Revised Exempt Selling Guideline released

By Anne Wardell, Compliance Quarter. 

The Australian Energy Regulator (AER) has released an updated Retail (Exempt) Selling Guideline Version 5 March 2018 (new Guideline). They have also released a Notice of Final Instrument which discusses the changes introduced. The new Guideline became effective from 16 March 2018 which was the date of publication.

There are a number of important changes which have been introduced. All of the changes have been the subject of extensive consultation and discussion between the AER and stakeholders. For additional background please refer to our earlier articles:

• AER seeking feedback on Revised Draft Retail Exempt Selling Guideline;
• The proposed new dispute resolution obligations for exempt sellers; and
• Complaints Resolution for Exempt Customers.

I will discuss each important change individually.

Dispute resolution, membership of ombudsman scheme now a condition

One of the major changes is the requirement for exempt sellers who have residential customers to be members of the relevant ombudsman scheme in the states and territories in which they operate.

The Notice of Final Instrument provides the following overview of the changes:

‘We have revised the Guideline to improve dispute resolution arrangements for exempt customers. New and amended core exemption conditions now require exempt sellers to
have appropriate complaints and dispute handling processes, and exempt sellers with residential customers must be members of, or subject to, energy ombudsman schemes where the scheme allows.

We have made a number of amendments to strengthen protections for exempt customers and to better align the protections of exempt customers to those of customers of authorised retailers. Finally, we have made some small housekeeping amendments to help clarify aspects of the Guideline and exemption conditions’ (emphasis added).

Exempt retailers will need to amend their standard conditions to incorporate the changes introduced, particularly conditions 16 and 17.

Condition 16 – Dispute resolution

1 An exempt person must develop and make a set of procedures detailing the exempt person’s procedures for handling complaints and disputes, and those procedures must
be provided to exempt customers in accordance with condition 2(1)(d)(i).

2 The procedures must be consistent with the Australian Standard AS/NZS 10002:2014 Guidelines for complaint management in organizations as amended and updated from
time to time.

3 In the event of a complaint or dispute concerning the sale of energy to an exempt customer, and in the absence of a determination of the relevant tenancy tribunal if the
customer is a tenant, the exempt person must:

a. deal with the complaint or dispute in accordance with the exempt person’s procedures for handling complaints and disputes and

b. make reasonable endeavours to resolve the dispute and

c. advise the exempt customer:

i. of any right the exempt customer has to access an energy ombudsman (if applicable), including to lodge a complaint or for free independent information
and advice, or any other external dispute resolution body in the state or territory where the exempt customer is located, and

ii. of the telephone number and other contact details of the energy ombudsman (if applicable).

Condition 17 – Member of energy ombudsman scheme

1 An exempt person must, if permitted by an energy ombudsman scheme:

a. be a member of, or subject to, an energy ombudsman scheme for each jurisdiction where it sells energy to exempt customers and

b. comply with the requirements of that scheme.

Explicit informed consent

The AER has updated the definition of explicit informed consent as follows:

explicit informed consent means consent given by a customer to an exempt seller where the exempt seller has clearly, fully and adequately disclosed all matters relevant to the
consent of the customer, including each specific purpose or use of the consent; and the customer, gives the consent to the transaction:
 in writing signed by the customer or
 verbally, so long as the verbal consent is evidenced in such a way that it can be verified and recorded or
 by electronic communication generated by the customer.

It has also expanded on what it will require from an applicant to a conversion to demonstrate they have obtained explicit informed consent. The application will need to confirm the following:

• that you have evidence of written consent from all customers impacted by the retrofit; and
• that consent was sought separately from customers for the retrofit and the energy sale agreement.

Importantly you will also need to confirm evidence that where a customer or customers have expressed concerns you have sought to resolve the concerns.

Note although the actual evidence of this consent does not need to be included in the initial application, you should be able to produce the evidence upon request. You should not confirm the existence of this evidence if it does not actually exist.

