we have, assigned a grading of “A-” for this obligation.

Electricity Gas



Section 7.1.7 (g) of the Code requires that prior to a customer entering into a supply agreement, the retailer must inform the customer of their right to a standard form contract and difference between the supply arrangement offered and a standard form contract.

A sample of fifty [50] new connections were selected to check that the customer had been provided with information on the difference between the offer and the standard contract which highlighted no exceptions.

Compliance Grades:

We did not identify any instances where the marketer did not provide the customer with information on the difference between the supply arrangement offered and a standard form contract. On this basis we have assigned a compliance grading of “A+“.


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Appendix B – Scope of Work

Systems Audit

The Auditor is required to conduct sufficient procedures to form and express an opinion (reasonable assurance) on the robustness of the Licensees’ systems for ensuring compliance with key Licence Conditions listed in this Scope of Work. The Systems Audit should examine the operation of the systems for ensuring compliance and accurate reporting of the extent of compliance. The extent to which the Licensees encourage a climate of full compliance should also be reviewed.

The Auditor should use his/her professional judgment to ensure the Systems Audit is of sufficient depth and scope that the Auditor can express a high degree of confidence in the effectiveness of the Licensees’ compliance policies and systems. The Auditor should also apply a rating to assist IPART and the Licensees to assess the effectiveness of the systems of compliance controls implemented for each of the licence compliance areas being reviewed. Performance Audit A Performance Audit of a sub- set of Licence Conditions is to be conducted commencing October or November 2010. Performance auditing will assist to evaluate the performance and operation of the Licensees’ internal compliance systems. The Performance Audit will be used to determine whether the Licensees are interpreting the rules correctly and indeed whether the rules themselves need further clarification to meet Government objectives.

The Performance Audit should also satisfy on behalf of the Licensees the requirements of section 5.2.1

(b) of the Marketing Code of Conduct, which requires an annual audit to verify compliance with that

Code. Operating Statistics Audit

An audit of the Licensees’ 2009/10 Operating Statistics should be conducted in conjunction with the Performance Audit commencing October or November 2010. The Auditor should examine Licensees’ regulatory reporting systems to ensure Operating Statistics are collected in line with the definitions in the Explanatory Notes and verify the accuracy of the 2009/10 Operating Statistics submitted to IPART.


44

SCOPE OF WORK FOR SYSTEMS AND PERFORMANCE AUDIT OF ELECTRICITY AND GAS LICENCE CONDITIONS

The generic compliance issues to be addressed include:

• Does the Licensee have adequate policies, systems and procedures to ensure compliance with the licensing obligations?

• Are these systems fully understood by relevant staff?

• What procedures / process does the Licensee have in reconciling customer complaints to ensure compliance and accurate compliance reporting?

Obligation

s under

Electricity

Condition

Obligations

under Gas

Condition

Information to be provided to small retail customers in

relation to a negotiated customer supply contract

System

Audit

April

2010

Performance

Audit

Oct/Nov

2010

Comment

Elec

Supply

(General)

Reg cl 11(3)

Gas Supply

(NGRC) Reg cl

11(4)

Notice must be given no later than 21 days before end of

period of supply under negotiated customer supply

contract.

� � Non-compliance reported where 1000’s customers were impacted by late notices in 2008/09

ES

(General)

Reg cl

42(2A)

Gas Supply

(NGRC) Reg cl

50(2A)

Disclosure notice must contain certain information in

relation to a negotiated customer supply contract as

specified in the Regulation

- � Performance audit only

ES

(General)

Reg cl

42(2)

Gas Supply

(NGRC) Reg cl

50(2)

Supplier must provide a small retail customer with copy of

contract and a disclosure notice within 2 business days of

the negotiated contract being entered into.

- � Performance audit only


45

Electricity Supply (General) Regulation 2001

Licensee Billing Obligations

Billing issues to be addressed:

Does the Licensee have adequate policies, systems and procedures to ensure customers receive 3 monthly bills?

Does the Licensee have policies and procedures implemented to deal with its recent backbilling issues?

Recent Energy & Water Ombudsman NSW (EWON) complaints records show AGL receiving higher complaints about “disputed” bills than other retailers. What steps are

being taken to resolve current high level of complaints about disputed bills?

Are these policies, systems and procedures fully understood by relevant staff?

