Res Online 24 - August 2018

Number 24
August 2018

Res Online 24 - providing up-to-date information, statistics and analysis on energy and water complaints.

Overview

The Ombudsman's View

Re-emergence of energy marketing issues

Between 2013 and 2015, complaints to EWOV about energy marketing and related account transfer issues decreased markedly. This welcome development coincided with a shift away from door-to-door sales and telephone marketing by some larger energy retailers, following scrutiny of these practices by regulators and consumer groups.

However, EWOV's recent case handling is highlighting energy marketing issues which are particularly concerning and which suggest that energy mis-selling is still occurring among some smaller energy retailers.

The 'issues watch' feature in this Res Online highlights recent systemic energy marketing issues we've identified in EWOV's case handling. It also summarises customer rights and retailer responsibilities when it comes to energy marketing and switching retailer. 

Other case studies in this issue

Affordability Report

In our latest quarterly Affordability Report, released in June 2018, we draw on our analysis of the rate of EWOV credit cases in different municipalities to highlight Victoria's affordability 'hotspots'. The results show that these 'hotspots' are in relatively disadvantaged areas, many in rural and regional Victoria. Read it here.

Cynthia Gebert

Energy and Water Ombudsman (Victoria)

Marketing-related systemic issues

Marketing-related systemic issues

EWOV's identification and reporting of systemic issues plays an important part in reducing the potential for problems or practices to affect more customers. Our recent casework has highlighted several systemic issues related to energy marketing practices. With a view to curtailing the impact of these practices on customers, the Ombudsman has written to the Australian Competition and Consumer Commission (ACCC).

The issues have arisen in both door-to-door and telephone sales, with customers complaining of misleading and high-pressure sales tactics and transfer of their account to a different energy retailer without their consent:

  • Over 2016 and 2017, EWOV received 15 complaints from customers complaining that they’d received an excessive number of telephone sales calls from a small retailer. The retailer’s explanation was that this was the result of poor practices by two different sales companies it had engaged, and the practices were subsequently stopped. (SI/2016/50)
  • Over 2016 and 2017, 17 customers complained about a small retailer’s misleading door-to-door marketing and related transfers without consent. The retailer’s explanation was that the complaints related to conduct by multiple sales companies. It said one sales agent was dismissed and agents were re-trained. (SI/2016/70)
  • In early 2018, several customers complained about transfers without consent following telephone marketing calls from a small retailer. The retailer’s explanation was that its sales company had obtained explicit informed consent, but some customers seemed to be unaware they were agreeing to transfer. It said it had since modified the consent procedure to include a customer ID check, which would make it clearer that the customer was agreeing to a transfer. (SI/2018/15)

EWOV is currently investigating a potential systemic issue (SI/2018/26) relating to door-to-door sales. A different small retailer’s practices have prompted a customer complaint about transfer without consent.

A reminder of rights and responsibilities

While the Energy Retail Code places some specific obligations on energy retailers around provision of information to customers and energy marketing activities, it's not the only source of marketing obligations. Other codes and laws setting out the rules that energy retailers and their sales representatives must follow include the Australian Consumer Law, the Australian Communications and Media Authority (ACMA)'s Do Not Call Register, and the Telecommunications (Do Not Call) (Telemarketing and Research Calls) Industry Standard 2017. 

The Australian Consumer Law provides that people must be given clear, truthful and easy-to understand information. Marketers must be honest that they’re selling energy. They mustn’t let the person think they’re calling from their current energy retailer or distributor, or from the government. They mustn’t pressure someone to make a decision. If someone says ‘yes’ to a sales representative at their door, they must be given the contract terms and conditions then and there. If they say ‘yes’ over the phone, the terms and conditions must be sent to them as soon as possible.

Consent to switch to another energy retailer must be explicit (a conscious decision) and informed (the person knows what they're agreeing to). It must also be shown by the person's signature on a contract (door-to door sales) or a voice recording (phone sales) and kept by the energy retailer. There is a cooling-off period of 10 business days starting from the day after the person agreed to and signed the contract, or received the contract information. Within this time, the contract can be cancelled without penalty.

