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Domestic electricity retail contracts

The Authority is progressing a significant body of work that had been undertaken to date by the Electricity Commission and other industry groups regarding electricity retail contracting arrangements.

Current status

This page provides the results of the June 2010 Consolidated Report and Retailers' Report on this page provide the results of the June 2010 baseline review and the July 2011 alignment review.

Background

In mid-2009, a point was reached where it was timely to consider whether the development of model contracts was the most appropriate approach to meeting the desired market outcomes for this aspect of its retail work programme. The need to intervene in the market in the area of domestic retail contracting arrangements was considered, and various options ranging from taking no action (i.e. relying on general consumer protection law) through to a fully regulated domestic retail contract were explored.

A draft set of Reasonable Consumer Expectations (RCEs) was identified for domestic electricity consumers and proposed for consultation, and the extent to which the options identified could assist in meeting those expectations was assessed. It is important to emphasise that the set of expectations was written from the consumer perspective and related to matters wider than just the retailer contracting relationship.

In its consultation paper, the Electricity Commission proposed a voluntary approach to retail contracting arrangements based around a comparatively narrow set of suggested minimum terms and conditions, supported by a set of good contracting principles. The RCEs were used to develop the draft set of principles and terms for consultation. It should be noted that the RCEs were not intended to be the performance standard for assessing compliance per se; rather, they provide a framework for identifying terms and conditions that reflect the reasonable expectations of consumers (as referred to in paragraph 38 of the Government Policy Statement).

Having considered submissions, the Electricity Commission:

• remained of the view that there is a need to take some action to protect the interests of consumers in their domestic retail contracting arrangements; and
• considered that there is reasonable support for its proposed approach (even though some of that support comes from parties who are not convinced of the need to intervene at all).

In finalising the domestic retail contracting arrangements, the Electricity Commission:

• made some amendments to the set of RCEs; and
• made some amendments to the set of contracting principles and minimum terms.

Monitoring and transition

It is intended that monitoring of retailers’ adoption of the proposed arrangements will take place over a two-year period. As suggested by submitters, monitoring started with a baseline review of the level of alignment between each retailer’s own contracting documents, and the published set of suggested minimum terms and conditions. The baseline review was relatively informal and individual results were not made public. The first formal review will take place at the end of the first year (in June 2011), and the second, one year after that (in June 2012). At the end of the two-year period, an assessment will be made as to whether the voluntary approach is achieving satisfactory outcomes, or whether alternative approaches are warranted.

Baseline review - June 2010

At a high level, the baseline review was carried out on the following basis, (the assessment methodology contains more detail, and retailers were written to about the baseline review process):

• The review used only published or publicly available information as at 15 June 2010;

• Assessment was qualitative in nature and indicated the extent to which each clause in the minimum terms and conditions was met by retailers’ published terms and conditions and any associated documents. Ratings range from Full alignment, through Substantial, Moderate, Low, to None, and included a Not Applicable (N/A) rating for some terms;

• The Electricity Commission carried out the baseline review, but retailers were also invited to undertake their own review, if they wished to do so;

• The output of the baseline review was an individual report for each retailer (which was not published) and a non-attributable, consolidated, high-level report (Consolidated Report) that has been made publicly available. Before finalisation, retailers were invited to provide feedback about their draft individual reports - this feedback could either be in writing, on the phone, or face to face in a meeting. In addition, a second more detailed report was prepared for retailers (Retailers' Report) to help them consider what changes they may wish to make before the planned first formal alignment review in June 2011;

• Individual reports and the consolidated report were finalised in September 2010; and

• The GIC also carried out its baseline review of retail gas contracts at the same time. This provided an opportunity for sharing information to help minimise effort required on the part of dual-fuel retailers.

Minor amendments to principles and minimum terms and conditions

In April-May 2011 the Authority consulted on some proposed minor amendments intended to address areas where the principles and minimum terms and conditions appeared to have unintended consequences or raised legitimate issues affecting retailers' ability to comply.  These matters, and the intention to address them, were signalled to retailers by the Electricity Commission in September 2010.

The Authority has completed its consideration of the submissions received on the proposed amendments and prepared and published in June 2011 a revised set of principles and minimum terms and conditions for domestic retail contracts. These are published below.

Alignment review – July 2011 

Over the period July to September 2011 the Authority assessed the extent to which electricity retailers’ domestic contracts aligned, as at 1 July 2011, with the published set of voluntary, good-practice, contracting principles and minimum terms and conditions for domestic retail contracts issued by the Electricity Commission.

For this ‘alignment review’ the Authority adopted a similar approach to that followed by the Electricity Commission for the June 2010 ‘baseline review’.

The results for the 2011 alignment review are summarised in the 2011 alignment review consolidated report below. Three retailers, TrustPower, Genesis Energy and Powershop, substantively amended their domestic electricity retail contracts in line with the minimum terms and conditions over the 12 month period between the 2010 baseline review and the 2011 alignment review, and achieved full or substantial alignment with between 89% and 99% of the applicable minimum terms and conditions.

This page is related to: Retail and Wholesale Market.

Back to top Last updated on 16 December 2011