Thinking | 16 June 2021
Shut the front door! Door-to-door sales to be prohibited, as Victoria introduces Energy Fairness Bill
The Andrews Labor Government recently introduced the Energy Legislation Amendment (Energy Fairness) Bill 2021 (Energy Fairness Bill) as part of its retail electricity and gas energy market reforms.
To give some background on the current raft of reforms (which to date have included making contracts fairer, the Clear Advice Entitlement and introducing the Victorian Default Offer), we can travel back to August 2017 and the release of the independent review into the electricity and gas retail markets in Victoria (the Thwaite review).
The Thwaite review found that the introduction of competition to the Victorian energy market in 2002 did not have the intended consequences of lower prices for consumers and more market participation. Instead, since 2000 (prior to competition), it found that electricity and gas prices for Victorian households increased by almost 200%.
Nearly one-quarter of the customers whose bills were analysed for the review were paying at least $500 more than the cheapest available offer. The Thwaite review came to the conclusion that strong market intervention was required to ensure better outcomes for consumers.
And coming back to the present day, the Victorian Government appears to be seeking to implement such strong market intervention with the introduction of the Energy Fairness Bill. This Bill introduces new measures to address some of these alleged imbalances between energy retailers and consumers, including:
- a ban on electricity and gas retailers from using door-to-door sales or cold calling sales tactics, which comes into effect on 31 December 2021;
- a ban on ‘save’ or ‘win-back’ offers, which often include short term discounts but can end up costing more over the course of the contract;
- introducing new criminal penalties of up to $1 million for energy retailers who arrange the wrongful disconnection of vulnerable customers; and
- introducing penalties of up to $1 million for licensees who provide false or misleading information to the Essential Services Commission.
There is some concern in the market that introducing more regulation will have a different set of unintended consequences and that the reforms that have already been introduced by the Victorian Government sufficiently address the concerns set out in the Thwaite review. Or further, that the Victorian Government is seeking to regulate for issues that do not need to be regulated, such as wrongful disconnection (energy retailers already do not do it).
For example, the Australian Energy Council noted that research conducted by Energy Consumers Australia highlighted that 19% of customers who considered switching energy companies in Victoria, did so because they were proactively approached.
The concern is that if retailers are prohibited from contacting customers, there is likely to be less engagement by consumers and people will be more likely to stay on their current contracts or contracts based on the Victorian Default Offer (which in some cases can be up to several hundreds of dollars more than the cheapest market offer).
Smaller retailers may be particularly affected by the ban on door-to-door sales and telemarketing as without these channels, it is not clear how smaller retailers can expect to gain any real market share. The rationale from the Government is that any impacts on competition are expected to be offset by the bans on ‘save’ and ‘win-back’ offers.
As with all market reforms, it will be a matter of time to see whether they achieve the desired economic outcomes.
In the meantime, please contact us for any assistance you need with understanding the proposed reforms and the effects they may have on your interactions with your customers.
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