We have previously indicated that we are examining whether the practice of non-voluntarily moving customers on deemed contracts to advance billing was in the spirit of the Retail Exit Code.[1]
When we designed the Retail Exit Code we considered that it was necessary to put in place measures to protect customers, in part because competition will take time to develop. Specifically, we said that there was a ‘…principle of the Exit Regulations that customers would be no worse off as a result of exit’.[2] The price protections imposed in the Code are a clear manifestation of that policy.
We recognise that customers are affected by both the price and non-price terms of their contracts. The non-price terms include a number of factors including the billing period, payment period and ability to require a security deposit. Historically, there have been a range of different billing practices across the industry and across customer groups. Since market opening we have observed that some retailers have changed the billing periods for some of their customers on deemed contracts. In particular, some customers have been non-voluntarily moved from being billed in arrears prior to market opening to now being billed, at least partially, in advance. We are concerned that non-voluntary changes to contract terms could lead to customers being worse off compared to pre-market opening, although this is not explicitly prevented by the current Retail Exit Code.
As a result of these observations, we are commencing more in-depth analysis of the issue, with a view to launching an industry consultation later this year, to obtain a full understanding of the likely nature of the harm that customers may experience, and any potential risks and unintended consequences of changing existing arrangements. This will allow us, for example, to consider the case for amending the Retail Exit Code if appropriate, so that it captures the full range of both price and non-price terms.
[1] We are specifically referring to situations where customers on deemed contracts have had a non-voluntary change to their billing period, from arrears to advance. Deemed contracts are the terms and conditions, including default tariffs, that apply to the relationship between the retailer and customer if no contract has otherwise been agreed between them. We indicated that we were examining this in our recent consultation: Review of the Retail Exit Code: Price Protections beyond 2020, March 2018, p11.
[2] Consultation on Retail Exit Code: Conclusions, April 2016, p5