A new rule made by the AEMC to stop pseudo-discount deals that leave consumers worse off starts this week.
The rule prohibits energy retailers from making discounts appear bigger than they actually are by discounting off rates above their standing offers.
The AEMC made the final rule in May 2018, giving retailers six weeks to fix up their offers. The Australian Energy Regulator will monitor retailers’ compliance with the new rule.
This rule was requested by the Federal Minister for the Environment and Energy, the Hon Josh Frydenberg, and is part of the reform package following the Australian Government’s roundtable with energy retailers last year to help deliver more affordable energy for consumers.
In detail, it prohibits retailers from offering discounts in a market retail contract where at least one rate (such as usage) is above the equivalent rate in their standing offer, and no rates are below an equivalent rate in their standing offer. In these cases, before discounts, consumers would be worse off compared to the standing offer.
These changes relate to one particular aspect of discounting. However, there are broader issues with retailer discounting practices. As explained in the AEMC’s 2018 Retail Competition Review, discounts from bases that vary by retailer have created consumer confusion. Also, many discounts are conditional, such as paying on time, with customers who fail to meet conditions being penalised significantly.
The AEMC supports the work underway on these broader issues with discounting, including the Australian Energy Regulator’s revision of the Retail Pricing Information Guidelines and also the ACCC’s retail electricity pricing inquiry.
The AEMC has been liaising with the AER and ACCC on other rule changes and initiatives to make it easier for consumers to compare energy offers.
Victoria
Victoria has not adopted the National Energy Customer Framework. This means the National Energy Retail Rules managed by the AEMC do not apply in Victoria. Accordingly this new rule does not apply in Victoria.
Victoria has its own retail energy code managed by a state regulator, the Essential Services Commission of Victoria. The Victorian regulator can adopt a rule from the National Energy Retail Rules to its own retail energy code.
Media: Prudence Anderson, Communications Director, 0404 821 935 or (02) 8296 7817
KEY TERMS
Market offer contracts are set by energy retailers. Because the prices are set by the retailer, discounts can be offered. They have terms and conditions which must adhere to consumer protection laws. Outside of these minimum requirements, retailers have flexibility in how they design their offers for customers. This can include incentives, different billing periods and additional fees and charges for flexible service arrangements.
If you don’t want to sign up to a market retail offer, you can choose a standard retail offer, sometimes called a standing offer. With standard retail offers, prices are:
- often set by the government (depending on where you live)
- are generally higher than for market retails offers
- and can’t change more than once every six months.
Customers on standard retail offers can’t get discounts like they can with market retail offers. In general, standing offers are used as a benchmark against which retailers may offer discounted prices.
For more information visit the Energy made easy website.