How can energy retailers prepare for new data rules?

From November 2022, energy retailers must comply with a new suite of regulations designed to create an ‘open energy’ data regime across Australia.

The energy market is following on the heels of open banking legislation introduced in 2020. New measures will allow consumers to access their energy usage and connection data, then shop around for better deals offered by rival retailers.

It’s a seismic shift in the way power retailers interact with their customers, and a major challenge to ensure every retailer is fully compliant and ready to go by the starting date.

How will it work?

The Consumer Data Right (CDR) for Energy will empower consumers to share their data, helping them find the most cost-effective energy products and services in the National Electricity Market (NEM).*

To make the process safe and secure, consumers will need to provide consent and authorisation for their data to be shared with the third parties they specify.

Under the original plan, AEMO was going to provide a gateway for the transfer of all relevant energy data between consumer and retailer.

This has now been replaced by a peer-to-peer access model, bypassing AEMO and allowing for direct exchange of information between designated retailers.

Energy providers will be required to share product information using application program interfaces.*

This tailored software will allow multiple IT systems to talk to each other nationwide, ensuring quick, secure transfer of data.

CDR challenges facing energy retailers

With the deadline already pushed back six months, there’s still plenty to do before retailers are ready to put the new regulations into practice:

• Building new platforms or adapting existing systems
• Creating new interfaces and customer dashboards
• Signing off on data security and new privacy protections

Organisations are naturally uneasy about being forced to share data, face stiffer competition and tick every box by the time November rolls around

According to the AFR, industry insiders say the government may have underestimated the huge task ahead for companies trying to shape up. Mark Perry, Chief Customer Officer of compliance startup Biza.io, says it will be a struggle.

Unlike banks, energy retailers don’t tend to have close customer relationships, he says. This will make the technological requirements more difficult.

Many retailers rely on anonymous payment portals for bills, with no existing passwords or logins. Building a completely new platform is a daunting task.

'There will need to be a major uplift in the way energy companies have to interact with their customers, and it’s a lot of work to get these processes in place,' he told the AFR.

EY, which has teamed up with Microsoft to create CDR compliance platform Fuse, states that teams 'must understand the regulations and standards, including the unique application program interface (API), security, identity, data, privacy and product implications.' *

'There are considerable risk variables and associated costs that are not being adequately tackled by the energy sector based on what we saw when financial services were similarly going through this, and we are determined to help the energy sector leverage those lessons,' EY Oceania power and utilities leader Igor Sadimenko told ARN.*

Systems like the EY model, hosted in Australian data centres, could provide a tailored fix for retailers struggling to incorporate the consent, access and data transfer functions essential for full compliance.

Fortune favours the brave – and the organised

Despite the challenges, an open energy market presents real opportunity for businesses to embrace innovation, competition and disruption.

Yet it’s compliance first, innovation after, according to PwC Australia. Once retailers get to grips with the testing regulatory framework, they can then explore new pathways to differentiate their product and boost customer loyalty.*

In open banking, many smaller institutions and fintechs have placed themselves ahead of the rest. Going forward, however, power retailers that don’t keep up with changing CDR rules are likely to miss valuable opportunities.

PwC Australia suggests several ways that retailers can practice new business models and optimise multi-sector alliances, within a CDR framework.

• Subscription and energy-as-a-service in heating, battery storage or EV bundles
• Appliances to monitor electricity usage
• Cross-industry integration and partnerships in banking, healthcare, telco, EV and security
• Carbon reduction roadmaps to help businesses achieve sustainability.

Did it work in banking? And will it work for energy?

Australia embarked on open banking in July 2020, following the UK’s lead in January 2018.

On open banking’s first anniversary in 2021, the AFR reported a disappointing score card for Australian banking institutions, pointing out ‘negligible levels of accreditation, consumer awareness and participation in the regime’.*

Despite the much-heralded benefits for consumers, just one personal finance app and a single personal loan assessment engine were available. Only a handful of consumers were using them.

As the UK model shows, however, time is essential to allow full company compliance and user uptake. According to TrueLayer, it took two years to get a million bank customers using the system, a further eight months for the next million, and another six months to reach three million users.

In Australia, grey areas are showing up in consent for joint account access, use of intermediaries, and whether advisors like accountants can act on clients’ behalf.

As Deloitte Australia states, ‘consumers and community sentiment’ now drive policy. While governments lay the foundation, it’s up to private enterprise to make the transition to a genuinely open, flexible and consumer-focused energy market.*

The message for energy retailers is clear – act now, and get it right. Mistakes and non-compliance will prove costly down the track, as switched-on companies head off with the spoils.