Australian Energy Market Commission to ban power retailers unfairly penalising consumers

Sick of being stung by your power retailer because you missed a due date for payment? The energy market rule makers agree that consumers have been unfairly penalised — and they want the retailers to be the ones facing a fine.

Energy companies are set to be banned from penalising customers who fail to meet conditions such as paying their bills on time.

The energy market’s rule setting body will on Thursday propose a change where retailers can only recoup the reasonable cost of dealing with a customer paying late.

“Our analysis indicates the resulting cost to an average customer of not meeting a pay-on time discount could be up to $755 per annum … (or an increase on an annual bill of roughly 50 per cent) which is clearly not representative of the cost to retailers from late payment,” the Federal Government said.

Energy and Emissions Reduction Minister Angus Taylor has asked the Australian Energy Market Commission, which sets market rules, to initiate a ban on the practice.

“For too long, the big energy companies have focused on their profits and not on their customers,” he said.

Energy and Emissions Reduction Minister Angus Taylor.

The commission’s own research also found “excessive penalties for customers” in both electricity and gas contracts.

“Unfortunately some retailers have used conditional discounts to profit from customers who struggle to pay their electricity and gas bills on time,” commission acting chief executive Suzanne Falvi said.

“This draft rule puts a stop to that.”

As part of the rule change, the commission recommends retailers be hit with a new fine of $100,000 per breach of the ban.

The proportion of electricity contracts which have conditions linked to discounts or penalties has fallen sharply since July when a new system was introduced for customers who do not shop around, the so-called default market offer.

Now, about 14 per cent of contracts offered in SA include such discounts but last financial year more than 70 per cent of contracts were written in that way, and these would still be in force for many thousands of households.

Of customers on such contracts, more than a quarter fail to pay in time and that proportion rises to nearly 60 per cent for struggling households on hardship provisions.

Australian Energy Regulator chair Clare Savage.

Australian Energy Regulator chair Clare Savage backed the proposed change.

“Energy customers should have greater confidence to shop around, knowing that they can benefit when they meet the conditions of a discount, but will not have to pay an unreasonable amount if they cannot,” she said.

The commission is inviting submissions on the rule change until January 16.