In an important precedent for electricity consumers throughout Australia, around 1.3 million electricity customers will be told of their right to claim compensation for damages caused by power surges to appliances such as computers, television sets and such whitegoods as refrigerators and washing machines.
EnergyAustralia has provided the Australian Competition and Consumer Commission with enforceable undertakings in relation to statements that it was not liable for damage to consumers’ property caused by defects in the power supply. The ACCC believes this was in breach of the Trade Practices Act 1974.
EnergyAustralia will write to its 1.3 million customers informing them of their consumer rights and will also begin an immediate review of 3000 previously rejected claims.
The ACCC was particularly concerned that consumers may have had claims for compensation wrongly rejected or may have been discouraged from lodging a claim with the company at all, as a result of the misinformation.
This is an important precedent for the Australian electricity industry as a whole. The ACCC repeats its warnings to companies not to misrepresent consumers’ rights to claim for damage caused by power surges.
The ACCC considers that the industry is liable for damage caused by power surges and power brownouts (the opposite of a surge - when there is a reduction in voltage to below normal levels).
ACCC Chairman, Professor Allan Fels said, ‘An ACCC concern is that consumers are not misled into thinking that power companies have no legal liability for loss or damage caused by defects, such as power surges, in electricity supply. For example, where a power company tells consumers it is only liable if the surge was caused by its own negligence, this is likely to breach s. 52 of the Trade Practices Act because it is liable, regardless of fault.’
Section 52 prohibits misleading or deceptive conduct.
The Trade Practices Act defines electricity as a good and provides that goods supplied must be fit for the purpose intended. If a power surge causes damage, the electricity supply is not, in the ACCC's view, fit for the purpose intended and therefore the supplier is liable under the Act.
This is also good policy. If a power surge causes damage to a consumer's computer, television, washing machine or other appliance someone has to pay. It seems appropriate that liability is placed on the party best placed to avoid or minimise the damage, i.e. the company supplying the power.
EnergyAustralia has provided an enforceable undertaking to the ACCC to pay compensation to customers who suffered loss or damage to property as a result of defects in the power supply since 1 March 1996, unless EnergyAustralia can prove the damage was a result of problems in the customer’s own installation.
EnergyAustralia has also undertaken:
- to fund an independent review of claims for compensation, assessed as a result of the undertaking but disallowed, or where disputes over the amount of compensation arise
- to write to each of its customers informing them of EnergyAustralia's Guaranteed Customer Service Standards and the rights of consumers to make claims under the Trade Practices Act in relation to the quality of electricity supply
- to review its complaints handling procedure for compliance with the Australian Standard, and
- to review its trade practices compliance program for compliance with the Australian Standard.
Professor Fels commended EnergyAustralia for setting an example to industry by its swift action in offering to pay compensation where consumers may have been misled.
‘This action sends a strong message to other electricity suppliers who intend to compete for consumers’ business in NSW, once full retail contestability in electricity supply is introduced.
‘NSW electricity consumers will benefit from this positive action by EnergyAustralia.
‘The ACCC welcomes EnergyAustralia's customer-friendly response.