Unfair terms for energy retail contracts

As part of an ongoing review of standard form consumer contracts, New Zealand’s Commerce Commission has released a report detailing its findings in the energy retail sector.

Unfair contract terms provisions were introduced in March 2015 as part of changes to the Fair Trading Act. The provisions are designed to protect consumers from contract terms that create a significant imbalance of rights or obligations between the company and the consumer.

The Commission has an ongoing project to review a range of standard form consumer contracts in various sectors for unfair terms. The report on the energy retail sector follows one on the telecommunications sector that was released in February.

Commissioner Anna Rawlings said the energy retail sector was chosen as its second focus because it is an essential service for New Zealanders. “Almost all New Zealanders use electricity provided by an energy retail company, so the potential impact of any unfair contract terms was significant.”

“The majority of the nine energy companies included in the review had made real efforts to comply with the provisions before they were introduced. However, we did identify 59 terms that we considered potentially unfair. Many of the terms were common across the contracts, particularly those that limited the liability of the company, allowed the company to unilaterally vary the contract or automatically renewed fixed term contracts unless the customer opted out,” Ms Rawlings said.

In some instances the companies were able to provide information to the Commission to show that the term was necessary to protect the legitimate business interests of the company. In all other cases, the companies accepted the Commission view and have amended or agreed to amend the terms concerned.

“We are pleased that the energy retail companies constructively engaged with us and were receptive to our concerns, avoiding the need for the Commission to consider court action. Most New Zealanders have a standard form consumer contract with an energy retail company or live in a house that is covered by one. Our review covered 90% of the energy retail market in New Zealand and New Zealanders can now be more confident about the fairness of those contracts, which is a great outcome,” Ms Rawlings said.

All companies have been issued with compliance advice letters from the Commission reminding them of their obligations under the law and cautioning them to ensure their standard form contracts remain compliant with the law.

You can read the full report here.

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