The Commerce Commission has warned 29 power companies that their contracts for domestic consumers are at risk of breaching the Fair Trading Act.
Commission Chairman Dr Alan Bollard said that the Commission's concern is with the way the contracts try to limit the companies' liability should something go wrong.
Dr Bollard said that the Consumer Guarantees Act puts in place rights to guarantees and remedies that must be provided to household consumers. The Fair Trading Act prohibits false or misleading claims about guarantees, rights or remedies.
The Commission is involved because there may be breaches of the Fair Trading Act. A key legal issue is whether electricity is covered by the Consumer Guarantees Act.
The Commission's opinion is that while electricity is not specifically mentioned in the Consumer Guarantees Act, it is not excluded from that Act. That Act applies to consumers when they acquire "goods or services of a kind ordinarily acquired for personal, domestic or household use".
The Commission's view is that the guarantees and remedies in the Consumer Guarantees Act must, therefore, apply to domestic electricity consumers. Electricity contracts that try to reduce these guarantees or remedies may breach the Fair Trading Act because they appear to be false or misleading claims about consumers' rights.
The Commission's specific concerns about the contracts are that they:
· attempt to limit electricity companies' obligations to supply electricity to domestic consumers, e.g. continuous supply at the correct voltage and amperage;
· attempt to limit companies' liability to specified dollar amounts when loss or damage has been caused by their supply of electricity; and
· attempt to limit companies' liability for consequential loss resulting from their supply of electricity.
Under the Consumer Guarantees Act, suppliers have an obligation to use reasonable care and skill to supply their goods or services. Also, they may not limit their liability to particular amounts, and, in some circumstances, they are liable for consequential loss.
The Commission has advised companies to ensure that :
· liability and exemption clauses in domestic contracts should explicitly recognise the Consumer Guarantees Act and not attempt to limit consumers' rights;
· domestic contracts should clearly state that the company is liable under the Consumer Guarantees Act for all costs incurred through the company's negligence; and
· domestic contracts should explicitly define those events that are within the electricity company's control and where its failure to deliver would make it liable to consumers.
"At this stage, the Commission intends to give the companies time to amend their contracts," Dr Bollard said. "It will then follow-up its warnings."
Media contact: Fair Trading Manager Rachel Leamy
Phone work (04) 498 0908, cellphone 021 662 773, home (04) 386 3110
Communications Officer Vincent Cholewa
Phone work (04) 498 0920, home (04) 479 1432
The power companies the Commerce Commission has warned are:
