12.1.6 Application to electricity

In 2003, the Consumer Guarantees Act was amended to clarify that it applies to the supply of electricity, gas, telecommunications or water or the removal of waste water. As a result of some continued uncertainty by electricity retailers about their potential liabilities to consumers under the Act, the major retailers took a High Court case against the Electricity and Gas Complaints Commission’s interpretation of the Act.

The resulting judgment by the High Court⁷⁹ concluded that electricity retailers may be liable to consumers for breaches of the guarantee of acceptable quality for electricity. This judgment is clear for consumers and accords with the objective of the Consumer Guarantees Act that consumers should be able to seek redress from the retailer, in most instances.

However, electricity retailers are concerned that effectively they could be liable for distribution faults and distribution network defects over which they do not have direct control. Several have raised their concerns in submissions on the Electricity Industry Bill. It is understood by the retailers that the Consumer Guarantees Act works on the basis that retailers would negotiate with their suppliers (electricity lines companies and Transpower) to define the expected quality of electricity supply that they on-sell. However, because electricity lines businesses are monopoly providers of services in situations involving the supply of electricity to domestic consumers, the retailers note that there is no incentive for electricity lines businesses to agree on a fair and efficient allocation of risk, resulting in all of the risk inappropriately resting with the retailer.

Some retailers proposed in their submissions on the Bill that the proposed new Electricity Industry Code include a mandatory requirement for distributors’ use-of-system agreements to indemnify retailers for losses incurred under the Consumer Guarantees Act for breaches of acceptable quality caused by faults in the network.

Such a contractual requirement would assist retailers to engage with consumers when they have issues related to the supply of electricity yet not to have sole responsibility for the redress. Consumers would still only have to seek redress through a retailer and not another entity with whom they do not have a contractual relationship.

Some retailers in their submissions alternatively suggested that consideration is given to amending the Consumer Guarantees Act to reflect that consumers only need to deal with their retailer when they have supply issues, but that both an electricity retailer and a lines company would be liable for the quality guarantees set out in the Act, including the guarantee of acceptable quality.

There has not been any analysis of the second possible option as it has been raised late in the Consumer Law reform review process. Views on this option, its implications and how it could work are invited and there will be fuller consideration given in the next stage of the review.

Question

Footnotes

79 Contact Energy & Ors v EGCC HC WN CIV 2007-485-2761