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INSIGHT

The ESC's draft decision on first round of amendments to the Energy Retail Code

By Jacqueline Downes 18 September 2018
Competition, Consumer & Regulatory Energy Government

In brief

While the Federal Government gives further consideration to implementation of the ACCC's recommendations relating to retail tariffs and retailer behaviour, the Victorian Essential Services Commission has been progressing reforms proposed by the Independent Review into the Electricity and Gas Retail Markets in Victoria. The reforms are directed towards rebuilding consumer trust and confidence in the market, and they introduce three new customer entitlements into the Energy Retail Code. Submissions on the draft amendments are due 5 October 2018. We look at the key reforms and analyse the implications for retailers servicing households and small businesses. We can also expect further amendments to the Code in due course, subject to further analysis and consultation by government – and we will keep you informed on that.

The proposed key reforms

Proposed ChangeImplications
Retailer's best offer Best offer requirement Retailers will now be required to inform customers on the customer's bill of the cheapest generally available offer from that retailer, based on that customer's energy usage. An offer is 'generally available' if it is available to any customers in the relevant distribution zone and excludes offers that may only be made in certain circumstances, such as win-back or retention offers.

Retailers may present customers with cheaper plans that are not generally available.
  • The new entitlement is intended to inform customers about whether their retailer is charging them a reasonable price for their energy.
  • Retailers will be required to proactively identify their 'best offer' for that customer on the customer's bill. This will need to take into account the individual customer's energy usage.
Application The best offer requirement applies to standard and market retail contracts. This requirement does not apply to holders of an exemption from a retail licence.
Operational requirements

Retailers must determine the 'best offer' for the customer in accordance with the prescribed criteria. Most relevantly, the best offer must be calculated:

  • based on the customer's previous 12 months' metering data (or the retailer's best estimate if that data is not available);
  • inclusive of conditional and unconditional discounts and any concessions that currently apply to the customer; and
  • should not include savings arising from bundled offers.

This offer must be presented on customers' bills at least every six months, starting from 1 July 2019, and must be available to customers for at least 13 business days from the date a bill is issued.
Clear advice entitlement Clear advice requirement

Before customers can provide consent to an electricity plan, retailers will be required to inform customers of:

  • the terms and conditions that will affect the costs faced by the customer over the term of the contract, including, where feasible, the dollar-cost implications of these terms with reference to the retailer's estimate of the total monetary value of a bill for the customer under the contract; and
  • any other offers from that retailer that may be more suitable for the customer.
The draft decision contemplates that this requirement would apply to contract terms such as conditional discounts or additional fees for paper billing, as well as to the nature of the tariff structure and any rights the retailer has to change prices during the contract term.
  • The new entitlement is intended to help customers understand whether the retailer's contract best suits their circumstances.
  • To demonstrate that a customer has provided explicit informed consent, retailers must first provide that customer with clear advice of the dollar-cost implications of the terms under the relevant electricity contract.
  • Failure to satisfy this requirement could result in the contract being held void.
Customer-specific information When determining which information to communicate to the customer, a retailer must take into account any information it already possesses in relation to that customer. For example, when informing a customer about any pay-on-time discount, the retailer would take into account the customer's payment history.

Under the draft code amendments, a retailer should also provide the customer with any information it considers relevant to the customer's decision to enter into the contract that is consistent with the relevant legislative objective. This provision aims to entitle small customers to obtain clear, timely and reliable information to assist them in assessing suitability and select a retail contract.
Bill change notices Bill change notice requirement Under the current regime, retailers are required to provide customers with prior notice of changes to a benefit under the relevant contract. However, changes to tariffs and charges that are not considered 'benefits' are permitted without prior notice to the customer.

The proposed amendments introduce a regime under which retailers must provide a bill-change alert to customers in the event of a benefit change or price change to replace the current notification requirements.
  • The new entitlement is intended to help customers assess the ongoing suitability of their contract in the face of price changes.
  • Customers must receive advance notice of all pricing changes regardless of whether these constitute changes to a 'benefit'.
  • The notice of a benefit change or price change must also inform the customer of the dollar impact of that change and whether the retailer considers this the 'best offer' for the customer.
Application The bill-change notification requirement applies in relation to standard and market retail contracts. It does not currently apply to exemption holders, who will continue to be covered under the existing benefit change and price-change notification regimes.
Information provision

In addition to the information required to be provided under the existing benefit change notice requirement, the proposed amendments require the bill-change notice to include:

  • the retailer's 'best offer' for that customer;
  • the retailer's estimate of the annual dollar impact of the benefit or price change (where the benefit is financial in nature);
  • information to assist the customer to complete the fields necessary to use Victorian Energy Compare;
  • in the case of a price change, the date the price change will come into effect; and
  • in the case of a price change, the customer's existing tariffs and charges and the tariffs and charges as amended by the price change.
Notice period Although the current notice period for a benefit change notice ranges between 40 and 20 business days, the proposed amendments require a bill-change notice to be provided at least five business days before a benefit or price change takes effect.
Other GST inclusive prices All tariffs, fees, prices and charges are to be expressed in GST-inclusive terms. Retailers may, however, itemise GST as a component to the total price on bills.
  • Although bills to households must already provide GST-inclusive prices under the Australian Consumer Law, retailers must now provide GST-inclusive prices to all small customers (including small businesses).
  • Bills must also include information for accessing the VEC website.
Access to VEC website Under the proposed amendments, all customer bills must include information about how the customer can access the government comparator website, Victorian Energy Compare (VEC).