Consumer protections – National Energy Customer Framework and the Australian Consumer Law

There are two main sources of consumer protections for energy products and services:

In our 2018 Retail energy competition review the Commission noted that the evolving nature of the energy market provides an opportunity to consider whether the existing energy specific consumer protection framework continues to meet is objectives. In order to understand this better we have taken the first step of mapping the consumer protection elements of the NECF and the ACL.

Context

The NECF was developed in the context of regulating traditional energy services and the Australian energy retail market being opened up to competition. At the heart of this framework is the principle that consumers have a right to access energy (as an essential service) on fair and reasonable terms.

However, since the NECF was established, the energy market has undergone significant transformation due to new technology, innovation in products and services, and changes in consumer preferences. The way in which electricity is supplied to consumers and how consumers engage with the market is changing. These changes have potential regulatory implications, in particular on regulations designed to protect energy consumers.

The NECF and ACL

Energy consumers are protected by the core principles of the ACL for the supply of goods and services, including the supply of energy and energy related products (such as solar panels). The ACL includes prohibitions to protect consumers from certain conducts that harm effective competition, fair trade and commerce.

In addition to the general protections under the ACL, energy consumers are protected by the energy-specific provisions under the NECF for the sale of energy. For example, while both frameworks limit energy retail practices and market participants' behaviour, the NECF provides targeted protections related to energy supply being an essential service, vulnerable consumers and information requirements that are not covered by the ACL.

Key findings

The Commission's mapping exercise highlights that the two frameworks largely complement each other to maintain consumer protections in the provision of energy. However, the market has evolved significantly in recent years in relation to non-traditional energy products and services and the nature and application of the NECF has not adapted to these changes. There has been significant market evolution in recent years in relation to non-traditional energy services and products.

Solar, being led by widespread roll-out of household PVs, is experiencing strong market penetration and the steadily falling costs of batteries will reinforce this trend. Consumers are also more actively engaging with the market, and selling the surplus energy they are generating themselves to the grid.

There is a need to analyse and update the NECF framework to remove barriers to innovation and extend consumer protections so consumers have safe and affordable access to new models of energy supply.

The Commission has already proposed fundamental reforms to the regulation of embedded networks like apartments and retirement villages, so consumers within these networks receive the same level of consumer protections as all other consumers in the national electricity market (NEM). The Commission's reforms include both rule and law changes which are currently before the COAG Energy Council for consideration. The Commission urges the Council’s adoption of these reforms to protect consumers.

Further to this, the AEMC will take the next step and review the NECF to determine if consumer protections need to be extended to new energy service provision without creating barriers to innovation.

Mapping exercise

To assist us in comparing how consumer protections operate under the NECF and the ACL, we identified five categories of protection that are applicable to both frameworks. We have provided a summary of each of these below. The full assessment of each of these can be found in our Final report.

The Commission notes that the Competition and Consumer (Industry Code Electricity Retail) Regulations 2019 introduced an Electricity Retail Code of Conduct with new requirements on retailers in addition to the ACL and NECF provisions. However, the Electricity Retail Code of Conduct is not included in this mapping.

The contract (contract terms provisions)

Under the NECF a retailer can only provide retail services to small customers under two types of contracts; standard and market retail contracts. Retailers must comply with minimum requirements under each contract to guarantee the provision of energy. In general, the NECF prescribes what these contracts must and must not include. However, it does not provide any general principles for retailers to follow when designing contract terms. 

In contrast, the ACL does not specify specific terms applicable to the sale of goods and services but includes a set of principles that businesses must have in mind when designing and entering into consumer contracts, including energy contracts.

The below figure summarises the key consumer protections that both frameworks contain.

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Marketing and offers

Under the NECF, retailers and retail marketers must comply with legal requirements in terms of information and marketing of retail contracts. In contrast, under the ACL there are no requirements specifically for retailers or retail marketers, but there are broadly applicable consumer protections.

The figure below compares key consumer protections for marketing and offers under both the NECF and the ACL frameworks.

