Commerce Commission finds 59 'unfair' terms in energy contracts

Tuesday 30th August 2016

The Commerce Commission's review of household contracts with electricity and gas suppliers has found 59 terms it considers unfair to consumers.

The regulator began investigating the industry in May 2015, following an amendment to the Fair Trading Act that came into force in March 2015. That law bans unfair contract terms on standard form consumer contracts.

The contracts offered by Mercury Energy, Contract Energy, Meridian Energy, Powershop New Zealand, Trustpower, Genesis Energy, Pulse Energy, Nova Energy and The Lines Company were all examined.

All nine providers had terms the Commerce Commission viewed as being unfair to consumers. Trustpower had the most, with 17 terms attracting the ire of the regulator. The Lines Company had the least, with only one term being highlighted.

Three of the energy companies had contracts that allowed them to unilaterally renew a fixed term contract and imposed a termination fee to exit the renewed contract. All three sought to justify this, but the commission has ruled this is unfair. Two of the companies have changed their practices by dropping the termination fee, while the third no longer automatically renews fixed contracts.

Many of the contracts also contained clauses that allowed the energy company to vary the price of the service, despite the contract being for a fixed-term, something the commission said, "created a significant imbalance between the parties' rights and obligations under the contract." In response, the companies said that while the contracts could be interpreted in this way, "they had no intention of changing the price of fixed-term contracts." This is to be made clear in amendments or future versions of the contracts.

One company, The Lines Company, imposed a condition that required a customer who bought a property with an existing electricity installation to pay outstanding lines charges as a condition for the continued use of the installation, something the commission described as "inherently unfair." The term is to be removed from The Lines Company's contracts.

Another, Trustpower, imposed a term which gave itself the right of first opportunity to negotiate with a customer if they wished to leave and switch to another company. The commission said this would mean that a customer could be "deemed to be in breach of contract if it did not allow the company to negotiate with it" and constrained a customer's ability to terminate the contract. Trustpower has agreed to remove the term.

The commission has closed its investigation, saying the companies have addressed each of the clauses the commission considers to be potentially unfair. A review of the contracts offered in the credit industry and by gyms is ongoing.

BusinessDesk.co.nz

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