When can an energy retailer change prices for Victorian small energy customers?

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Clause 94 of the Energy Retail Code of Practice aims to provide small customers with certainty that tariffs payable under a market retail contract can only be increased by a retailer on a network tariff change date or otherwise as permitted by Clause 94.

The General Rule

Pursuant to subclause 2, a retailer must not increase any of the tariffs payable by a small customer under a market retail contract except with effect from a network tariff change date.

Subclause 3 states that a retailer is not permitted to increase any tariffs payable by a small customer under a market retail contract with effect from a network tariff change date if the relevant contract is a fixed price period contract or the retailer is otherwise prohibited from doing so under the terms and conditions of the relevant market retail contract.

Subclause 4 states that a retailer must not increase any of the tariffs payable by a small customer under a fixed price period contract except with effect from the date on which the fixed price period expires and each anniversary of that date.

The Energy Retail Code of Practice includes the defined term exempt to market retail contract and the code notes that the general prohibition does not apply to tariffs payable by a small customer under an exempt market retail contract provided that the relevant contract is entered into on or after 1 July 2020, and the retailer has complied with its obligations under Clauses 26(4) and 118 of the Energy Retail Code of Practice to obtain the small customers’ explicit informed consent to enter into that exempt market retail contract. 

The term exempt market retail contract is defined in Clause 117 and, more broadly, Division 7.  An exempt market retail contract is a contract that includes a tariff that continually varies in relation to the prevailing spot price of energy, or under which a small customer pre-purchases a specific quantity of energy, or on terms and conditions in respect of which the Essential Services Commission has granted an exemption.  The requirements in relation to explicit informed consent and notice and reporting are provided within Clauses 118 and 119.  Additional requirements apply with respect to tailored assistance to customers on exempt market retail contracts by virtue of Clause 120.

Price changes outside of network tariff change dates

By subclause 6, the Energy Retail Code of Practice provides that in the event that a VDO price determination is varied on account of an event that was uncertain or unforeseen by the Essential Services Commission, Subclauses 2 and 4 do not prevent a retailer from increasing any tariffs charged under a market retail contract with effect from the date one month after the date on which the variation to the VDO price determination takes effect. Clause 13(3)(a) of the VDO order permits the Essential Services Commission to vary a VDO price determination if an uncertain or unforeseen event has occurred or will occur.

Further ‘carve outs’: Subclause 7 provides that Subclauses 2 and 4 do not prevent a retailer from increasing any tariffs charged under a market retail contract at any time where:

• The increase to the tariff is a direct result of, and does no more than to give effect to, a tariff reassignment by the distributor; or

• The market retail contract is in respect of more than one premises and the customer is or would be a small customer in relation to at least one of those premises and the aggregate of the actual or estimated annual consumption level of the relevant premises is higher than (in the case of electricity) the upper consumption threshold provided for in an order made under Section 35(5) of the Electricity Industry Act.

Fixed benefit contracts

Clause 96 provides that any fixed benefit period must apply for the duration of the market retail contract.  Within this clause, the Energy Retail Code of Practice notes that if a market retail contract provides for a discount, a rebate or credit (including a conditional discount) to be made available to the small customer for a fixed benefit period, the retailer must continue to make that discount, rebate or credit available and must not change the amount of that discount, rebate or credit throughout the term of the contract.

Meaning of network tariff change date

The term network tariff change date means the date one month after (in respect of electricity) the date on which the relevant distributors approved pricing proposal takes effect under Clause 6.1, 8.8(d) of the NER.

In summary: to comply with the Energy Retail Code of Practice, a retailer must only (as a general rule) increase its tariffs if the relevant market retail contract allows for such an increase and is not a fixed price period contract, with effect from a network tariff change date.  The exceptions to this general rule are nuanced and retailers should be careful when seeking to change tariffs outside of this general rule to ensure that they do not fall foul of Clause 94 of the Energy Retail Code of Practice.

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