This information is summarised in EWOV's Energy marketing fact sheet

Customer story: Pressure sales
Telemarketing; aggressive and persistent sales representative
Case number: 2017/21347

Ms T was distressed after a telephone marketing call from an energy retailer's sales representative. She said she was aggressively pressured into a contract for electricity and gas, even though she said she wasn’t interested and was happy with her current retailer. She said the salesperson persisted, insisting she should change retailer.

We registered Ms T's complaint as an Assisted Referral and facilitated contact with her by a higher-level contact within the energy retailer. She returned to EWOV saying the retailer hadn't contacted her as part of the Assisted Referral process, so we opened an Investigation.

Responding to EWOV's Investigation, the retailer apologised for what it assessed as inappropriate behaviour on the part of the sales representative. It said it had reviewed the recording of the call to Ms T and agreed that the representative had acted aggressively, hadn't listened to her and had pressured her into a contract. The retailer said its sales agent had since put the salesperson through a six-week training and coaching plan and had undertaken to closely monitor all his future sales. The retailer confirmed that no contract was in place.

The retailer added Ms T to its 'do not contact' list so that she wouldn't receive any more marketing calls. She was given a direct contact at the retailer should she have any further concerns. We also referred Ms T to the Australian Communications and Media Authority’s Do Not Call Register, so she could list her phone number and opt out of receiving telemarketing calls generally.

Ms T was satisfied with this outcome. The complaint was closed.

Customer story: Transfer without consent
Telemarketing; customer requested information; found his account switched to a different retailer
Case Number: 2017/25002

Mr B received a telemarketing call from an energy retailer. He said he didn't agree to switch, but he did ask for some written information so he could consider the offer. When he didn’t receive anything, Mr B called the retailer to ask for the information again. The customer service representative who took the call told Mr B that he’d already signed up and his cooling-off period of ten days was about to expire. The same day, Mr B received a welcome pack via email. Mr B said he'd tried several times to get through to the retailer's call centre to cancel the transfer. When he couldn't get through, he contacted EWOV.

We registered Mr B's complaint as an Assisted Referral and facilitated contact with him by a higher-level contact within the energy retailer. He returned to EWOV saying he received a call and was assured a transfer back to his original retailer would be arranged. However, the same day he received an email stating that a payment would be required. He rang the retailer again. This time he was assured the transfer back would be arranged by mid-November 2017. When that didn’t happen, Mr B recontacted EWOV and we opened an Investigation.

Responding to EWOV's Investigation, the retailer acknowledged that it had obtained the billing rights to Mr B’s property incorrectly. It arranged a retrospective transfer back to his original retailer and confirmed that he wouldn't be billed. To make sure he wouldn’t receive any more marketing calls from it, the retailer put Mr B on its 'do not call' list. It also provided a $50 customer service payment via credit card in recognition of the inconvenience the transfer without consent had caused.

Mr B was satisfied with this outcome. The complaint was closed.

Top Issues

Case Studies

Cases by Industry

Systemic Issues

Summary of systemic issue Investigations opened and closed

April to June 2018
 

  Energy Water LPG
Open/Under Investigation 3 0 0
Closed 7 0 0

Note: Systemic issue Investigations opened and closed during the above period that cannot yet be identified as
being systemic haven’t been included.

Systemic issues identified through EWOV's case handling

April to June 2018

Energy

Poor customer communications during unplanned outage event

During a weather-related unplanned outage in January 2018, around 14,000 customers were affected by problems with the local electricity distributor's website, faults and emergency lines, and notifications. The distributor acknowledged the problems. It said it was using what went wrong to help it plan for future events. This included making changes to its website and SMS messaging system. SI/2018/7

Transfer complaints follow telephony problems

An energy retailer linked a spike in transfer complaints to the systemic telephony issues EWOV had investigated previously (SI/2018/10). It said some customers had changed their mind about switching, and others didn't think they'd entered into a formal contract because they weren't asked for identification at sign up. The retailer maintained that its sales company had obtained explicit informed consent for the account transfers, but some customers still seemed to be unaware they were agreeing to switch retailer. It said it had since modified its consent procedure to include a customer ID check, to make this clearer. SI/2018/15

