TrustPower fined for misleading customer advice

Friday 16th October 2009

Listed electricity retailer TrustPower has been fined $17,000 for failing to give adequate information about low user tariff options in letters purporting to advise customers about their best choice of tariff.

The Commerce Commission took the action against TrustPower under the Fair Trading Act after investigating a mailout of 208,199 letters to customers in May 2005, 57,400 of whom "may have been eligible for a low use option which may have provided additional benefits".

The low user tariff option is available for households using less than a threshold amount of 8000 kilowatt hours annually, or 9,000kwh for customers south of Christchurch.

TrustPower says, at the time, it was pioneering the increasingly common practice of reviewing customers' useage and recommending a better tariff if one exists.

The government-imposed low user tariff is generally less profitable, and often unprofitable, with the result that not all retailers actively market its availability beyond a once-per-year requirement to inform customers of its existence.

Some retailers also fear recommending a low use tariff where the customer is close to the threshold, as the expectation of lower power bills can lead to higher consumption which, once the threshold is breached, makes the low use tariff more expensive than standard tariffs.

In the TrustPower case, the company made tailored recommendations on better tariff options, based on its review of useage, but "excluded consumption based options from both the review and the recommendations".

"Information on TrustPower's website did not explain that the scope of the review excluded a low use option and the letters sent to customers were not sufficiently clear that some customers may have been eligible for the low fixed charge tariff option" which could have produced savings over and above TrustPower's recommendations.

"The ability of TrustPower's customers to make an informed decision about their electricity plans was affected," said the Commission's director of fair trading, Adrian Sparrow.

TrustPower spokesman Graeme Purches said the company was "not overly worried" about the prosecution, saying it had been "trying to do the right thing" and would not make the same mistake again.

As one of the few electricity retailers still charging summer and winter tariffs in some parts of the country, it was more than usually difficult for TrustPower to make safe recommendations on the low user tariff, he said. If a customer on a low user tariff breached the thresholds during winter, when the electricity tariff is at its highest, there was a real risk their bills could be much higher than on a standard tariff.

Businesswire.co.nz

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