Energy retailer Red Energy Pty Limited (Red Energy) has paid penalties totalling $40 000 following the issue of two infringement notices by the Australian Energy Regulator in respect of alleged breaches of the National Energy Retail Law (Retail Law) and the National Energy Retail Rules (Retail Rules), by failing to inform customers of their options at the end of a retail contract, and failing to obtain explicit informed consent from customers whose contracts were automatically rolled over.
The Retail Rules require retailers to inform customers about their options at the end of any fixed term contract. Retailers must, in writing, advise customers that they have the option of setting up a new contract or moving to another retailer. Importantly, retailers must disclose what happens if they choose not enter into a new contract with their current retailer. In addition, the Retail Law requires that customers give their explicit informed consent to enter into a market retail contract.
The AER issued one infringement notice to Red Energy as it had reason to believe that it had breached the Retail Rules, between at least 2013 and 2015, as the notices Red Energy sent to its customers did not contain the necessary information about a customer’s end of contract options.
The second infringement notice was issued as the AER had reason to believe that between February 2013 and August 2015, Red Energy breached the Retail Law by placing customers who took no action after receiving the notice onto a new Red Energy contract without the explicit informed consent of those customers.
“The AER was concerned that by not telling customers about their options to shop around and switch retailers at the end of a contract, and then entering those customers into new contracts without their explicit informed consent, Red Energy did not allow customers to make informed choices about their energy supplier,” AER Chair Ms Paula Conboy said.
“These requirements of the Retail Law and Retail Rules are key safeguards to ensure customers are fully informed and make an active choice of their retail energy supplier. The AER will continue to take enforcement action when suppliers fail to comply with these requirements,” Ms Conboy said.
Red Energy has also provided the AER with a court-enforceable undertaking in which Red Energy undertakes that it will not place customers whose retail contracts have expired on to a new market retail contract without complying with the relevant provisions of the Retail Law. Red Energy has also undertaken to review and amend its Retail Law compliance program.
The payment of a penalty specified in an infringement notice is not an admission by a business of a contravention of the National Energy Retail Rules.
Background
The Retail Law and Retail Rules (which apply in New South Wales, the Australian Capital Territory, Tasmania, Queensland and South Australia) set out key protections and obligations for energy customers and the retail and distribution businesses they buy their energy from.
Where a customer’s previous contract expires and the customer continues consuming energy, the Retail Law provides the retailer’s standing offer is to apply.
A standing offer is an energy offer where the minimum terms and conditions are prescribed by law. Retailers are not permitted to alter these terms and conditions. Key consumer protections of a standing offer include restrictions on price changes and a requirement to bill customers every three months. Importantly standing offers do not have an end date or attract an early termination fee.
Market retail contracts may contain terms and conditions which are not included in a retailers standing offer such as a fixed term, discounts and other incentives such as reward programs.
The price of energy under a standing offer is typically higher than the prices of market retail contracts; however the customer is free to end the contract at any time and enter into a market contract with another retailer without incurring any fees.
Customers seeking information about the offers available to them can use the AER’s price comparator website, Energy Made Easy, to look at the energy deals in their area. The Energy Made Easy website is designed to help customers make informed choices about energy offers.