Protecting consumers in digitized and multi-source energy systems

Figures & data

Table 1. Examples of new energy sources, products and services

Broad product category	Examples of specific products and services
New ways of sourcing energy	Energy sourced from small-scale onsite distributed generation facilities (e.g.: solar PV facilities and small-scale wind turbines). Energy sourced from microgrids or community owned generation facilities. Energy sourced or shared through peer-to-peer platforms (such as where households share surplus energy with one another under a peer-to-peer arrangement).
New ways of storing energy	Small scale batteries. Electric vehicles.
Products that allow consumers to use energy more efficiently, manage consumption and respond to market signals	Insulation or energy efficient appliances. Manual systems that allow appliances to be adjusted through apps on mobile phones. Automated appliances and smart devices which automatically switch on and off in response to market signals (e.g. smart pool pumps or air conditioners). Automated home management systems and smart thermostats. Personalized and customized products to manage energy use
Products where consumers interact with third parties or intermediaries	“White label” products which involves grid sourced energy being provided through a third-party, who has a direct relationship with consumers. Community sharing arrangements. Joint product offerings where a customer is offered a specific retail market offer contingent on them also being contracted with a storage provider.
Products that allow consumers to better assess, and make choices, about different products and suppliers	Price comparison websites, energy brokers and other intermediaries. Suppliers of energy efficiency advice or bill forecasting or checking services. Switching products including the automated switching of accounts among different suppliers (“auto-switchers”).
Information and data products	Products which provide breakdowns of specific timing and amounts of energy consumption and the associated estimated costs. Products which allow customers to monitor and record data on their consumption over time.

Table 2. Coverage of risks of new energy products and services under existing energy-specific consumer protections

Risk	Current protections for consumers of traditional suppliers	Potential gap for consumers of non-traditional suppliers
Consumers could disconnect themselves, or de-energize their connection to grid sourced energy, and cannot access at least one energy source/supplier at a later date	Designated suppliers can be obliged to provide connection services and be under a general obligation to maintain a customer connection, limit interruptions and to undertake various steps before disconnections.^18 Also additional protections for customers on life support equipment.^19	No requirement on non-traditional suppliers to offer/ provide or maintain a customer connection, or in terms of the process for disconnection. For example, there is no requirement on providers of long-term solar agreement to offer consumers a connection, nor are they obliged to follow rules for disconnection in the event of nonpayment.
Consumers cannot, or do not, effectively exercise choice among competing new sources/suppliers because they are unfamiliar with products.	Designated suppliers subject to specific disclosure and information requirements, which includes: historical billing data; bill review; end of fixed term contract notice.^20	There is often no standardized rules on disclosure and information requirements for new products and services (e.g.: solar panels or batteries) provided by non-traditional suppliers over and above those provided in general consumer law relating to fraud and deception.
Consumers do not fully understand the terms and conditions for the products and services they are purchasing and risk agreeing to adverse contract terms and conditions.	Designated suppliers are often subject to pre-contractual information and marketing rules, such as requirements to disclose certain information prior to a contract being struck and certain restriction on marketing, canvasing and advertising.^21	No specific requirements to provide pre-contractual information or marketing material applies for non-traditional providers beyond those contained in general consumer protection law.
Consumers might agree to long-term contractual lock-ins or high exit/termination charges which limit the ability of a consumer to switch at a later date	Designated suppliers typically cannot lock-in consumers to supply arrangements or impose fees ability consumer ability to switch to another supplier.^22	Contractual terms are negotiated between a consumer and a non-traditional supplier. Contracts can be long term (up to 20 years) in nature, or might involve a consumer committing to fund an asset which they will be required to honor even if they choose to switch to an alternative energy source.
Consumers agree to adverse contract terms and conditions because they do not fully understand or are unfamiliar with the new terms and conditions	Designated suppliers can face established minimum contract terms: relating to billing; payment obligations; pricing.^23	Contractual terms are negotiated between a consumer and a non-traditional supplier and no minimum contractual terms exist.
Consumers cannot access low cost and accessible avenues for resolving disputes	Designated suppliers often required to have established processes for customer complaints and dispute resolution. Small customer complaints are sometimes handled by a jurisdictional energy ombudsman^24	Consumers of non-traditional suppliers may not have accessible rights of redress to make their rights meaningful and enforceable. This means they will have to pursue matters through the courts.
Vulnerable customers or customers experiencing financial hardship are not protected having regard to their particular circumstances	Designated suppliers often required to provide support and assistance to those experiencing financial difficulty or who are otherwise vulnerable.^25	Vulnerable consumers, or those experiencing financial hardship, of non-traditional suppliers do not automatically have additional or specific protections.