Obligations

under

Electricity

Condition

Obligations

under Gas

Condition

System

Audit

April

2010

Perform

ance

Audit

Oct/Nov

2010

Comment

ES (General)

Reg cl 22(1)

Gas Supply

(NGRC) Reg

cl 22(1)

Variation in rates of charges for electricity supplied under

negotiated contract may not be imposed unless notice setting

out particulars of variation is served on customer.*

- � Performance audit only (Auditor should discuss with IPART the

compliance requirements of this licence obligation prior to the

audit)

ES (General)

Reg cl 27(2)

Gas Supply

(NGRC) Reg

cl 27(1)

Supplier must do certain things if, on review of a complaint or

any other time, the supplier determines that customer has

been overcharged by more than $25.

� �

ES (General)

Reg cl 27(3)

Gas Supply

(NGRC) Reg

cl 27(2)

If the amount overcharged does not exceed $25, the supplier

must do certain things (e.g. credit the amount to customer in

next bill & credit interest at a certain rate).

� �

ES (General)

Reg cl 29(1)

Gas Supply

(NGRC) Reg

cl 29(1)

Supplier must issue a bill to a small retail customer under

customer supply contract at least once every 3 months. � � AGL has had systemic billing delay issues in 2008/09. This has

resulted in significantly high disputed bill complaints to EWON.

Customer complaints could be related to unusually long

periods between bills.

ES (General)

Reg cl 30(1)

Gas Supply

(NGRC) Reg

cl 30(1)

Date for payment of bill issued for 1st time under supply

contract with small retail customer not to be less than 12

business days after date on which sent.

� -

ES (General)

Reg cl 30(2)

Gas Supply

(NGRC) Reg

cl 30(2)

Supplier must accept payment by small retail customer by

certain payment methods. � -


46

ES (General)

Reg cl 30(3)

Gas Supply

(NGRC) Reg

cl 30(3)

Supplier may not impose charge in connection with a method

of payment used by customer. � � AGL charged approx 50,000 standard gas customer Merchant

service fees in 2008/09 in breach of this obligation.

ES (General)

Reg cl 30(5)

Gas Supply

(NGRC) Reg

cl 30(5)

Supplier must accept payment in advance if requested by

small retail customer. � -

ES (General)

Reg cl 31(2)

Gas Supply

(NGRC) Reg

cl 31(2)

A bill issued by supplier under negotiated customer supply

contract must include certain information if charges for

supply under contract are based on the customer’s

consumption.

� �

ES (General)

Reg cl 36(5)

Gas Supply

(NGRC) Reg

cl 36(5)

Estimated bill is to be based on SRC’s historical meter data or

the average daily consumption for the same class of

customer.

� � Customer complaints to EWON on disputed and estimated bills

are high compared to other retailers.


47

Market Operations Rules

(NSW Transfer Rules for Retail Electricity Supply) Rules No. 4 of 2001

Transfers and Cooling-off Period Requirements

Specific issues to be addressed:

• Does the Licensee have adequate policies, systems and procedures for accurately verifying customer accounts prior to transfer?

• Does the Licensee have adequate policies, systems and procedures to ensure a customer’s request to terminate the contract (orally or in writing) under a cooling

off period is actioned?

• Does the Licensee have adequate policies, practices and procedures to ensure a record of contract termination under a cooling off period is provide to the

customer?

• Are these policies, systems and procedures fully understood by relevant staff?

Obligations

under

Electricity

Condition

Obligations under

Gas Condition

System

Audit

April 2010

Performance

Audit

Oct/Nov

2010

Comment

ES (General)

Reg Schedule

2, cl 7(1)

Gas Supply (NGRC)

Reg Schedule 1, cl

12(1)

A supplier’s negotiated customer contract must confer on the

customer a right to terminate the contract (orally or in writing) within

10 days after the date the contract is entered into, or the date a copy

of the contract is received by the customer, whichever is the later.

� � In NSW, customers also have the

right to terminate contract orally in

the 10 day cooling off period.

ES (General)

Reg Schedule

2, cl 7(1A)

Gas Supply (NGRC)

Reg Schedule 1, cl

12(1A)

A supplier’s negotiated customer contract must require the supplier

to provide the customer with a record of contract termination under

a cooling off period,

� � Note: Record of termination can be

provided verbally (for example by

issuing a unique reference number)

MOR (ACS) cl

4.3

- As soon as practicable after applying to DNSP, supplier must forward

a summary of terms and conditions of contract to customer. � -

MOR (TRRES)

cl 4.1

- Supplier must not initiate or effect the transfer of a small retail

customer without the customer’s written consent. � � EWON receives the highest number

of complaints about erroneous

transfers against AGL. However,

AGL’s reported figures are lower

than some other retailers.

