Think that by signing a fixed-price contract for electricity or gas you'll know what the rate is for the life of the contract? Think again. The market regulator has confirmed that power companies have the right to change the rates charged on a fixed-price contract whenever they like -- even before the deal begins. What a ridiculous joke.
Electricity picture from Shutterstock
The Australian Energy Market Commission (AEMC) yesterday rejected a proposal that would have banned power companies from changing the rates charged during a fixed-term contract. Instead, it said that companies must make it clearer that it's possible that the rates might change.
The end result? Something can still be described as a "fixed rate" contract, even though the rate isn't actually fixed. And power providers still aren't obliged to tell you the rate has changed until after they send you a bill featuring the new rates -- which you're already stuck with paying. The entire system advantages the power resellers, and the consumer is left to foot an unpredictable bill.
On this point, we agree entirely with the Consumer Action Law Centre, which was one of the groups pushing for the change. "Australians think a contract actually stands for something -- that the price you sign up for is the price you should pay. But energy companies think it's OK to change the terms of the contract as they wish, and it seems the national rule maker agrees with them," Gerard Brody from the centre commented.
The fact this is allowed makes a nonsense of the notion of a fixed-price contract and of market regulation. The lesson here? As with mobile phones, contract deals are bad news. And competition between electricity providers has not always resulted in better deals for consumers -- something to bear in mind the next time you hear that moving services to the private sector to enable competition is the only way to go.