UTILITIES DISPUTES CASE NUMBER 65546
Recommendation - upheld
Business A complained the electricity retailer automatically renewed the two year fixed-term contract and then charged Business A an early termination fee of $425.50 when it changed to a different retailer. Mr B, the director of Business A, said the retailer did not tell him about the automatic renewal clause in the fixed-term contract when he signed up. He said the impact of this automatic renewal clause enabled the retailer to effectively fix the contract according to its own terms for as long as it wished.
In response to Business A’s complaint, the retailer said it believed it acted in line with its contract with Business A. The retailer said it believed the contract allowed it to:
- automatically renew Business A’s contract every two years after completing the correct notification process, and
- charge Business A a termination fee if it switched the property to a different retailer before the end of the contract term
The parties could not reach an agreement and asked the Commissioner to recommend a settlement.
The Commissioner recommended the retailer remove the early termination fee from Business A’s account. The Commissioner based her recommendation on the following reasons:
• The retailer told Mr B about the automatic renewal and early termination fee terms at the time he signed up
• The automatic renewal terms in Business A’s contract with the retailer are unfair in this case because they are accompanied by an early termination fee
• It is fair and reasonable for the retailer to remove the early termination fee of $425.50 from Business A’s account
Business A accepted the Commissioner’s proposed recommendation. The retailer rejected the proposed recommendation and provided comments for the Commissioner’s consideration.
The retailer said it believed the Commissioner reached the wrong conclusion when deciding the automatic renewal terms are unfair. The retailer disagreed with the Commissioner’s interpretation of the Fair Trading Act, and said it believed the terms could not be considered unfair because the test for Unfair Contract Terms could not be applied to this case.
After reviewing the issues raised by the retailer, the Commissioner issued a recommendation. The Commissioner recommended the retailer remove the early termination fee from Business A’s account. The Commissioner accepted it was likely the retailer advised Business A of the automatic renewal and early termination fee when it agreed to the contract, however the Commissioner believed the automatic renewal terms were unfair because they were accompanied by an early termination fee. The Commissioner considered section 46L of the Fair Trading Act and determined the contract terms created significant imbalance in the parties’ rights and obligations, which were detrimental to Business A and were not reasonably necessary to protect the retailer’s interests.
Business A accepted the Commissioner’s recommendation. The retailer rejected the recommendation.
As Business A accepted the recommendation, the Commissioner issued a determination. This required the retailer to comply with the Commissioner’s binding decision. The retailer complied with the decision, and the Commissioner closed the file.