Who holds the exemption clarified

The new Guideline also clarifies the position in relation to who should hold the exemption when the seller uses third-party agents:

‘We revised Section 5 of the draft Guideline to clarify who should (or may) hold a retail exemption. We say under the current Guideline that the seller is the person or business who
will bear the financial risk of their customers’ non-payment. We proposed amending this because it could include third-party agents, which is not what we intended. Instead, we
proposed defining a seller as the person who buys energy from a retailer at the gate meter and then sells it to the customers at the site’.

Applications for network conversions

New information requirements

The new Guideline has made amendments to the information requirements for applications for network conversions;

‘The draft Guideline included additional information requirements for preparing network conversion applications (Appendix B). These are not new requirements but expand on the
application criteria outlined in section 7.2.1.
We also proposed removing some of the information requirements in Appendix B that we do not require to assess applications, for example, information about energy rebate/concession availability, energy efficiency options, whether premises are separately metered, the frequency of meter reads, and the application of tenancy or other jurisdictional legislation.

…

We have therefore adopted our proposed additions to Appendix B with a further change to the consent requirements (see section 4.5, below).

We have also amended the introduction to section 7.2.1 to explain that applicants need to demonstrate the steps they have taken to mitigate any potential customer detriment. We have removed sub-section 3 (Mitigation of detriment: state or territory legislation) as it is redundant now that exempt customers can access the retail market in all jurisdictions where the exemptions framework applies’. 

Consent

The new Guideline makes it clear that a customer’s consent to a proposed conversion is not the same as their consent to join a network. This allows a customer to consent to the proposed conversion but choose to enter into a supply contract with a different retailer. The Information Notice provides the following important clarification in relation to what is required:

‘To assess whether consent is fully informed, we consider the actions taken by the applicant to disclose all matters relevant to the conversion. Specifically, we look at whether applicants have clearly, fully and adequately disclosed all matters relevant to the customer’s consent. 

We consider information about price is essential to customers’ decisions. It is also important that potential customers are made aware of how easy (or difficult) it is to find another energy retailer. We also consider how applicants sought to obtain consent and customers’ capacities to provide consent. This information needs to be supported by evidence. 

We acknowledge customers in existing embedded networks face the same practical limitations in their ability to access the competitive market as those experiencing a network conversion. However, we believe that customers entering an existing embedded network effectively consent to the network by choosing to enter it and do not see the need to create an additional consent requirement. We note that condition 2 requires exempt sellers to provide new customers with a copy of the conditions and information about energy selling arrangements in the embedded network, which clearly establishes that energy selling arrangements in the embedded network are different. 

We have amended our discussion of explicit informed consent in the Guideline to address the questions and concerns raised in the consultation and to clarify what we mean by the term. The information requirements in Appendix B have also been clarified’ (emphasis added).

Grounds for refusal

The examples of what is a ground for refusal have been expanded to include the following:

• we do not consider it will contribute to the achievement of the national energy retail objective;
  we do not consider it is in line with the policy principles or is consistent with the exempt seller related factors or the customer related factors;
  you have not adequately demonstrated why you should be granted an individual exemption or have not provided evidence necessary to support your application and / or
  claims;
  we consider you should apply for a retailer authorisation, given the scale and scope of your energy sales; and
  you have provided us with false or misleading information.

Class variations

• Class D10 has been expanded to include government contractors who operate facilities on behalf of the government and for whom the sale of energy is part of the overall facility operation. In these situations the contractors are ‘standing in the shoes’ of the government.
• Class R8 has been clarified with the insertion of the words ‘selling energy as a supplementary supply’. This is to make it clear that the class is only open to sellers who are not a customer’s sole supplier of energy.

Core condition variations

Apart from the variation to conditions 16 and 17 referred to above, the following core conditions have been amended:

It is important for current exemption holders to review their terms and conditions to ensure they comply with the new Guidelines.

We will be providing a Webinar on the changes. Please email me at anne@compliancequarter.com.au if you would like additional information about the webinar.