MOR (TRRES)

cl 12.1

- A New Retailer must ensure that the 10-day cooling-off period

provided to a small retail customer on entering a negotiated contract

has elapsed before all approvals for a transfer are completed.

�


48

Discontinuance of supply

Licensee Obligations Prior to Disconnection &

Licensee Obligations Towards Customers Facing Financial Difficulties

Specific licensing issues to be addressed:

• Does the Licensee have adequate policies, systems and procedures to ensure the supply to a small retail customer under a standard customer supply contract (gas) or

negotiated contract (electricity) is not disconnected unless the requirements of the contract or the Regulations is complied with.

• Does the Licensee have adequate policies, systems and procedures in identifying a customer facing financial difficulties?

• Are all requirements of regulations being met in establishing Payment Plans including an appropriate assessment of the customers’ capacity to pay?

• Are the licensee’s financial hardship policies, practices and procedures (including the requirement to offer appropriate Payment Plans before disconnection of

customers facing financial difficulties) fully understood by call centre and other relevant staff?

• Are there systems in place to effectively monitor disconnection requirements (e.g. records of qualifying hardship customers) and quality control (e.g. complaints

feedback)?

Obligations

under

Electricity

Condition

Obligation

s under Gas

Condition

System

Audit

April 2010

Performance

Audit

Oct/Nov 2010

Comment

ES (General)

Reg cl 16

Gas Supply

(NGRC) Reg

cl 15

Supplier must not discontinue supply to small retail customer unless

requirements of negotiated customer supply contract have been complied

with.

� �

ES (General)

Reg cl

13AA(1)(a)

Gas Supply

(NGRC) Reg

cl 13AA(1)(a)

A supplier must develop and implement a customer hardship charter in

respect of small customers who own or occupy residential premises. � � This obligation became effective 1

March 2010, hence both system

and performance audit to be

undertaken Oct/Nov 2010.

ES (General)

Reg cl

13AA(1)(b)

Gas Supply

(NGRC) Reg

cl 13AA(1)(b)

A supplier must publish its customer hardship charter on its website. � (see

comment)

� As above

ES (General)

Reg cl

13AA(1)(c)

Gas Supply

(NGRC) Reg

cl 13AA(1)(

As soon as practicable after a customer is identified by the supplier as a

hardship customer, a supplier must inform the hardship customer of the

existence of the customer hardship charter and provide the hardship

customer with a copy of the customer hardship charter on request and at no

expense.

� (see

comment) � As above

ES (General)

Reg cl 13AA(3) Gas Supply

(NGRC) Reg

A supplier’s customer hardship charter must contain certain matters. � (see comment)

� As above


49

cl 13AA(3)

ES (General)

Reg cl 13A(1)(a)

Gas Supply

(NGRC) Reg

cl 13A(1)(a)

A supplier must operate a payment plan applying to small retail customers

who own or occupy residential premises and who are experiencing financial

difficulties.

� � Disconnection obligations were

not audited in the 2009 limited

audit

ES (General)

Reg cl 13A(1)(b)

Gas Supply

(NGRC) Reg

cl 13A(1)(b)

A supplier must operate a payment plan that does certain things and provides

for certain things. It must have its payment plan approved by the Minister. � � As above

ES (General)

Reg cl 13A(2)

Gas Supply

(NGRC) Reg

cl 13A(2)

Specifies the requirements of a Payment Plan including customer

consumption and customer’s capacity to pay � � As above

ES (General)

Reg cl 13A(3)

Gas Supply

(NGRC) Reg

cl 13A(3)

A supplier must not discontinue supply, or request discontinuance of supply,

to residential premises of small retail customers for failure to make due

payment unless the supplier has done certain things including provision of (2)

written notices and the availability of a payment plan for customers

experiencing financial difficulty.

� � Note: Minor amendments made to

this obligation effective 1 March

2010.


50

Marketing Code of Conduct

Specific licensing issues to be addressed:

• Does the Licensee have adequate policies, systems and procedures in identifying a marketing breach? In particular, how are marketing complaint statistics reviewed to

determine whether breaches have occurred?

• Are there appropriate policies/procedures in place to avoid marketing to vulnerable customers?

