Consumer Law Reform: Meridian Energy Group Oral Submission

Transcription

1 Consumer Law Reform: Meridian Energy Group Oral Submission Gillian Blythe, Regulatory Affairs Manager, Meridian Alannah MacShane, Regulatory Affairs Advisor, Meridian 24 May 2012

2 Overview 1. Overview of electricity regulatory environment 2. Purpose statements 3. Fair Trading Act - Contracting out for business-to-business arrangements - Unsubstantiated representations - Uninvited direct sales - Unfair contract terms and unconscionable conduct 4. Consumer Guarantees Act - Suggested amendments to s.46a indemnity provisions

3 Contract chain affecting electricity consumers Generator Transmission Distributor Retailer Consumer Benchmark agreement Benchmark agreement Use of system Agreement Consumer contract Electricity Industry Participation Code 2010 Customer switching rules Metering equipment rules Meter reading rules Low Fixed Charges Industry regulations Benchmark agreement Model use of system agreement Model consumer contract Medically dependent & vulnerable consumer guidelines Regulatory test will determine whether contract between distributor & retailer, and retailer & consumer will become regulated terms, i.e. whether the models will be enforced Complaint resolution Electricity & Gas Complaints Commission Generic Consumer Law Disputes Tribunal Ministry of Consumer Affairs Fair Trading Act Door to Door Sales Act Consumer Guarantees Act Commerce Commission Unsolicited Goods & Services Act Credit Contracts & Consumer Finance Act

4 Generic purpose clauses are unnecessary and undesirable Meridian supports the inclusion of Act specific purpose statements, but considers the additional generic purpose clause: Is not sufficiently detailed; and Could create interpretive confusion and give rise to risks of one or more of the generic purpose clauses being favoured over specific purpose clauses. Recommendation: Generic purpose statements should be removed from the FTA, CGA, and Weights and Measures Act as they are likely to hinder rather than help interpretation.

5 Contracting out provisions need to protect commercial certainty Meridian supports the general intent of proposed new sections 5C and 5D but considers: Excluding ss. 10 and 11 and s.12 from contracting out provisions may lead to claims being simply reframed; and The fair and reasonable clause 5D(3)(d) requirement will undermine commercial certainty and appears unnecessary, given absence of any such test in CGA does not appear to have led to any issues in the past. Civil and offence proceedings could still be pursued should ss. 10, 11, and 12 be brought into the scope of the provisions. Recommendation: FTA contracting out provisions are are amended to: - allow parties in trade to contract out of ss. 10, 11, and 12 in addition to s. 9 to avoid risks of parties reframing their claims; and - remove the requirement it is fair and reasonable that parties are bound by a contracting out provision, since this requirement is not needed and will undermine commercial certainty.

6 Unsubstantiated claims provisions could deter unobjectionable behaviour A prohibition on unsubstantiated claims is unnecessary and undesirable in practice: - FTA already applies where absence of reasonable grounds is misleading; - Policy basis for criminalising unsubstantiated but ultimately true claims which do not harm consumers is unclear; and - Prohibition would impose significant compliance costs on businesses, and could deter unobjectionable behaviour (for instance, the sharing of genuinely held opinions for the benefit of consumers), for no clear public benefit. It is also of concern that clause 12A appears to greatly extend the reach of the Commerce Commission s information gathering powers under the FTA and appears to preclude supporting research being undertaken by third parties. It is appropriate not to allow for civil actions since this could encourage needless and costly litigation. Recommendations: Section 12A is removed or at least amended to: - limit the prohibition to unsubstantiated factual claims; and - establish that third parties may undertake supporting research in order to reduce potential compliance costs and avoid deterring unobjectionable behaviour.

7 Uninvited direct sales disclosure requirements are unworkable Disclosure requirements need to be re-drafted to recognise: Electricity retailers will not have sufficient information to establish a total price at the time the agreement is formed (e.g. retailers won t know how long the person will be a customer, or their consumption). Legally binding contracts are often first entered into as an agreement over the phone. Recommendations: - S. 36L(2)(b) is amended to allow for businesses to comply by disclosing their method or formula for determining prices where an actual price cannot be provided. - Certain amendments are made to s. 36L to recognise agreements are often formed over the telephone.

8 Unfair contract terms and unconscionable conduct provisions are not appropriate Pursuing legislative provisions on unfair contract terms and unconscionable conduct is inconsistent with best practice regulatory principles: - Australian provisions are recent insufficient time to absorb learnings; - Extent of NZ problem is unknown; and - In competitive industries customers can switch suppliers. Legislative provisions concerning unfair contract terms: - Would constitute statutory intervention in private contractual matters; - Could lead to inconsistencies with the Bill of Rights Act; and - Would lead to undue compliance costs and complexities for the highly regulated electricity industry. Legislative provisions relating to oppressive conduct would be preferable to an extension of the unconscionability doctrine to the FTA Recommendations: - Provisions relating to unfair contract terms and unconscionable conduct are not included in an amended FTA. - If the Committee were to decide to recommend such provisions, it should first invite submissions on an interim report ahead of making its final report to the House.

9 We support distributors and retailers bearing the acceptable quality guarantee but consider refinements to indemnity provisions are needed Meridian strongly supports the s. 46A indemnity provisions: - Indemnity recognises situations where it is unfair for retailers to face the costs of acceptable quality guarantee breaches (incl. network failure); - Unlike similar Code provisions would extend to other potentially relevant parties (e.g. Transpower and embedded networks); and - Code may change over time and any changes will not be subject to the same level of scrutiny. Suggested changes proposed include revisiting the definition of responsible parties due to complexities and risks inherent in adopting a supplying line function services definition. Recommendations: CGA provisions are amended to: - Adopt the definition of distributor from the Electricity Industry Act 2010; - Remove references in s. 46A(1)(a) to who determined the section was breached, since these references are not needed and may be incomplete; - Restrict the payment offset to the same loss and broaden the categories of costs covered to capture all payments based on a Part 2 claim and related expenses; - Allow indemnity disputes to also be heard by courts and the Disputes Tribunal (consistent with the normal course of provisions of this nature) and provide that referral to an approved dispute resolution scheme is at the retailer s option (to promote disputes being considered in the same fora); and - Establish requirements on retailers to notify and consult responsible parties.