Consumerists Bureaucracies: their place in our downfall

The Australian’s Nick Cater, in his superb denouement of the ACT’s Human Rights Commission makes us yearn for otiose bureaucracy – the do-nothing agencies rather than the negative value-added institutions that prey on legitimate businesses, leaving the costs they, as the Vanguard of the Proletariat, impose on suppliers to be borne by the consumer they purport to represent.

Today we have the annual report of the Energy and Water Ombudsman of Victoria (EWOV).  This variety of ombudsman is not to be confused with the State Ombudsman which, ostensibly, has the peerlessly pure task of offering an avenue of redress to the tyrannies endemic in public service monopolies quarantined from real accountability.

Aside from water (a small part of its business) EWOV is largely responsible for monitoring, stoking and arbitrating complaints about the electricity and gas industries.  And it names names – this year two of the big three energy companies (Origin and TRU) were singled out as receiving increased complaints while AGL, having shown a fall, is unhelpfully strangling the regulator’s funding base!

That’s because the EWOW funding is overwhelmingly based on the complaints they receive.  Its revenues largely comprise daily fees payable in the first instance by businesses and the fees increase to the degree that a complaint can be leveraged into higher areas of oversight and review.

Although the EWOW Annual Report was publicly released today, like all slick politicians, EWOW management provided an advanced pre-release to reliable journalists complete with self-serving aphorisms from the Ombudsman herself.  It notes that EWOW received 64,000 complaints during the year and dredged $16 million from its captive customers, mainly the electricity retailers.  And no job is too small, as evidenced by its call, “Even one complaint lodged with us can be a sign of a systemic problem”.  (Actually, a great many of the complaints are about price increases and feed-in tariff rates and other matters that are due to government actions).

Such entrepreneurship has allowed EWOW to grow its staff to 120, up from just one 15 years ago.  In the period when electricity was a state-owned monopoly there was no deemed need even though competition would have made it less and not more necessary.

The EWOW empire builder, Fiona McLeod, has moved on to a new government-funded gig which is to establish a National Energy Consumer Advocacy Centre.  With an initial establishment of 9.5 people, on her past record she should have every hope of creating a vast overbearing bureaucracy of over 1000 people 15 years from now.  Her successor, Cynthia Gebert, sports an engaging Cheryl Kernot tilt in her photographs to demonstrate her empathy with the Little People who big businesses are oppressing.

The EWOW Annual Report contains all the expected boiler-plate portentous Statements about “Visions”, “Mission” and “Guiding Principles”.  The Guiding Principles tell us about EWOW’s Independence, (impartial, complaint resolution not advocacy), Access, Equity, Quality, Effectiveness, Efficiency, Community Awareness, and Linkages.

Notwithstanding its strictures about being impartial and about settling disputes fairly, EWOW feels no constraints about wandering into policy matters and informing bodies from the Senate down to other regulatory agencies about how the energy industry should best operate. Thus, a recent submission to the Senate sought,

  • a flat rate ‘social’ tariff for eligible concession card holders that is less than a retailer’s cheapest market offer.
  • A mandatory requirement that retailers recommend the most appropriate tariff to a customer in financial hardship and monitor the customer’s payments, usage behaviour and circumstances.
  • An increase in government concessions, grants and/or rebates in response to higher electricity costs.
  • Government support to allow concession card holders to buy and install an in-house display free of charge to use in conjunction with the Advanced Meter (Smart Meter). This will help inform customers in ‘real time’ about how and when they use electricity and shift electricity use to cheaper times of the day.

More cost impositions.  But for a competitive market, the surest way of getting “fairness” in the provision of goods and services is to have multiple suppliers and we have these in spades throughout the electricity industry, constrained only (though not in Victoria) by State governments fixing prices for household customers.

The recent plethora of energy reports comment about the decline in the electricity supply industry’s productivity.  The reasons are clear – costs have risen.  With electricity this is partly because of the industry being forced to substitute low productivity wind and solar energy sources for high productivity coal generation; partly it is due to regulations on green energy, on how to respond to customers, on reports to regulators have all involved firms hiring more people than are justified by meeting genuine customer needs.  EWOW is a part of this cost imposition.

