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Fixed-term contracts come with sting

Mercury does it. Meridian used to do it. And now Genesis Energy is getting in on the act of automatically renewing fixed-term electricity contracts. If customers want out of the deal, they can be stung with a hefty termination fee.

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Consumer member Barbara Cribb recently received a letter from Genesis offering to renew her 24-month electricity contract. The letter set out the prices she’d pay and said Genesis would automatically roll Barbara on to the new 24-month term if it didn’t hear from her. If she later wanted out of the deal, the company reserved the right to charge a $150 termination fee.

Mercury Energy and Meridian Energy have sent similar letters to their customers to renew fixed-term contracts. If customers do nothing, they’re automatically signed up for another fixed term and have to pay a fee to cancel.

We think it’s unfair to sign customers to fixed-term deals without their express consent and then charge a fee to break the contract. The Commerce Commission has also identified the practice as a potential breach of the unfair terms provisions of the Fair Trading Act.

Last year, we wrote to Mercury and Meridian questioning their automatic renewals. Both companies said they believed the practice was fair and complied with the Act. But Meridian has had a change of heart and stopped automatically renewing fixed-term contracts.

Genesis says it’s “in discussion” with the commission about the practice.

Barbara has decided against fixing and advised the company she doesn’t want another 24-month contract.

Your rights

If a company tries to automatically rollover a fixed-term contract and then sting you with a cancellation fee to end the deal, it risks breaching the Fair Trading Act. The Act bans unfair terms in standard form consumer contracts — the non-negotiable terms and conditions you’re presented with whether you’re signing up with an electricity company, joining a gym or hiring a rental car.

If you get stung, make a complaint to the Commerce Commission. Let us know too. As part of our Play Fair campaign, we’ll be continuing to put pressure on retailers to ditch the practice.

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