A large market gas customer disputes the default rates applied to his account after his contract expires (November 2017)

Getting connected and changing energy company, High bills
Case Number 2017/10453
Outcome Conciliation

The Issue

The large market gas customer, a commercial flower grower with annual consumption of around 15,000 GJ, was on a contract that was due to expire on 31 December 2016. Although the customer and retailer had discussed a new contract in December 2016, no new agreement had been put in place. The customer then transferred to a new retailer from 1 March 2017.

Initially, the original retailer had billed the customer for its January 2017 usage using rates from the expired contract. However, in April 2017 the retailer reissued the bill using the default rates – drastically increasing the charges. The customer’s representative, Mr S, was dissatisfied that the retailer hadn’t given any advance notification of the default rate that would apply.

We raised an Assisted Referral, but Mr S recontacted EWOV when the retailer didn’t respond within the timeframe it had agreed. We opened an Investigation into the case. While we investigated, the customer agreed to make a payment of $30,000, representing the portion of the charges that it wasn’t disputing.

The Investigation

The retailer explained that since the contract had expired on 31 December 2016, default rates applied for usage in January and February. It pointed out that it had attempted to negotiate a new contract with the customer’s broker. The customer’s contract had stated that default rates would apply after expiry, and the retailer had also explained this in an email to the customer on 20 December 2016. The retailer said that it was within its rights to charge the default rate and correct the initial undercharging.  

Reviewing the retailer’s email to the customer, however, we noted that it had only advised that the default rate would be ‘at least’ $14.50 per GJ. The next day, the retailer had updated its website with the actual default rate, which was $23.50 per GJ. However, its email to the customer the day before didn’t refer the customer to the website to check current rates.

The default rate was increased again in February 2017, and the customer was directly notified of this higher $37 per GJ rate on 7 February 2017. Mr S said that the customer would consider the matter resolved if it were billed at $14.50 per GJ from 1 January 2017 to 7 February 2017, and at $37 per GJ for the rest of February.

Mr S argued that it wasn’t fair and reasonable for the retailer not to directly notify customers about price increases. We reviewed the customer’s contract and the applicable laws, but these contained no further conditions about how and when the retailer was required to notify the customer about specific default rates.

In the absence of any legal requirement, we asked other retailers about good industry practice in this area. Two retailers said that they considered the customer’s proposal to be fair; one of these retailers said that it notifies customers of specific default rate increases in both a letter and an email from the Account Manager. The third retailer said that it rolls over contract rates rather than applying default rates. In light of this advice, we asked the customer’s retailer to reconsider its position.  

The Outcome

The retailer apologised for the lack of communication and delay and the inconvenience caused by the matter. It agreed to the customer’s proposal, rebilling it at a rate of $14.50 per GJ for the 1 January 2017 to 7 February 2017 period. This amounted to a $15,902.08 reduction in charges, leaving $12,108.31 owing on the customer’s closed account. The customer confirmed that it would pay these charges and the case was closed. 

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