Many economists have remarked upon the increasing importance of bureaucracy in decelerating the growth of income levels by placing impediments in the way of lowering costs and otherwise meeting consumer needs.

In this vein, William Kingston writes,

All intervention, in fact, widens the area of poor decision-making, by increasing the importance of bureaucratic rather than innovatory firms in an economy, and by strengthening the bureaucratic element at the expense of innovators in all managements, including those in the private sector.

We badly need a house clean to eradicate the regulatory agencies that are doing much to advance the careers of a business-hostile intelligentsia, which sucking productivity out of the economy.

 

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26 Responses to Consumerists Bureaucracies: their place in our downfall

  1. H B Bear

    Whingeing, hand holding and hand wringing are all growth industries. A useful employer of graduates from Dawkins universities too.

  2. Scapula

    Dawkins – isn’t he the one that commercialised and part-privatised the universities so that they could earn foreign income and act as under-paid research assistants to the corporate and governmental worlds?

  3. HRT

    So the EWOW is awash with Access, Equity, Quality, Effectiveness, Efficiency, Community Awareness, and Linkages. They haven’t been thorough with their gobbledygook however. How could any goodthink organisation not also be a promoter of diversity, equality, nurturing, upskilling, outreach and empathy?

  4. chet

    Sorry Alan, I have to disagree with some of this.

    “Even one complaint lodged with us can be a sign of a systemic problem”.

    By definition, the first complaint regarding a systemic issue fits this definition. If I am the first person in history to complain that someone has been murdered, they are still dead even if no one else complains, and its still a system-wide issue if there isn’t a law against it.

    “Such entrepreneurship has allowed EWOW to grow its staff to 120, up from just one 15 years ago. ”

    15 years ago the electricity and gas industries in Victoria were government owned, so there was no need for an Ombudsman.

    Now there is a fully deregulated market which is the most active in the world. Sorry Alan, I disagree that is Empire building, the market has changed dramatically, and its leader either has to provide the service the organisation has been paid to do, or resign.

    Most definitely NOT saying it couldn’t be done more efficiently, but leaving out the dramatic structural change in the underlying market over that period gives a false perspective.

    “EWOW is a part of this cost imposition.”

    $16m across the electricity industry is pretty infinitesimal. We’re talking asset bases of hundreds of billions of dollars in each state. You are right raising the green energy issue, but putting EWOW in the same category is a bit like saying a mouse is a mammal just like an elephant. True of course, but there are relativities involved…

    I totally agree that Senate submission was consumer advocacy, not arbitration so not something EWOW should be poking their nose in. VCOSS et al already get plenty of taxpayer money for that role.

    Don’t forget that energy companies are no saints, they do mislead and break contract terms (intentionally and unintentionally) from time to time.

    Organisations like EWOW and the TIO were set up to save the legal system. The alternative would be for 64,000 small claims cases to be taken out in our already flooded legal system over power bills – I don’t consider that a more efficient outcome, and I’m sure it would cost the economy a lot more than $16m…

  5. thefrollickingmole

    H B Bear

    Has nailed it in one. Where would the current crop of graduates find employment if not for the sheltered workshop of regulatory and government bodies?

  6. Biota

    I wish that these people weren’t referred to as intelligentsia. Same goes for progressives.

  7. Entropy

    So, a graduate from a teaching college with pretensions, Scap?

  8. Scapula

    You must be an old aged pensioner, enty, teaching colleges were abolished over twenty years ago.

  9. manalive

    I wish that these people weren’t referred to as intelligentsia. Same goes for progressives

    ‘Elites’ likewise.

  10. David Brewer

    Alan you are onto a large problem here.

    The original justification of these government consumer watchdogs is always to protect the little man from getting screwed by companies providing what are taken to be basic services.

