Review of the customer compensation scheme (CCS)
Background on CCS
1 Mar 2016
The CCS addresses issues that can arise in dry years, with the associated risk of energy shortage:
- A retailer incentive to call for official conservation campaigns (OCC) as a risk management approach, rather than appropriately hedging their spot price exposure.
- The lack of customer incentive to save energy during a OCC because they receive no direct benefit from those savings, and possibly because they will suffer from ‘campaign fatigue’ if an OCC occurs too often.
The CCS obliges retailers to pay qualifying customers a default amount of $10.50 per week for every week that an OCC operates. Retailers may also elect to develop a more targeted additional compensation scheme that their customers can choose to take up.
Our review will focus on the challenges raised by uncertainties surrounding the potential closure of thermal plant and the consequences for dry-year security of supply, and whether the current form of CCS is suited to such conditions. We will examine the nature and level of payments made under CCS, the obligations for parties to make those payments, and the resulting incentives for risk management.