Electricity and gas retailer Lumo Energy has been slapped with a penalty of more than $10,000 for allegedly misleading consumers over the discounts they would receive by switching.
Lumo Energy was issued with an infringement notice by the Australian Competition and Consumer Commission (ACCC) which claimed the power retailer had contravened the Australian Consumer Law by making false or misleading representations about energy discounts in February 2017.
On its website, Lumo Energy made a representation that consumers across the country could save 33 per cent on their electricity bills and 17% on gas bills if they switched to Lumo. However, the discounts were only available to households living in Victoria. Maximum discounts were substantially less in other states. In addition, Lumo Energy does not retail gas outside of Victoria.
“Discounted energy plans are very attractive to many Australians who are trying to reduce their energy bills,” ACCC Commissioner Sarah Court said. “It is vitally important that any representations made to consumers about discounts are accurate and relevant to them, so that people can make informed decisions about their choice of energy retailer and feel confident in those choices.
“Consumer confidence can lead to increased switching between retailers, and better competition within the energy market as a whole,” Ms Court said.
The payment of a penalty specified in an infringement notice is not an admission of a contravention of the Australian Consumer Law. The ACCC can issue an infringement notice where it has reasonable grounds to believe a person has contravened certain consumer protection laws.
Lumo Energy told Canstar Blue in a statement: “Lumo Energy stand by, and is proud of its strong culture of compliance, and prides itself on its high level of decency, honesty and transparency. Lumo has always sought to treat their customers in accordance with best practice and applicable legal requirements and is always committed to doing the right thing by its customers.
“As part of the resolution, Lumo Energy has paid an infringement notice of $10,800 for making a false or misleading representation on their website in February 2017.
“Lumo fully accept the findings and are pleased to report that there was no immediate impact to our customers, and that this was an isolated case. As a result, Lumo Energy have put in place processes to ensure that this does not occur again.”
Lumo Energy also paid penalties in February 2017 when call centre staff allegedly told customers that the Australian Energy Regulator (AER) was responsible for gas price increases, when in fact the rise was due to a commercial decision by Lumo.
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The truth about energy discounts
Energy discounts have become a common marketing tool for electricity and gas retailers, but research from Canstar Blue shows that energy discounts do not always deliver the cheap prices they suggest. In a recent comparison, Canstar Blue found that an electricity plan in Victoria with a 2% total bill discount worked out cheaper overall than several other offers all promising more than 30% off usage charges. This is because plans with big discounts often come with higher than average usage costs, largely negating any savings.
The ACCC has commenced an inquiry into retail electricity pricing, which will examine the representation of prices to consumers, amongst other issues. Further information can be found here.