    This job could be handled more efficiently by simply ensuring fair competition in the relevant sector (so the little man can go elsewhere when he is not satisfied), and free speech (so he can ring up some shockjock, or use the threat to do so, to curb any arbitrary screwing to which he might otherwise be subject).

    Of course these two avenues already exist, so the watchdog is superfluous. But they soon subtly extend their mandate to become lobby groups for handouts for whoever is having trouble paying the particular bills covered by their mandate.

    The Poms have got this down to a fine art, and have invented all sorts of special-interest poverty groups who must be assisted through policy measures proposed by these watchdogs. In this case, the catchcry is “fuel poverty” and addressing this has become a whole industry in itself. There is a special “cold weather payment” so that pensioners do not have an excuse to leave the heating turned down, myriad subsidies for insulation etc., and even pressure groups (who of course can get government handouts themselves) on the topic. I have just heard one of their spruikers for these groups on the BBC explaining how they get Met Office alerts when the temperature is going to stay below 2 degrees for a couple of days, and then mobilise councils up and down the country to make sure old people know they should keep warm and – get this – not let their houses get too cold either.

    Some of these frail aged who but for such tender ministrations would die of cold because they were too stupid to keep warm somehow managed to survive the Blitz.

  11. Carpe Jugulum

    So, a graduate from a teaching college with pretensions, Scap?

    Scrappy, that is a reference to your vintage.

    Wow, you need subtlety applied with a sledgehammer.

  12. Scapula

    So you’re speaking for other people now, carpe, or are you and Entropy one and the same?

    Its called turning a joke back on its author, by the way, powderpuff.

  13. mundi

    Looks like a typical government win-win loop. Push the price of electricity up (which also pushes GST revenue up), then setup a body who you can call ‘independent’, whom will of course call for expanding government powers and welfare handouts in the industry.

  14. I’m not sure that you would bracket the Telecommunication in this list of “consumerist bureaucracies”, but I for one am grateful for its existence. Vodaphone ripped me off right royally a few years ago (selling a service that didn’t work) and threatened legal action when I refused to pay. The TO took about a month to sort it.

  15. chet

    “This job could be handled more efficiently by simply ensuring fair competition in the relevant sector (so the little man can go elsewhere when he is not satisfied), and free speech (so he can ring up some shockjock, or use the threat to do so, to curb any arbitrary screwing to which he might otherwise be subject).”

    Except if there is money to be made by bending contract rules or misrepresentation, then all competitors will ultimately do it, and the consumer has nowhere to go..

    Also, I’m not sure 64,000 people calling a current affair or Alan Jones is an efficient way to enforce contract terms. And that’s just energy – throw in the telecommunications ombudsman as well and Alan Jones will need a call centre, and spend every show constantly airing grievances…

    “they soon subtly extend their mandate to become lobby groups for handouts for whoever is having trouble paying the particular bills covered by their mandate.”

    Absolutely agree. Lobby on changes to rules sure, like police they see where the loopholes are on a daily basis, but they should not be commenting on social policy

  16. Louis

    “We badly need a house clean to eradicate the regulatory agencies that are doing much to advance the careers of a business-hostile intelligentsia, which sucking productivity out of the economy.”

    The longer I work in government, the more convinced I am that that is a correct statement. Although I suspect “intelligenstia” is a bit much too much praise really.

    I worked on numerous projects that really were just about providing new and higher paid positions to public servants. Local government’s have figured this out too. They convince councillors of the need for higher rates and new ‘permit’ fees. And then they turn around and demand pay rises becasue, afterall, they have just increased council’s revenues.

    And the ironic thing is that the department’s who are more luvie, arts, education, environment, are usually the ones who are most totalitarian in the powers they want and denying avenues of appeal.

    There is also the issue of regulator caputure by busniesses that want to crush or crowd out competitors.

  17. Chris

    This job could be handled more efficiently by simply ensuring fair competition in the relevant sector (so the little man can go elsewhere when he is not satisfied), and free speech (so he can ring up some shockjock, or use the threat to do so, to curb any arbitrary screwing to which he might otherwise be subject).

