Rule to ban misleading energy discounts

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The Australian Energy Market Commission (AEMC) has introduced a new rule that will prevent retailers from offering discounts on an energy deal if the discount is based on higher rates than the retailer’s standard rates.

The AEMC has also recommended strengthening the Australian Energy Regulator’s (AER) ability to enforce how retailers present their offers to consumers.

The rule aims to stop pseudo-discount deals that leave consumers worse off.

The rule was requested by the Federal Minister for the Environment and Energy, Josh Frydenberg, and is part of the reform package from ministers following the Australian Government’s roundtable with energy retailers in 2017 to help deliver more affordable energy for consumers.

AEMC Chairman, John Pierce, said preventing discounts off inflated base rates is another way of protecting consumers and giving them more control over their energy bills.

“Discounting can work to benefit consumers as long as the details are properly disclosed,” Mr Pierce said.

“But dodgy discounts deliberately designed to confuse consumers are not acceptable.

“Confusion around retail price offerings also means most consumers don’t grasp the opportunities on offer.

“That’s why it’s important to have rule requests like these – so competition in the retail market delivers for consumers.”

The new rule starts on 1 July 2018.

The new rule will prevent retailers from attempting to confuse consumers, providing them with the confidence that a discount is exactly that – a discount.

The Australian Government will be pursuing this reform through the COAG Energy Council.

It complements actions already taken by the government as part of its plan to deliver affordable energy for Australian households, including:

  • A rule change requiring energy retailers to notify their customers when their discounts are about to finish or change
  • A rule change proposal requiring retailers to provide their customers with advance notice of price changes
  • A rule change proposal to allow consumers to submit self-reads of their energy meters
  • A rule change proposal to reduce the time it takes to install new meters.

In detail, it will prohibit retailers from discounting off market retail contracts where all the rates in the contract (such as usage rates and daily charges) are above the equivalent rates in a standing offer. In these cases, before discounts, consumers would be worse off compared to the standing offer.

“There’s no single deal that is best for every customer, given the different ways people use energy. So it’s still important for customers to shop around,” Mr Pierce.

The AEMC’s final determination also recommends new civil penalties if retailers breach the Retail Pricing Information Guidelines which set out how energy prices must be presented.

These changes relate to one particular aspect of discounting.

Victoria has not adopted the National Energy Customer Framework, which mean the National Energy Retail Rules managed by the AEMC do not apply in Victoria. 

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