• Does the Licensee have adequate training policies for marketing staff?

• Are these marketing policies, systems and procedures fully understood by relevant staff?

Obligations

under

Electricity

Condition

Obligations

under Gas

Condition

System

Audit

April 2010

Performance

Audit

Oct/Nov 2010

Comment

Marketing

Code of

Conduct,

section 5.1.2

Identical

obligation

A marketer must ensure that any person employed or authorised by, or

representing the Marketer and engaging in marketing activities, complies with

the Code.

� �

Marketing

Code of

Conduct,

section 5.2.1

Identical

obligation

A marketer must monitor and keep records of complaints; conduct audits

annually to verify compliance with the Code; and provide to the Code

Administrator any information relating to Code compliance, if requested.

� �

Marketing

Code of

Conduct,

section 6.1.1

Identical

obligation

A marketer must not engage in misleading, deceptive or unconscionable

conduct when marketing.

� � AGL did not initially report any

MCC 6.1.1 breaches for 2008/09,

until prompted.

This is an area where retailers may

be prone to under-report breaches.

IPART acknowledges that there is

some subjectivity in distinguishing

between a breach of this obligation

and a complaint from a customer.

IPART promotes a pragmatic

approach. With some customer

complaints about marketing, it is

quite apparent that breaches have

occurred (i.e. fraudulent

behaviour). Other cases may not

be clear cut (i.e. where customer’s


51

and marketer’s account of an

incident differs dramatically). In

these circumstances, the licensee

should examine complaint history

regarding the Marketer concerned

and report breaches where the

history suggests the benefit of

doubt should be given to the

customer.

Marketing

Code of

Conduct,

section 6.1.7

Identical

obligation

If any requirement under this Code is met electronically, the Marketer must

explain certain things to the customer prior to the electronic transaction. � � Customers should be able to

terminate contracts verbally as

long as a unique record (e.g.

reference number) is provided and

recordings of marketing calls

retained.

Marketing

Code of

Conduct,

section 6.2.5

Identical

obligation

A marketer must maintain certain records in relation to telephone calls

involving marketing to customers. � �

Marketing

Code of

Conduct,

section 6.2.6

Identical

obligation

A marketer must keep the records of marketing telephone calls for at least 1

year after the last call for the purpose of marketing. � �

Marketing

Code of

Conduct,

section 6.3.1

Identical

obligation

If a marketer engages in marketing in customer’s premises, the marketer must

do certain things. � � (check if AGL is undertaking D2D

marketing)

Marketing

Code of

Conduct,

section 6.3.2

Identical

obligation

If a customer indicates at any time during the visit that he/she does not wish

to proceed, the marketer must cease marketing and leave the premises

immediately and must not contact the customer for the purposes of

marketing in accordance with 6.6.1 or 6.6.2

� -

Marketing

Code of

Conduct,

section 6.3.4

Identical

obligation

A marketer must maintain certain records of marketing conducted at

customers’ premises. � �

Marketing

Code of

Identical

obligation

A marketer must keep records of marketing conducted at customers’

premises for at least one year. � �


52

Conduct,

section 6.3.5

Marketing

Code of

Conduct,

section 7.1.1

Identical

obligation

Before or at the time a customer enters into a supply arrangement that was

arranged or facilitated by a marketer, the marketer must obtain the

customer’s written acknowledgement that the marketer has provided certain

information items.

� -

Marketing

Code of

Conduct,

section 7.1.3

Identical

obligation

The customer’s written acknowledgement must be in a certain form. � -

Marketing

Code of

Conduct,

section 7.1.4

Identical

obligation

Where the customer’s written acknowledgement is obtained in accordance

with 7.1.3(b), the marketer must provide the customer with a certain list prior

to the customer signing the supply arrangement.

� -

Marketing

Code of

Conduct,

section 7.1.5

Identical

obligation

Marketers must keep a record of customers’ written acknowledgements for at

least 1 year after they were obtained. � -

Marketing

Code of

Conduct,

section 7.1.7

Identical

obligation

Before or at the time the customer enters into any supply arrangement, a

marketer must provide certain information to the customer.

IPART is focused on part (g) which requires information on the difference

between the offer and the std contract to be provided.

� � Auditor should discuss with IPART

the compliance requirements of

this licence obligation prior to the

audit.

Regulatory Audit of (AGL) Performance Audit...Regulatory Audit of AGL Sales Pty Ltd (AGL) & AGL...

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