The wax lyrical, but fact – bad behaviours in the Energy Industry

The Checkout in its wax lyrical style ran a story on Energy contracts including exit fees.  Had we not seen it we may have felt we were alone in our concern for the behaviours in the industry. Obviously, this media version was directed for the public appetite, but the story is based on fact! Consumer laws are very weak and the National Electricity Laws strongly favour the Energy Companies.

The Checkout story was run on the ABC (Australian) on 26 June 2014, 8PM. It is also interesting that it did not highlight a single company practicing or should we say taking advantage of ‘trust me’ then doing the screw you turn on you the user – it highlighted a common practice among many retailers in the industry. We appreciate residential customers have some protections, but that in NSW is set to change or should we say leave many people further exposed to the behaviours. Whilst the market will be fully deregulate, it would seem the Laws and rules of the industry will not be amended soon.

Those with legal training, or savvy enough will avoid the pitfalls and probity issues of the simple thing and essential commodity – energy needs. However, in a conversation with the other side (a energy retailer) recently they admitted that they too found it difficult to follow the rules. Why, consider this: You want to change the wording on your contract – a simple word change on a clause. You have a dispute and that word is found to ‘not flow’ with the rest of the contract. Therefore the wording of the National Electricity Law is to be relied on. It overrides what is written in your contract. Ok that is the scary part. The practical is that mum and dad’s are told ‘we care, we will look after you, you will save, that’s good is it not ‘– you say yes, and Call Centre then declares you are now under contract. So simple – but, you don’t save. That issue is covered off so well in The Checkout Story.

Business customers have a little more exposure in that depending on their size, according to the market, as opposed to Corporations Law, they will need to be careful of the Energy Service Agreement (ESA), the Contract, they have presented to them. For instance, most have terms and conditions in the standard form that will penalize for exceeding consumption caps. The penalty can result in the price offered being withdrawn and you being placed on a default tariff that can be hundreds of percent higher than what you negotiated. Another trap is that you need to be mindful that the network charges are not negotiated in most standard form agreements. You might say, the rules say a network tariff review must be conducted – but beware it is not binding on the retailer that they be negotiated unless stipulated on the contract.

That last paragraph also highlights what you need to know. Your consumption caps are not binding on the network company. The ESA is a contract for supply from the retailer – it protects the retailers from its risk in the market. The transport and distribution networks will rely on what is the constraints of the system and set limits as it sees affects its asset. An example: Your retailer ESA says 20% variation allowed. Your network company – generally a default and deemed contract according to law, say we will impose a demand tariff on you when you exceed 160MWh per annum load. It may be good it may be bad depending on your circumstance. But, what is does not do is connect your circumstance to your ESA. You should also be aware the majority of business is distribution connected and prices set for the transport are determined by an approved formula. If you are large enough to be classified for a transmission connection you can have sway in contracting and negotiating what you take from the system. For the very large customer you also need a team of lawyers to complete the deal.

Now, all above is about import power, what if you want to export power – small scale generation – well what was called a power purchase arrangement (PPA) is now a Energy Supply Agreement (ESA) as described by the Australian Energy Regulator (AER). Before we go any further did you notice the near same term and the same acronym meaning something similar but very different in what it does. To use the words of our good friends Solar Professionals: “Can I start by saying that the creation of an ESA template is both very expensive and lengthy in duration. Multiple legal aspects have to be considered when drafting these contracts, from property law, banking institution requirements, GST impacts, numerous funding and system requirements not the mention standard consumer law principals and all the requirements from the AER.” We include this to let you know what is needed is complex and has a very detailed need.

So what started off as a wax lyrical presentation, now shaped the focus on what (watt) can really hurt you – electricity! We guess once the carbon tax is gone, another way to tax will follow! Lets us be a little devil – they might impose a transport tax on delivering you energy? Well it makes sense – they make the electrons cheaper but now the transport cost is fairer?

On that matter of the Carbon Price our politicians are saying they will force the ‘energy companies to pass on the savings’. Did you know the majority of your Carbon Price is blended into your network charges? It is not transparent. The energy retailers cannot unbundle what the network companies levy you. Maybe the politicians need an education too! Yeah, that has appeal – Politicians ESA 101. Or more correctly they might prefer: The tax is dead, long live the tax!

 

Inappropriate electricity tariffs – it will cost you!

Inappropriate electricity tariffs have the potential to cost excessive amounts of money for the unwary. In NSW for instance, the National Electricity Law (NSW) has gaps in it you can drive a truck through. Consider this: Energy Retailers might know you are paying too much for your network charges, and they take no action. The Energy Retailer can request a review of your charges, but apart from a newly introduced mandatory review period, may not provide this service. One retailer even provided proof in saying the do not have the systems in place to be proactive on behalf of the Customer. In other words it may be immoral, but it is not illegal to withhold the service. CO2Land org has written evidence that one NSW small business has claims of having been on an inappropriate network tariff and it costing them as much as 72% more than needed to pay – how much? Almost a quarter of a million dollars ($250,000)!

Another issue is that a deemed contract can exist whether you are aware or not, and it may be a simple communication error that costs you dearly. As a residential customer it may cost you up to $220 because you entered into a new Energy Service Agreement (ESA) and were not aware you were already contracted to another retailer. The charge is a break contract fee. It will not be transparent and a St Vincent De Paul commissioned report suggests it is also unreasonable.

A similar break fee event, that CO2Land org is aware of, involves a Commercial and Industrial (C&I) customer with an annual energy spends of approximately $50,000 pa. This small business was invoiced in excess of $10,000 (including government fees and charges) for breaking a deemed contract. In that invoice no attempt was made to show how the number was arrived at other than the words ‘to cover costs’ and a list of the government charges. The source of these two examples here is Wintelboff – www.wintelboff.com .

Possibly you should contact your favourite energy advisory and have them look at your bills?

Co2Land org is also aware that through the Office of Environment and Heritage (OEH) and in conjunction with Carbon Training International (CTi) ‘Energy Management Basics Training for Business’ is available. The ‘plug’ is because they also offer to review your billing as part of the class exercise, and provide up to 15 hours of technical advice as part of the course.

We are also aware the NSW Business Chamber is offering discounts to its members of up to 19% if they use Energetics to participate in the Business Chamber’s ‘Better Energy Manager Program’.

Which of these groups is better? It really gets down to cost. The benefits are obvious if you are paying too much.

If we go back to the National Electricity Law (NSW) and the way it is framed – sounds like a Roger Rabbit episode! A quick read will make it clear the consumer advocacy part is weak. A large business must engage through a complex process for its matter to be heard. [As an aside a business can be classified as large if it has energy consumption greater than 160MWh pa. However, it may not be large under taxation and corporate laws]. If you need to go to court over your energy bills, the dispute resolution it will be classified along corporate laws. You could be excused for being confused! A course of dispute resolution is to go to the Energy and Water Ombudsman NSW (EWON). What you should know is EWON is not a government-sponsored body – it is industry member sponsored. The body can also make the choice to be involved in disputes? They will make legally binding judgements, but they decide whether to be involved and you must have your wants clearly made and they must be for more than moral issues. They also have guidelines in the use of the body. Currently, you need to have an annual turnover of less than $2million, employ less that 20 people and be a family run business. Some variation to these guidelines are possible, but you might need to contact them if you have questions www.ewon.com.au .

If you did not know there is ‘spin’ that all this be fixed when the assets are sold? As it happens the poles and wires – the network companies in NSW are state government businesses. If the process is flawed you could expect a reasonable person asking why is it not fixed? The answer may be it is an inconvenient truth right now, we are trying to sell the companies!