Table 3. Types of “customer” under the Electricity Directive

Type of customer	Meaning
Customer	A wholesale or final customer of electricity
Final customer	A customer who purchases electricity for own use
Household customer	A customer who purchases electricity for the customer’s own household consumption, excluding commercial or professional activities.
Active customer	A final customer, or a group of jointly acting final customers, who consumes or stores electricity generated within its premises located within confined boundaries or, where permitted by a Member State, within other premises, or who sells self-generated electricity or participates in flexibility or energy efficiency schemes, provided that those activities do not constitute its primary commercial or professional activity.
Vulnerable customer	Each Member State can define the concept of vulnerable customers that may include criteria such as income levels, age or other criteria.

Source: European Union 2019a.

Table 4. Consumers rights of all energy products and services

Principle	Rationale
All consumers can access at least one reliable energy supply source	Will ensure that no consumer is left “stranded” without access to any energy source/supply, including consumers that have previously chosen to use a new product and service as their main supply source. Practically, this could require that consumers can always access a “default supplier” in a specific region/area (meaning that a default supplier would need to be adequately funded for providing this insurance function). In addition to the traditional sale or resale of energy, access might involve “self-supply” or “collective sharing” of energy among groups of consumers involving no financial exchange.
All consumers can choose to switch to another supplier/ energy source without undue impediments	Should ensure consumers are not unduly “locked-in” to poor deals over the long term. In practical terms, this principle will again likely require that consumers can switch to and access a “default supplier” if requested. For some new products and services that involve individual or shared investments, consumers may still have to pay their share of any investments they had committed to funding prior to exiting that supply arrangement (i.e. undue impediments is a relative concept).
All consumers have access to sufficient, accurate and timely information about the product or service	Should ensure consumers are able to make timely and informed decisions about the suitability of new products and services. Such an understanding is likely to be particularly important where it involves a new and unfamiliar product or complex and long-term financing arrangements which consumers may not be familiar with. Where specific disclosure and information requirements are contained in voluntary codes or guides, suppliers could be mandatorily required to bring that to the attention of consumers, and specify whether they participate in that voluntary code or not.
Vulnerable and financial hardship consumer circumstances are adequately considered	As is currently the case with traditional suppliers in some jurisdictions, new energy products and service providers may be required to take account of specific consumer circumstances in proposing their products/services to vulnerable customers or those experiencing financial hardship and in contracting with them. This is to ensure that the consumer protections related to vulnerability (e.g. critical dependence on electricity for health reasons, financial vulnerability, age etc) apply irrespective of how a vulnerable consumer sources energy. This requirement to take account of consumer circumstances is likely to be particularly important where new energy products or services involve substantial up-front investments, will lead to increased practical impediments to changing supplier; potentially reduce reliability of supply or increase price volatility.
All consumers should have access to low cost and accessible dispute resolution mechanisms	As new products, providers and business models emerge this could give rise to misunderstanding and disputes about supply arrangements. Accordingly, the ability of consumers to access low-cost and accessible dispute resolution (such as ombudsmen schemes) is likely to be as important for new products and services as it is for traditional energy products.

Source: Own analysis which draws on Decker (2020)

European Union. 2019a. ‘Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU.’ 5 June 2019.

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Decker, C. 2020. ‘Consumer Protection Frameworks for New energy Products and Services and The Traditional Sale of Energy in Australia’ Report for the Australian Energy Market Commission.

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