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Information provision

Further to the above, the NECF contains other requirements related to consumer information requests, general information for the supply of energy, and notifications for new meter deployments and energy interruptions. Under the ACL there are no equivalent consumer protections to these information requirements. The figure below summarises these additional information requirements.

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Service standards and quality

In terms of service standards and quality, the NECF has a provision to guarantee that consumers continue to receive electricity and/or gas supply in the event of retailer failure.​ Additionally, the NECF has certain specific requirements that are limited to distribution services, and connection and disconnection standards.

The ACL has a broader scope and provides consumer guarantees for consumer transactions relating to the supply of goods. These consumer guarantees do not apply to the supply of electricity and gas but may apply to other energy products (e.g. solar panels) or services.

The below figure lists the different consumer protections under both frameworks.

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Complaints and dispute resolution procedures

Under the NECF, energy customers have two mechanisms to resolve complaints and disputes. Retailers must have their own standard complaint and dispute resolution procedures and, must also be members of an energy ombudsman scheme to resolve any relevant matter concerning the customer and a retailer or distributor.​

The NECF provides certain circumstances where the customer can initiate a dispute or submit a complaint to the retailer or distributor, under their standard complaints and dispute resolution procedures, or to the relevant energy ombudsman. Below are some examples of disputes that customers can initiate under the NECF:

  • the carrying out of an energy marketing activity by a person
  • retailer's obligations before and after a customer retail contract is formed
  • billing disputes.

Under the ACL, the ACCC and jurisdictional regulators are unable to pursue every complaint received. Therefore, they must consider complaints carefully and exercise discretion, directing resources to matters that can result in industry-wide change or provide the greatest overall benefit for consumers. As these discretionary matters may vary within or between jurisdictions, priorities for enforcement action differ accordingly.

Additional protections

In addition to the above, the NECF provides other protections that recognise energy as an essential service. These additional protections for energy consumers are related to:

  • guaranteed connection and limitations on disconnections and energy interruptions
  • customers facing financial difficulty
  • customers requiring life support equipment. 

Each of these is outlined below.

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Vulnerable customers

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Life support equipment

The NECF protects customers that require life support equipment. The following are the specific consumer protections for these customers:

  • a retailer or distributor may only arrange a planned interruption to the premises of a person that requires life support equipment by obtaining the affected customer's explicit consent to the interruption occurring on a specific date.​
  • a retailer or distributor must not arrange the de-energisation of a customer's premises where the premises are registered as having life support equipment.​

Disclaimer

This version of the mapping exercise and summary of the NECF and ACL is current as at 28 June 2019.

This mapping and summary is made available for use on the following basis:

  • Purpose: This summary is provided by the AEMC for information purposes only. You are not permitted to commercialise it or any information contained in it. This summary is not a substitute for obtaining legal advice. By publishing this summary, the AEMC does not bind itself to a particular interpretation or analysis of the law, nor does it limit the AEMC's discretion in the exercise of its functions and powers.
  • Currency: The summary is based on versions of the Retail Law, Retail Rules and ACL in force as at the date of its publication. It does not include any amendments to these instruments that are currently the subject of consultation or consideration by the AEMC, the COAG Energy Council or states or territories. It does not include jurisdictional derogations to the Retail Law and Retail Rules, or the Competition and Consumer (Industry Code Electricity Retail) Regulations 2019.
  • No reliance or warranty: The summary may be subsequently amended. The AEMC does not warrant or represent that the information in this document is accurate, reliable, complete or current or that it is suitable for particular purposes. You should verify and check the accuracy, completeness, reliability and suitability of this tool for any use to which you intend to put it and seek independent legal advice before using it, or any information contained in it.
  • Limitation of liability: To the extent permitted by law, the AEMC and its advisers, consultants and other contributors to the summary (or their respective associated companies, businesses, partners, directors, officers or employees) will not be liable for any errors, omissions, defects or misrepresentations in the information contained in this document, or for any loss or damage suffered by persons who use or rely on such information (including by reason of negligence, negligent misstatement or otherwise). If any law prohibits the exclusion of such liability, the AEMC’s liability is limited, at the AEMC’s option, to the re-supply of the information, provided that this limitation is permitted by law and is fair and reasonable.