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House of Assembly - Fifty-Second Parliament, Second Session (52-2)
2012-11-01 Daily Xml
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ELECTRICITY (EARLY TERMINATION) AMENDMENT BILL

Introduction and First Reading

Mr WILLIAMS (MacKillop) (10:38): Obtained leave and introduced a bill for an act to amend the Electricity Act 1996. Read a first time.

Second Reading

Mr WILLIAMS (MacKillop) (10:38): I move:

That this bill be now read a second time.

There has been a lot of public discussion of late about electricity prices, and the debate has canvassed a wide range of issues. The one this bill seeks to address is what we call 'exit fees' or 'termination fees', where small electricity consumers (and 'small electricity consumers' are defined in the Electricity Act, that is, basically householders) wish to transfer their market contract from one electricity retailer to another.

The way the market has operated in recent years, since we have had full contestability or competition in the retail market, means we now have something like 10 retailers operating in the South Australian electricity market. They are quite aggressive in signing up new households and new clients to their business as an electricity retailer. They are offering quite generous discounts. One of the headaches that customers are finding is that the discount that they have been offered is not actually related to anything. They are approached generally by door-to-door salespeople and they are promised maybe a 10, 12, even up to 15 per cent discount, but they are never really informed about what the discount is against.

They are told they are going to get electricity cheaper than what they are getting it from their current retailer. Quite often if they contacted their current retailer they may, again, be able to get a discount on the price that they are currently paying for electricity. So the marketplace is quite dynamic and it is quite volatile.

A host of things is impacting on the electricity market at this time but one thing that customers are complaining about is, first of all, the way that the salespeople operate, and I understand that the industry has done a lot of work to try to tidy that up. They are also complaining that they are being encouraged to sign up to a market contract believing that they are going to get a significant discount, and some time later they find that the price they are paying has been increased quite substantially.

Under those circumstances, when they attempt to move to a different retailer, they are being told by their existing retailer that they will be subject to an exit fee to get out of their contract. The contracts quite often run to two and three years, and I have a list of some of the exit fees: AGL charges $75 if you wish to break your contract in the first 12 months, and a $50 exit fee if a customer wishes to break their contract within the second 12 months of the contract; TRUenergy charges $90 in the first 12 months, and $70 in the second, and $50 in the third 12 months; Origin Energy charges a flat $70 exit fee for anybody who wishes to break the contract anytime after a cooling-off period; Simple Energy charges a $95 exit fee within the first 12 months of a contract and $75 within the second 12 months of the contract; and Lumo Energy charges a flat $75 exit fee.

The way in which people get caught is that they sign up to one of these market-based contracts, the retailer increases the price after having promised a 12 or a 15 per cent discount, the customer shops around to other retailers and then decides to change again to get another discount, and their existing market contract retailer informs them of these exit fees, and I am sure the exit fees are designed to offset any benefit that the customer might get in changing.

This flies in the fact of what we expected out of true competition when the then government divested the state of the electricity assets, brought the private sector into the various segments of the electricity industry and, particularly, pushed for competition within the retail market sector. It was always the belief of this parliament, I believe, that we would have full, open and fair competition. Customers, particularly householders, do not see signing electricity market contracts as a major business transaction, and one thing that is causing disquiet is that it is now running into a substantial amount of money.

People have traditionally bought electricity relatively cheaply and it fitted easily into their household budget, but because of increasing electricity prices from a range of causes, not the least being things like carbon taxes and green schemes which are impacting on costs, people are becoming very sensitive to what they pay for electricity, and they are learning to shop around. The exit fees, in my opinion, and that of the opposition, are working against a free market in the electricity retail sector.

The bill I bring to the house today would, basically, outlaw exit fees—if a retailer signed up a market-based contract with a customer and then increased the charges at a rate greater than the regulator determines the rate of the standing fee would increase. The regulator, from time to time, sets a standing contract fee, which is the default contract price. This bill would allow any market contract rate to be increased in line with the increases set by the regulator, currently the Essential Services Commission of South Australia (ESCOSA). That would be fair game, but any fee or charge increase over and above that would free the customer from paying an exit fee if they so chose to change their retailer.

The bill I present to the house today sets out how this would work. It obliges the retailer, if they do increase their charges by a rate greater than the standing contract increase, to notify their customers and then the customers would have a set period in which they could change retailers without paying the exit fee. So, it is not open-ended. It gives them, I think, a 20 day period in which they can make that decision to change their retailer and the retailer concerned would not be able to charge an exit fee.

I have spoken publicly about this move for some time now. I first raised it publicly in a press release I put out on 7 August. This came to my attention because something not dissimilar to this has been instituted in Queensland. I have to say the Queensland market is somewhat different to that in South Australia. It is not as competitive, at this stage. The new Queensland government is trying to protect consumers and has introduced similar measures up there. That is where it first came to my attention.

I have consulted with a significant number of people in the industry and have spoken publicly about this for some months now. As I say, I put out a press release on 7 August. The government, I hope, will support this measure. I know the government, certainly in public statements from the minister, has supported the principle of this. The minister, I think, is loathe to do anything, but he has been, as is his wont, saying publicly that he is looking at it, he has his agency looking at how it might be approached. He has talked about doing something with the code of practice. This has been going on for a fair while, many months. We have not seen anything concrete from the government. The impact of the bill would be to make this a condition of the electricity retailer's licence.

All electricity retailers in South Australia have to be licensed. This would become a condition of their licence, that they abide by the new rules the bill would promulgate, and it would, indeed, protect customers from being, in the first instance, encouraged to change to a new retailer with the promise of a significant saving in electricity costs, then to find that their retailer is increasing the price of electricity once they have been signed up and keeping them locked into those contracts because of the exit fees. All we are doing is saying: if the retailer is going to practise in that sort of way then we would prevent them from charging exit fees, and this will simply increase competition in the marketplace.

I think this is a very sensible measure. As I say, it is one that the government has spoken at length about the principle and agreed that it supports the principle. I present the bill to the house in the hope that the government will come on board very quickly and support it and we can have it operational before the end of the year and present the benefits of this to every householder across Australia. I commend the bill to the house.

Debate adjourned on motion of Mrs Geraghty.

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