The Consumer Law Reform Bill currently before Parliament proposes to make two key changes to gas and electricity industry regulation. The Bill is an omnibus bill which amends various consumer laws, including the Consumer Guarantees Act 1993 (CGA). This note focuses on the impact of the Bill on the electricity and gas industries.
Clarification of the meaning of 'acceptable quality' to cover electricity and gas
One of the core features of the CGA is the requirement that consumer goods are guaranteed to be of 'acceptable quality'. However, whilst electricity and gas are considered consumer goods under the CGA, they do not readily fit the CGA's definition of 'acceptable quality' which is primarily targeted at more conventional consumer goods. The Bill clarifies the meaning of 'acceptable quality' under the CGA in relation to electricity and gas supplied to consumers.
The proposed amendment establishes that in order for electricity and gas to be of 'acceptable quality' its supply must, in the eyes of the reasonable consumer, be safe, reliable and able to be consistently used for reasonable purposes. In considering what a reasonable consumer would expect, the proposed amendment assumes the consumer takes into account matters such as emergencies, network maintenance, price and location of supply. Whilst this proposal clarifies the law on this point, it is unlikely to represent a substantial change from the current position.
New statutory indemnity imposed on lines companies
The Bill also introduces a new requirement in the CGA that Transpower and other entities which provide 'line function services' (lines companies) must indemnify retailers for any loss attributable to a failure of transmission services. This requirement is very similar to, and may conflict with, the indemnity provisions which already operate under the Electricity Industry Code 2010 (the Code).
The Code currently provides that all use-of-system agreements between retailers and lines companies are deemed to include a clause whereby the lines company indemnifies the retailer for losses attributable to a failure of the lines company's network. However, the Code provides that the parties to such an agreement may contract out of this requirement, an option which would be unavailable under the proposed CGA amendment. The Code also excludes Transpower from the obligation to provide an indemnity, however the Electricity Authority has noted that they are currently reviewing this exception and may impose a similar requirement on Transpower in the future.
The Electricity Authority has recognised this conflict between these two regimes, and has made a submission opposing the inclusion of a statutory indemnity for electricity and gas retailers.
The Bill had its first reading on 9 February 2012, and is currently being considered by the Commerce Select Committee. The select committee are to report back to the House by 9 August 2012.
For details of other changes arising from the Consumer Law Reform Bill see our earlier article Getting ready for the Consumer Law Reform Bill.