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Australia | Publication | March 2020
Both the AEMC and the Victorian ESC have introduced new rules constraining pricing and discounting practices able to be undertaken by retailers from 1 July 2020.
These changes will form a further part of a complex web of new and existing prescriptions across the National Electricity Market, connected to offering the default market offer (DMO or VDO depending on the jurisdiction) and marketing and pricing by reference to those prices.
The common change relates to limiting the size of conditional discounts offered by retailers in new market retail contracts on the basis that consumers should be protected from paying a disproportionate fee if they fail to comply with payment conditions (especially paying their bill on time). However, the way that each rule maker has approached it differs meaningfully, as summarised below.
NECF jurisdictions | Victoria | |
Rule Change | National Energy Retail Amendment (Regulating conditional discounting) Rule 2020 No. 1 | Amendments to the energy retail code: reflecting the Final decision of the Victorian ESC of 28 February 2020 entitled “Ensuring energy contracts are clear and fair” |
Who/what is affected | Small customers, based in NSW, regional QLD, ACT, TAS, SA | Small customers, based in VIC |
What kind of discounts and fees are captured? |
|
Discounts offered to small customers conditional on them paying their bill on time. |
Limitations on conditional discounts and fees |
Requires:
|
Imposes a cap, as determined by the Victorian ESC each May, based upon the cost of debt. |
The AEMC framework captures a variety of conditional discounts and fees. On the other hand, the Victorian framework is focussed only on conditional discounts associated with paying on time, which is the key policy concern of both bodies.
Since only one type of conditional discount is targeted by the Victorian regime, the simplicity in also providing a specific monetary cap has some appeal. However, it does not allow for individual discrepancies between the costs of different business, which the AEMC framework allows. This could potentially disadvantage certain retailers.
The limitation on pay-on-time discounts is but one change arising in the Victorian ESC’s broader quest to “increase price certainty for Victorian customers and therefore increase confidence in the energy market”. It complements a variety of price-related amendments coming into force on 1 July 2020, including:
Note the focus of this memo is on “pricing” and “discounting”. There are also requirements relating to clarity of energy marketing and a replication of the existing prohibitions in the Australian Consumer Law against engaging in misleading or deceptive conduct.
Please contact us if you wish to know more about these regimes and the impending changes.
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