The Energy Retail Code, which allows energy retailers to increase the price of electricity multiple times during the term of a contract, has come under fire from the Consumer Action Law Centre. In a letter to Dr Ron Ben-David, Chairperson of the Essential Services Commission (ESC), Consumer Action called for electricity prices to be fixed for the term of a contract, arguing most consumers believe fixed term contracts come with a fixed price, and that current laws are undermining households who have shopped around for an affordable electricity deal.
‘When consumers sign up to an electricity account, they’re locked in and will be charged a fee if they wish to cancel the contract, but the same rules don’t apply to the retailers. Retailers can increase the cost of your electricity at any point in a contract and there’s nothing you can do about it – clearly the balance of power is out of whack,’ said Gerard Brody of Consumer Action.
‘This means shopping around for the best deal could be a waste of time if the retailer then goes and alters its price. It means it is harder for households to budget for their electricity because they can’t predict the price with any certainty. And it means the promised savings from group switching or comparisons websites may be short lived.’
In its letter, Consumer Action said the current system doesn’t even require retailers to give advanced notice of price rises, and notice doesn’t have to be given until the next bill. This makes it difficult for families to budget, compare competing energy deals and avoid ‘bill shock.’
‘Government and industry keep telling households to shop around for the best deal but there is no guarantee that the cheapest deal today won’t become the most expensive deal by the time the first bill arrives. What’s the point of spending valuable time shopping around if a price rise turns your cheap deal into a white elephant which you’re stuck with for the life of the contract.
‘If retailers are given the certainty of a fixed term, consumers should have the certainty of a fixed rate,’ said Mr Brody.
Consumer Action also hit out at the Energy Retail Code for allowing retailers to automatically move a customer into a new fixed-term contract when their contract lapses and the consumer doesn’t respond.
‘Energy companies are required to tell you that your contract is ending and, if you don’t act, they move you onto another contract. But making the new contract a fixed term and including cancelation fees is a bit rich. If consumers don’t actively choose an energy deal, they shouldn’t be obliged to stick with it,’ said Mr Brody.
‘Retailers are even able to set new terms and conditions on rolled over contracts, so locking in a consumer for a fixed term could be a heavy price to pay for their inaction. We think, in these circumstances, retailers should be obliged to move consumers onto their cheapest energy deal, and that a consumer should be able to leave if he or she finds a better deal,’ said Mr Brody.
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