Regulation Impact Statement Updates

Official website for publishing regulatory impact analysis information for regulatory decisions announced by the Australian Government, COAG and COAG Councils.

Regulating Conditional Discounting for the Retail Energy Market

COAG
27th February 2020

COAG Decision Regulation Impact Statement – Australian Energy Market Commission

On 27 February 2020, the Australian Energy Market Commission (AEMC) released a final rule determination in which it decided to amend the National Energy Retail Rules (NERR) to limit the level of conditional discounts and conditional fees in new energy retail contracts to those "reasonable costs" which a retailer is likely to incur when consumer fails to satisfy a payment condition.

Energy retailers have previously exercised flexibility in setting different types of pricing plans and structures in order to balance potential risk between themselves and their consumers. According to the Australian Competition and Consumer Commission, this flexibility has previously led to detrimental outcomes for many consumers, with 27 per cent of residential consumers and 58 per cent of hardship consumers failing to meet their discount conditions. This finding suggested an imbalance in risk allocation between parties, and demonstrated that some consumers were not well-placed to meet certain contract conditions.

The AEMC’s decision will restrict the size of conditional discounts and fees (e.g. late payment and direct debit dishonour fees) which retailers can prescribe under retail contracts, to those reasonable costs incurred or likely to be incurred by the retailer when a consumer fails to satisfy a payment condition, thereby providing protection to consumers from the recovery of excessive costs. The AEMC intends to recommend to the COAG Energy Council that breaches of new rules be subject to a civil penalty under the National Energy Retail Law.

The final rule determination has been assessed by the Office of Best Practice Regulation as compliant with requirements for a Council of Australian Government’s Decision RIS.

Please note: any accessibility queries should be directed to the Australian Energy Market Commission.

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