Consultations

The Retail Advisory Group is examining the operational effectiveness of aspects of the domestic contracting arrangements so as to identify and recommend potential alternatives that promote competition in, reliable supply by, and efficient operation of the electricity industry for the long-term benefits of consumers.

The purpose of this paper is to seek feedback on options for addressing the problems that have been identified with the operational effectiveness of the domestic contracting arrangements.

The RAG will use feedback from participants and consumers to develop advice and recommendations to the Authority Board on domestic contracting arrangements.

The Retail Advisory Group (RAG) is reviewing the domestic contracting arrangements, including an assessment of:

• whether to develop minimum terms and conditions for the relationship between consumers and distributors (where the distributor has a direct relationship) and retailers (referred to as conveyance model arrangements)
• whether to more closely monitor retailers’ behaviours by monitoring their compliance with their domestic contracts, for example, by collecting and reporting consumer complaints data
• the potential to improve the operational efficiency of the arrangements to assist medically dependent and vulnerable consumers.

The RAG is seeking feedback on issues relating to the operational effectiveness of the domestic contracting arrangements, so it can identify specific problems to be addressed.

In May 2010, following consultation with stakeholders, the Electricity Commission (Commission) finalised and published a set of voluntary good practice contracting principles (principles) and minimum terms and conditions (minimum terms) for domestic retail contracts.

Subsequent to their publication, as a result of detailed interactions with retailers, the Commission identified areas where these principles and minimum terms had unintended consequences or raised legitimate issues affecting retailers' ability to comply. These matters, and the Commission's intention to address them, were signalled to retailers by the Commission in September 2010.

In July 2011 the Electricity Authority (Authority) is due to assess the extent to which electricity retailers' domestic contracts align with the principles and minimum terms. This is the first alignment review described in the package of monitoring and transition arrangements published by the Commission alongside the principles and minimum terms in May 2010.

The Authority has considered the matters identified by the Commission and concluded that, while the matters are relatively minor, it is important to address them in advance of the forthcoming review. It has therefore developed a proposed set of minor amendments to address the matters identified. The issues identified relate to the following:

• the requirement to provide 7 to 14 days notice of disconnection for non-payment if a consumer has recently defaulted on a payment arrangement;
• the requirement to specify when disconnection will occur in a disconnection notice;
• termination for persistent (but not material) breaches;
• reference to redress under the Consumer Guarantees Act 1993;
• payment for electricity supplied where there is no formal contract and the point at which charges may commence;
• when and how price increases must be notified to consumers;
• flexibility for different pricing models; and
• minor drafting amendments.

The principles and minimum terms are a voluntary arrangement, and do not form part of the Code. Nevertheless, consistent with its Consultation Charter, the Authority has sought to apply its Code amendment principles to the proposed amendments to the extent practicable.

The Electricity Commission (Commission) has been progressing the development of model domestic retail contracts, and a significant body of work has been undertaken to date by the Commission and by other industry groups in previous forums.

In mid-2009, the project reached a point where it was timely to consider whether the development of model contracts is the most appropriate approach to meeting the Commission's policy objectives and the desired market outcomes for this aspect of its retail work programme.

The Commission is mindful that there are other options to the completion of a detailed model domestic contract, such as promulgating guidelines for good contracting, establishing minimum terms and conditions and providing for fully regulated benchmark contracts.

The Commission therefore considered the issues and drivers behind model domestic retail contracts, and the options for meeting its objectives in this area. It has developed a set of reasonable consumer expectations for domestic electricity customers, and has identified its preferred approach to meeting these. The Commission has also prepared a draft set of contracting guidelines and suggested minimum terms and conditions for the purposes of consultation, consistent with its preferred approach.

The purpose of this paper is to consult on the Commission's proposals for the following aspects of the domestic and retail contracting arrangements:

• the draft set of Reasonable Consumer Expectations for domestic consumers;
• the proposed package for progressing domestic retail contracting arrangements; and
• the initial draft set of contracting guidelines and minimum terms and conditions

Mindful of recent Government announcements following the Ministerial Review of the electricity sector, the Commission has discussed its proposed approach with officials from the Ministry for Economic Development and Ministry of Consumer Affairs. They have expressed support for the principle of moving away from a model contract towards principles and minimum terms and conditions. They are keen for momentum to continue on this work, and see a need for industry to continue to engage with the Commission on these matters.

This consultation covers the:

• Guidelines for Domestic Contracts for Delivered Electricity (Interposed), “MDC Guidelines”
• Model Domestic Contract for Delivered Electricity (interposed), “MDC”
• Model Use of System Agreement (interposed), “MUoSA”

The interposed versions of the MDC Guidelines and MDC were released in August 2005, and the interposed version of the MUoSA was released in December 2005. At the time of their release, it was made clear to participants that:

• They were drafts pending finalisation of the Transmission Benchmark Agreement (TBA) (which was released in May 2007 and came into force on 1 April 2008); and
• After the TBA was released, the MDC Guidelines, MDC and MUoSA would be reviewed for any alignment issues with the TBA and with each other, and amended as appropriate.

That alignment has now taken place for the interposed versions of the MDC Guidelines, MDC and MUoSA, as well as four changes to other areas: transparency of invoices; incorporation of the 'Guideline on arrangements to assist low income and vulnerable consumers'; clarifications regarding tax on distributed generation; clarification of responsibility for customer service lines; and amendment to references to the Electricity and Gas Complaints Commission and its Code of Practice.

The consultation document discusses the changes and provides marked up copies of the model contracts and guidelines.

The model contracts paper presents, for consultation, three Model Retail Contracts.

The draft GPS of September 2003 required the Electricity Commission (Commission) to prepare, in consultation with the Ministry of Consumer Affairs and consumer representatives, minimum terms and conditions for contracts with domestic consumers. The MARIA Governance Board (MGB) initially assumed responsibility for developing the Model Retail Contracts and it established the Model Retail Contract Project Team (MRCPT) in July 2003 to progress the work. As agreed with the Commission, the MRCPT ceased work on the Model Retail Contracts in May 2004 and the MGB forwarded the MRCPT's output to the Commission to progress.