On 12 January 2022, the Australian Competition and Consumer Commission (ACCC) announced that energy retailer CovaU Pty Ltd had paid $33,300 in penalties arising from three infringement notices issued for alleged contraventions of the Competition and Consumer (Industry Code—Electricity Retail) Regulations 2019 (the Code).
The alleged contraventions were that CovaU advertised three residential electricity plans on its website without stating a percentage difference to the comparison price between 27 June and 19 July 2021.
Below we discuss the Code and the comparison price obligations when it comes to unconditional offers.
A refresher on the Electricity Retail Code
The Code commenced on 1 July 2019 and is prescribed as a mandatory industry code under the Competition and Consumer Act 2010 (Cth) (the Act). It operates to limit the standing offer prices that can be charged to residential and small business customers, to regulate the advertising of offers, and to prohibit headline discounting.
The Code does not regulate all offers made by retailers. The operation of the Code is limited to retailers operating in certain distribution areas (Ausgrid, Endeavour Energy, Essential Energy, Energex, and SA Power Networks). It does not apply to Victoria, to distribution regions with less than 100,000 customers, nor to embedded networks or supply arrangements where the price for the supply include a demand tariff.
The operation of the Code is summarised in the following table taken from the ACCC’s Guide to the Code:
The unconditional price
The Code introduces the concept of an unconditional price. It is relevant in relation to checking compliance against the DMO and in allowing for a calculation of the discount percentage.
Retailers must include the following items in calculating the unconditional price of an offer:
- any charges;
- annual recurring fees such as membership and contribution fees;
- recurring metering charges; and
- sign-up credits and charges on green products.
The unconditional price must exclude any FiT and other optional green charges and be GST inclusive.
Sign up credits should be included in the unconditional price other than where they are limited to particular groups of small customers or where a condition unrelated to entering into an electricity contract is met. An example of such a credit would be a ‘refer a friend’ credit.
Clearly, retailers seeking to attract customers will want a low unconditional price. Consequently, those retailers should take care to ensure that the calculations of the unconditional price are correct.
The ACCC’s Guide sets out worked examples of the calculation of the comparison discount, including for ToU and controlled load offers.
The Code requires retailers to show how the unconditional price of an offer compares with the relevant reference price. This difference must be expressed as a percentage of the reference price.
The comparison percentage (unconditional discount)
Section 4.2 of the ACCC’s guidelines explains how to calculate the comparison percentage included in advertising, communications, and promotional material.
To calculate the comparison percentage, a retailer must:
- calculate the unconditional price of the offer;
- calculate the difference between the unconditional price and the relevant reference price; and
- express this difference as a percentage of the relevant reference price. This number may be positive or negative, indicating whether the offer is more than or less than the reference price.
What information are retailers required to tell customers?
The advertising components of Code apply to any communication by a retailer to a customer where the communication includes offered prices including where a retailer:
- advertises or publishes the offered prices;
- offers to supply electricity at those offered prices; or
- gives a customer written notice of a change to the retailer’s offered prices and the offered prices are the prices that apply after that change.
The obligation also applies where a retailer notifies a customer of a change in prices.
The Code requires that the following information be included or provided:
- the difference between the unconditional price and the reference price, stated as a percentage of the reference price (comparison percentage);
- for each proportional conditional discount, the difference between the conditional price and unconditional price, stated as a percentage of the relevant reference price;
- the lowest possible price of the offer (inclusive of all conditional discounts mentioned in the communication);
- conditions for all conditional discounts; and
- the distribution region and type of small customer.
The conditional discount should not be stated as the main element of the advertisement, publication or offer. The information listed above must be clearly and conspicuously stated.
The Code requirements apply in a variety of instances. For example, they apply to telesales where offers are made. In the case of telesales, the ACCC’s Guide notes that ‘retailers should have regard to speed, volume and other audio tools to ensure information required by the Code is clearly audible and emphasis is placed on this information compared to other statements, dialogue or sounds.’