Backbilling further than code allows

Through EWOV's case work, we identified that some customers had been backbilled for longer than allowed under the Energy Retail Code. The energy retailer advised that it had since changed its billing system processes to generate reports identifying bills for periods of over nine months. It now assesses whether a credit should be applied to reduce that billing to nine months. It said it had also updated the guidelines its employees follow in these cases. The retailer said it had provided affected customers with a credit of charges outside the billing time limit. SI/2016/74

Contract unclear on application of off-peak rates

EWOV's case work revealed that a customer had been billed on peak rates for all usage, despite an off-peak rate being listed on the welcome pack he was sent. The retailer responded that strict observance to network tariffs is not mandatory. It said that, under the Energy Retail Code, a retailer is required to notify the customer of all applicable prices and tariffs as part of their contract. It maintained it had complied with this in its paperwork, which listed peak, off-peak and solar tariffs. While the energy retailer appeared to have complied with relevant laws and codes, we communicated EWOV's assessment that its contract paperwork wasn't clear about when off-peak rates were applicable. SI/2017/11

Connection delays due to industrial action

Industrial action, by way of work bans by its contractors’ union, resulted in disruption to an electricity distributor's new connections. Once the union lifted the bans, delayed connections were completed. Under the Electricity Distribution Code, a distributor must connect a new connection on an agreed date or within 10 business days of the request. Where it doesn't meet this timeframe, the distributor must make a Guaranteed Service Level (GSL) payment of $70 for each day it is late, up to a maximum of $350. The energy distributor advised that it would make GSL payments to affected customers. SI/2017/25

New connection service orders rejected

EWOV's case handling highlighted that an energy distributor's system was rejecting new connection service orders. The distributor advised that recent changes by the Australian Energy Regulator meant that new connections now needed three service orders. It said the rejections related to service orders submitted by one energy retailer. In consultation with the retailer, it had made a system change to address the problem. SI/2018/24

Application of credit default listings

Several cases to EWOV highlighted that an energy retailer had applied credit default listings after customers defaulted on their agreed payment arrangements, but hadn't sent the customers the required notices. Advice to EWOV from the Office of Australian Information Commissioner was that this was incorrect. The energy retailer agreed that the information it provides to its customers about its default listing process could be clearer, including the possible consequences if the customer defaults on a payment arrangement. The retailer undertook to amend its payment arrangement letters to include an additional notification statement. SI/2018/8

Public submissions made by EWOV

National Energy Retail Amendment (Advance notice of price changes) Rule 2018
Australian Energy Market Commission (AEMC)

While noting that the proposed rule change won't be applicable in Victoria in the short term, we provided comments in anticipation that the ESC may look to harmonise the Energy Retail Code with the proposed rule. We welcomed the proposed change. EWOV's data and case handling show an increase in complaints and customer misunderstanding about how retailers may vary prices without notice. In our experience, delays in telling customers about price increases exposes them to a higher risk of bill shock. Our submission provided analysis of relevant EWOV case data, explained the common complaint issues where customers may have been affected by an increase of tariffs during a fixed-term contract, and included some case studies to illustrate customer experiences.

EWOV's submission online  
About this AEMC consultation

Estimated meter reads
Australian Energy Market Commission (AEMC)

With this proposed rule change not applicable in Victoria in the short term either, we again provided comments in anticipation that the ESC may look to harmonise the Energy Retail Code with the proposed rules. We welcomed this change also. Complaints to EWOV about inaccurate meter reads remain high, despite the completion of the Smart Meter rollout. For some customers this has meant unusually high bills. Other customers have found it difficult to manage their energy usage. Our submission provided analysis of relevant EWOV case data, explained the common complaint issues where customers may have been affected by an inaccurate estimated meter read, and included some case studies to illustrate customer experiences.

EWOV's submission online  
About this AEMC consultation

Strengthening protections for customers in hardship
Australian Energy Market Commission (AEMC)

We welcomed the proposed change, which would require the Australian Energy Regulator to develop binding Customer Hardship Policy Guidelines, as a single point of reference for industry on hardship obligations. In EWOV's experience, the hardship support provided to customers is inconsistent across retailers. Our submission provided analysis of relevant EWOV case data, addressed sections of the consultation paper relevant to EWOV's role, and provided a case study.

EWOV's submission online  
About this AEMC consultation

 

Glossary

Find out more about EWOV's issue and complaint terminology.