The Australian Energy Market Commission (AEMC) has acted on a request from the Hon Angus Taylor MP, Federal Minister for Energy and Emissions Reduction, to limit conditional discounts on energy deals.
The draft rule comes with a recommended penalty of up to $100,000 for retailers who fail to comply. Under our proposal consumers would no longer pay unreasonable fees for late payment of their electricity and gas bills.
Stakeholders are invited to provide feedback on a draft rule to regulate conditional discounting practices by energy retailers.
Conditional discounts are contracts where customers receive lower prices when they fulfil certain payment conditions during the term of a contract. The most common types of conditional discounts are pay-on-time and direct debit.
The AEMC’s analysis has found that large conditional discounts can result in excessive penalties for customers, and in particular can impact hardship customers.
Under the draft rule, retailers will be required to limit the level of conditional discounts for gas and electricity retail contracts to the “reasonable cost savings” that the retailer expects to make if a customer satisfies the conditions of the discount.
Acting AEMC Chief Executive Suzanne Falvi said while retailers would still be able to manage the risk of late payment through either conditional discounts or fees, the draft rule would cap these at a reasonable amount.
“Unfortunately some retailers have used conditional discounts to profit from customers who struggle to pay their electricity and gas bills on time. This draft rule puts a stop to that,” Ms Falvi said.
The draft rule includes transitional provisions so existing retail contracts with a conditional discount or conditional fee must comply with the new rule when a benefit period is reset. This typically happens every one to two years.
The AEMC is also recommending to the COAG Energy Council new civil penalties if retailers fail to limit conditional discounts. This could see retailers penalised up to $100,000 per breach.
Australian Energy Regulator (AER) Chair Clare Savage welcomed the proposed additional protections for energy customers.
“Energy customers should have greater confidence to shop around, knowing that they can benefit when they meet the conditions of a discount, but will not have to pay an unreasonable amount if they cannot,” Ms Savage said.
The changes would be part of the National Energy Customer Framework (NECF) which applies in the ACT, Tasmania, South Australia, New South Wales and Queensland. The changes would not apply in Victoria as it has its own Energy Retail Code.
The Commission is seeking feedback on the draft determination and draft rule by 16 January 2020.
This work is part of the AEMC’s consumer action plan.
Article by AEMC.
Media: Prudence Anderson, Communication Director, (02) 8296 7817