    Going elsewhere even when there is adequate competition is not always possible or straightforward though or even vaguely efficient. For example, say I’m trying port my phone number from one mobile provider to another and the first one simply refuses (through veiled incompetence to do so). Not that they think they’re going to get away for it ever, but delay it long enough for enough people that a significant portion either give up or they make a bit more money by holding onto them as customers for another month.

    Its simply not practical for most people to sue in these cases – its too expensive (either in time or $). But where there are patterns of behaviour like this an ombudsman can intervene.

    Or take one example where I put down a deposit for an item at a shop for them to order it in. They were eventually unable to supply the item but decided to not return the deposit. Its totally illegal, but the process of suing them for the deposit back makes it impractical – a day of my time would be more than the deposit. A call from consumer affairs who they knows legally what to do (and see patterns of behaviour by businesses) is enough to get them to change their mind.

  18. Alan Moran

    Chris,
    Number portability being promoted by regulation is something I have previously suggested might be one of the few areas of pro-competitive, pro-consumer regulation that I have come across. Would this doubtless beneficial arrangement have developed anyway and how without government insistence?

    Less persuasive is the deposit return system. The action by the shop that you posit is pure theft and there would be recourse at law and in reputational credits which would leave that shop unable to provide for the order trade.

  19. Chris

    Alan – in addition to number portability perhaps the recent changes to making it easier to change home loans is another example? In the financial industry being able to change banks without having to change account numbers (kind of like number portability) would be a huge benefit to consumers. For me at least changing all the direct deposit/debits is the biggest barrier to moving financial institutions. And these days with those fancy computer things it should be feasible.

    Less persuasive is the deposit return system. The action by the shop that you posit is pure theft and there would be recourse at law and in reputational credits which would leave that shop unable to provide for the order trade.

    The difficulty here is the cost of legal action (this actually happened to me). To take the shop owner to small claims court would easily take up a day of my time. That’s more than the deposit so financially I’d be even more behind. Perhaps I would have done it anyway out of spite. I perhaps could have caused reputational damage say via social media, but unless it becomes viral its a bit hit and miss and doesn’t actually compensate me at all. And the last thing I want is a defamation lawsuit – even if they don’t win it still chews up a tonne of time and money.

    I did actually threaten the shop (small businesses) with taking him to small claims court, but it didn’t change his mind. In the end it was consumer affairs who did.

  20. Tel

    But for a competitive market, the surest way of getting “fairness” in the provision of goods and services is to have multiple suppliers and we have these in spades throughout the electricity industry

    Oh really? Where is this competitive market you speak of. In New South Wales we have precisely three electricity suppliers: Essential Energy, Ausgrid, and Endeavour Energy. All are government owned, none of them compete with one another because the state is divided into distinct territories.

    Surely you have not been fooled into thinking that a competitive market in printing bills and debt collection represents genuine consumer choice as to electricity supply? I’ll bet you just cannot guess where the biggest markup in the supply chain sits, hmmm.

  21. William Bragg

    Like most anti-public service attacks trumpeted on the Catallaxy, Nick Carter’s was based on more than a modicum of sloppy research, as the letter in today’s Australian from the ACT Human Rights Commission makes clear. This, when have Cats ever let facts get in the way of a good beat-up.

  22. William Bragg

    Like most anti-public service attacks trumpeted on the Catallaxy, Nick Carter’s was based on more than a modicum of sloppy research, as the letter in today’s Australian from the ACT Human Rights Commission makes clear. Still, when have Cats ever let facts get in the way of a good beat-up.

  23. Dallas Beaufort

    The public service runs up the “adequate” and “appropriate” flags without considering consumer choice or the lack of it. And then pretends to justify consumer choice by bragging their regulatory model supplies 3 to service the public, What an utter contempt for the private sector and choice.

  24. Alan Moran

    William Bragg
    The rent squanderers’ letter only demonstrates their ignorance – they don’t count the backroom staff as part of their establishment and give no details as to what additional duties they perform other than human rights stoking and prosecuting.

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