The AEMC today published a consultation paper on a rule change request from the Federal Minister for the Environment and Energy to prohibit confusing retailer discounts – where retailers apply discounts to electricity rates in market contracts that are higher than the retailer’s equivalent standing offer. This can result in a discount ‘deal’ that leaves consumers worse off.
This rule change is proceeding under the expedited rule making process, with a final rule due in May 2018. To enable this faster process, the consultation paper includes the AEMC’s initial position on the request, which would achieve similar outcomes to the proposed rule but builds on the existing regulatory framework. Our recommended changes are:
- to prohibit retailers from offering discounts in market retail contracts where all of the energy rates in the contract (such as usage rates and daily charges) are above the equivalent rates in a standing offer. In these cases, consumers would be worse off compared to the standing offer.
- new civil penalties if retailers breach the Retail Pricing Information Guidelines which set out how energy prices must be presented.
The proposed changes relate to one particular aspect of discounting. However, there are also some broader issues with retailer discounting practices. As explained in the AEMC’s 2017 Retail Competition Review, the use of conditional discounts, such as pay-on-time discounts, are also potentially confusing consumers. Many consumers are not aware that the discounts are typically off a standing offer price that is not set consistently across retailers, as each energy retailer sets its own standing offer.
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. We will continue to liaise with the AER and ACCC on this rule change request and other initiatives to make it easier for consumers to compare energy offers.
The AEMC is holding a stakeholder workshop on the rule change request in early April (date to be confirmed). Submissions are due on 17 April 2018. Any written objections from stakeholders to the expedited process are due by 3 April 2018.
Media: Prudence Anderson, 0404 821 935; (02) 8296 7817