New rules on energy marketing disconnections and life support in Victoria

What you need to know

• The Energy Legislation Amendment (Energy Fairness) Act 2021 (Vic) has been passed and will come into effect on proclamation or otherwise on 1 May 2022.
• The Act includes new prohibitions on door-to-door sales, cold calling and the use of 'save' or 'win-back' customer retention offers. These provisions are anticipated to commence, by proclamation, on 31 December 2021. 
• The Act introduces new criminal penalties for the wrongful disconnection of a customer's gas or electricity supply, or where disconnection endangers a person on life support equipment.
• The Act also tightens time frames for registering customers who require life support protections, and notifying distributors and retailers (as the case may be).

What you need to do 

• Retailers need to review marketing arrangements, including through their contractors and agents, to ensure they do not engage in any illegal marketing practices once the Act comes into force.
• Retailers will also need to ensure their life support and wrongful disconnection processes are compliant, and take account of the increased penalties.

Background

On 10 August 2021, the Energy Legislation Amendment (Energy Fairness) Act 2021 (Vic) (the Energy Fairness Act) was passed.  It comes into force on a date to be proclaimed, or otherwise on 1 May 2022.  

Provisions of the Energy Fairness Act that ban unsolicited sales and "save" and "win-back" offers are anticipate to be brought into effect earlier, on 31 December 2021, by proclamation. 

The Energy Fairness Act is part of the Victorian Government's ongoing policy agenda in energy, which is focussed on protecting small customers.  It affects retailers, distributors and exempt sellers (such as businesses operating in embedded networks).

Increased consumer protections

Door-to-door sales and cold-calling

The Energy Fairness Act introduces consumer protections which the Government has described as being designed to protect vulnerable consumers from high pressure sale tactics, although it applies to all small customers.  

New section 40EB of the Electricity Industry Act 2000 (Vic) (the EIA) and section 48DB of the Gas Industry Act 2001 (Vic) (the GIA) provides that, without consent, energy retailers and their agents are prohibited from engaging in door-to-door sales and cold calling.  A contract that is entered into using such tactics will be void.   

This effectively means retailers and their agents cannot "cold call" or "door knock" potential customers in order to offer and negotiate energy contracts.

Save and win-back offers

The Act also bans "save" and "win-back" offers, which are offers made by retailers to retain customers who have decided to switch retailers, which generally involve the retailer offering a discount. 

Under new section 40EA of the EIA and section 48DA of the GIA, if a customer switches to another energy retailer, the 'losing retailer' is prohibited from contacting the customer for up to six months to entice them to return or stay.  

Additional licence conditions prohibit a retailer, its employees or agents from contacting a domestic customer with certain offers during a "prohibited period" (from the time the losing retailer is aware of the customer transfer process, until a period after it completes).  This includes offers to: 

• renegotiate the existing contract with the losing retailer; 
• enter into a new contract with the losing retailer; or
• provide a benefit, privilege or service for that customer to remain with, or enter into a new contract with, the losing retailer. 

Contracts that are continued or entered into as a result of any conduct prohibited under s. 40EA have no effect.

There is an exception where the customer asks the losing retailer to make an offer to return or stay, and the rule does not prohibit the losing retailer from contacting the customer as part of a general marketing campaign, but they must not be contacted at their home or by telephone.  There are also exceptions for certain administrative and other general communications with the domestic customer during the "prohibited period".

Balancing interests of big and small retailers

The Government accepted the ban on unsolicited sales would impact small retailers that use those channels to gain new customers, but claimed that "any impacts on competition are expected to be offset by the bans on 'save' and 'win-back' offers", which it describes as benefiting larger retailers.  

The customer ‘churn’ that results from these practices increases the costs of energy for all consumers.  The Government recognised that door-to-door sales and telemarketing were channels used by smaller retailers, but said that any impacts on competition could be offset by the bans on ‘save’ and ‘win-back’ offers, which it regarded as tending to larger retailers. 

The ban on "save" and "win-back" offers further changes the overall customer transfer market for retailers, that are already subject to new reforms for "Reducing customers’ switching times (retail)" in the National Electricity Market.  Changes to MSATS will occur on 1 October 2021, to facilitate transfers within 2 business days. These include quicker timing requirements for submitting change requests, removing barriers / objections to transfers and assisting a future transfer to take place within a cooling-off period and without a scheduled meter read. 

Wrongful Disconnection 

The Energy Fairness Act also introduces new criminal penalties for wrongful disconnection of up to $1 million – an increase from the previous maximum of $5000.  The prohibition is two tiered and provides that a retailer or an exempt seller:

• who knowingly or recklessly arranges for the supply of electricity or gas to be wrongfully disconnected will be guilty of an offence under section 40SE of the EIA or section 48DF of the GIA; or
• who disconnects or arranges the disconnection of a household in a way that endangers customers on life support equipment will be guilty of an offence under section 40SF of the EIA or section 48DH of the GIA.

Interestingly, according to a government briefing that was provided to the Opposition and cited in Hansard (at page 2105) during the debate on the Energy Fairness Bill in the Legislative Assembly, as of June 2021, the ESC had never imposed a penalty notice for wrongful disconnection since the power was introduced in s 54H of the Essential Services Commission Act 2001 (Vic) on 1 January 2016.  However, the ESC has subsequently issued penalty notices totalling $450,000 against a retailer for allegedly wrongfully disconnecting 349 customers between 7 February 2019 and 13 February 2020, which were issued on 13 July 2021 but not announced until 6 August 2021.

Life Support Customers 

The Energy Fairness Act also replaces the existing life support customer regime with a new regime that includes:

• an obligation to register customers on the retailer's life support register, and notify the relevant distributor, within one business day after being advised that a customer requires life support equipment (and a corresponding obligation on distributors); and
• substantial new penalties apply for non-compliance with the new obligations, including fines up to $110,000.

Enforcement 

The Energy Fairness Act also introduces criminal penalties of up to $1 million for gas and electricity licensees who provide false or misleading information to the Essential Services Commission. 

Authors: Justin Jones, Partner; Jessica White, Graduate; and Robert Boag, Graduate.