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Consumer Utilities Advocacy Centre (CUAC) and Consumer Action are pleased that the Australian Energy Market Commission – and other bodies, such as the Australian Energy Regulator, Energy Retailers Association of Australia, and consumer advocates – recognise that there is a problem in energy contracts worth addressing.

The AEMC’s Draft Determination finds the issues that require a regulatory response are narrower than those raised in CUAC and Consumer Action’s rule change request; specifically, that the key issue raised by the rule change request is that some consumers may be entering contracts unaware that prices may vary.

The Commission considers CUAC and Consumer Action’s suggested changes to be disproportionate responses to the issues identified, and likely to restrict consumer choice, inhibit retailers’ ability to innovate, adversely affect competition in retail energy markets, and result in poorer outcomes for consumers (including higher prices).

Instead, the AEMC propose to provide greater transparency for consumers in relation to how prices may vary when they sign up to a new contract. Specifically, the AEMC propose to amend the rules to require retailers to:

• disclose the possibility of price variation when obtaining explicit informed consent to enter a market contract; and
• provide information about when retailers will notify consumers of variations during a market contract as part of product disclosure information required upon entry.

CUAC and Consumer Action reject the AEMC’s conclusions and consider the Draft Determination and proposed rule a manifestly inadequate response to the issues raised in the Rule Change Application and subsequent submissions.

We have identified ten significant problems with the Draft Determination and associated materials:

1. Lack of response to the economic analysis and advice provided as part of the evidence base for the Rule Change Application;
2. Selective analysis of consumer research findings;
3. An absence of acknowledgement of the insights of behavioural economics into consumer behaviour or any analysis of the issues raised;
4. Failure to demonstrate why consumers are better at managing risks compared to energy retailers;
5. Lack of any modelling of alleged “premium” that retailers would charge if the proposed rule was made;
6. Little consideration given to alternative scenarios, such as banning exit fees;
7. Limited attempt to establish the presence or absence of price-baiting as a market practice;
8. An apparent unwillingness to consider international experiences and evidence to inform the draft determination;
9. Failure to reduce uncertainty with the application of unfair contract term laws for energy consumers; and
10. Willingness to accept retailer assertions about limiting contracts, with no clear supporting evidence base.

A full copy of our submission is available by clicking: National Energy Retail Amendment (Retailer price variations in market retail contracts) Rule 2014 Draft Determination.