Rule Change: Open
This rule change request from the Hon. Angus Taylor, Federal Minister for Energy and Emissions Reduction, seeks to regulate conditional discounting practices by energy retailers. Conditional discounts are contracts where customers receive lower prices when they fulfil certain payment conditions during the term of a contract. The most common types of conditional discounts are pay-on-time and direct debit.
The rule change request proposes that the level of conditional discounts for gas and electricity retail offers be restricted to the “reasonable cost savings” that a retailer expects to make if a customer satisfies the conditions of the discount.
On 21 November 2019 the Commission made a more preferable draft rule to cap conditional discounting practices.
Low realisation rates of conditional discounts indicate that many customers, particularly those in hardship, have not been able to identify, choose and remain on contracts with tariffs that benefit them. This has resulted in many customers taking on excessive risk through these types of pricing structures. Where risk allocation between parties is no longer balanced or efficient, targeted restrictions on the level of conditional discounts and fees may be appropriate.
The draft rule:
- limits conditional discounts and conditional fees (e.g. late payment fees) to the reasonable costs the retailer is likely to incur when the customer fails to comply with the payment condition
- is limited in its application to conditional discounts and conditional fees that are related to payment timing or method. Only terms that are triggered because of a failure to comply with a payment condition are captured by the rule (e.g. direct debit dishonour fee)
- limits duplication of penalties — when a contract includes both a conditional discount and a conditional fee that are triggered by the failure to comply with the same payment condition. The aggregate value of the penalty is capped to the reasonable costs the retailer is likely to incur when retail contract conditions are not met
- makes transitional provisions which require that existing retail contracts with a conditional discount or conditional fee comply with this rule when a benefit period is reset
The draft rule protects customers by stopping retailers from recovering excessive costs from customers who fail to comply with certain payment conditions. The rule will also enable retailers to manage the risk of breach of payment conditions in a more cost-reflective manner.
On 1 August 2019 the Commission published a consultation paper that seeks stakeholder input on the rule change request.
Submissions to the consultation paper were due by 19 September 2019 and can be found below.