Download decision - New Zealand Advertising Standards Authority

08/238
AWAP 08/009
SUMMARY DECISION
Special Meeting 11 June 2008
Convened Pursuant to Rule 3 of the
Constitution of the Advertising Standards Complaints Board
Complaint 08/238
AWAP 08/009
Complainant: Genesis Energy
Advertisement: TrustPower Limited
Complaint: A direct mail letter dated 14 March 2008 was produced and published
by TrustPower. It was addressed to individual Genesis Energy customers and
included a two page Electricity Supply Agreement for those customers who wanted
to take advantage of the offer. The letter was headed:
“Would you prefer to support renewable energy?”
and followed by:
“Switch to TrustPower and you will be supplied by a company that produces its
power supply from wind and water.
If you are a Genesis Energy customer; your power supplier produces most of its
power by burning fossil fuel. Their Huntly Power station has been identified as the
biggest point source of carbon dioxide in the country.
Will I actually receive renewable energy if I switch to TrustPower?
TrustPower’s renewable generation is fed into an overall pool that includes energy
from all major New Zealand generators. The electricity that flows through the power
lines to your property is a mix of energy, because it’s supplied from this overall
generation pool through the national grid and into your local line network.
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So Why Bother?
TrustPower is a 100% renewable generator, and by becoming a TrustPower
customer you show your support for renewable generation.
You also help us to build more renewable generation by growing our customer base we currently have four new renewable projects in the planning stages, which over
time can reduce the need for fossil fuel (coal and gas) power stations.
TrustPower can save you money
So long as you pay by the due date you will receive TrustPower’s 15%* on time
payment discount. This means you will pay less than you currently do with Genesis.
We also promise to keep our charges the same for at least 12 months from now. Its
that simple…”.
The Complainant, Genesis Energy, said:
(23 April 2008)
1. “Please find enclosed a copy of a direct mail letter that TrustPower has sent to
a Genesis Energy customer dated 14 March 2008 (the "Advertisement").
2. This letter is subsequent to the Summary Decision of the Advertising Standards
Association dated 11 March 2008 (Complaint 08/065), which upheld Genesis
Energy's and Energy Online's complaint against TrustPower's earlier
advertisements.
3. As you are aware the Summary Decision was made into a Final Decision
unchanged. In Genesis Energy's view, the Advertisement is in breach of the
Final Decision, and is in breach of further aspects of the Advertising Codes, as
detailed below.
Particulars of Complaint - Breach of ASA Decision in Complaint 08/065
4. The heading on this letter is:
" Would you prefer to support renewable energy?"
5. There are two paragraphs directly under this heading, which state:
“Switch to TrustPower and you will be supplied by a company that produces its
power supply from wind and water.
If you are a Genesis Energy customer; your power supplier produces most of
its power by burning fossil fuel Their Huntly Power station has been identified
as the biggest point source of carbon dioxide in the country.”
6. The next paragraph is entitled "Will I actually receive renewable energy if I
switch to TrustPower?" Below this is an explanation regarding the electricity
generation pool.
7. The next paragraph is entitled “So Why Bother?" and states:
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"TrustPower is a 100% renewable generator, and by becoming a TrustPower
customer you show your support for renewable generation. You also help us to
build more renewable generation by growing our customer base - we currently
have four new renewable projects in the planning stages, which over time can
reduce the need for fossil fuel (coal and gas) power stations."
8. There were two aspects to Genesis Energy's complaint in Complaint 08/065
which the Panel succinctly summarised as a) where the energy came from and
b) the effect of switching retailers. Both aspects of the complaint were upheld
by the Panel. The current Advertisement in Genesis Energy's view no longer
breaches the first aspect of the complaint, as TrustPower has adequately
explained the source of electricity through the generation pool. However,
Genesis Energy considers it is still misleading about the effect of switching.
9. To quote from the decision in Complaint 08/065, the Panel found:
"It noted in the Advertiser's view, a renewable energy programme could occur if
its customers showed a preference for-renewable energy. However, in light of
the submissions on the operation of the electricity industry, the Panel
disagreed. In its view it was neither the individual customers energy preference
nor the particular retailer that determined an investment in renewable energy.
Any move to increase investment in renewable energy depended on a number
of factors including the economy of change, and although not decisive,
Government policy. Therefore the Panel concurred with the Complainants'
submission that if the conditions were right, it would be the industry interested
in investing in new generation and not just the Advertiser.
The Panel also considered the statement which related to the burning of fossil
fuel. In the Panel's view the statement implied that a switch to TrustPower
would result in a reduction in energy produced by burning fossil fuel and a
corresponding increase in the production (particularly by TrustPower) of
renewable energy. However, the Panel disagreed. With reference to the
submissions relating to the electricity industry, it appeared to the Panel that any
change in the characteristics of the energy supplied, would be dependent on
the economy of that change. In other words, when market conditions were right
for investment in new generation.
10. In Genesis Energy's view, the continued production of direct mail in the form of
the Advertisement is a flagrant disregard of the Panel's decision regarding this
subject matter. Genesis Energy's view is that the information in the letter
continues to be misleading in breach of the Advertising Codes.
11. As already raised by Genesis Energy and agreed to by the Panel, switching to
TrustPower (or any switching among retailers) does not impact on the
investment of renewable generation or the reduction of thermal generation. It is
aggregate demand that determines new investment in generation, and because
of government policy, this generation is likely to be renewable generation
irrespective of who the generator is. Therefore a claim that "by becoming a
TrustPower customer you show your support for renewable generation"
continues to mislead customers as to the impact of switching given the nature
of the electricity industry.
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Particulars of Complaint - Breach of Code for Comparative Advertising and
Advertising Code of Ethics
12. On the fourth page of the Advertisement is a pricing table which compares
Genesis Energy's pricing to TrustPower's. The Genesis Energy pricing includes
the EC levy where the TrustPower pricing does not. Further, TrustPower's 15%
prompt payment discount is reduced to 13.5% for credit cards Both of these
qualifications are only disclosed in the small print, so that when you look at the
final column of the table it appears that TrustPower is cheaper.
13. However, if you add in the EC levy, or add in the EC levy and reduce the
prompt payment discount by 1.5%, Genesis Energy is largely equal to or
cheaper than TrustPower respectively, as set out below.
Genesis Energy including
EC levy after 10% PPD
17.09
12.82
8 30
15.38
16.05
8.03
86.35
19.66
15.39
10.25
17.94
18.79
10.25
30.00
TrustPower after 15% PPD and
adding on EC levy
17.08
12.82
8.29
15.38
16.05
8.03
81.70
19.43
15:17
10.64
17.73
18.39
10.38
30.15
TrustPower after 13.5% PPD
and adding on EC levy
17.38
13.05
8.44
15.65
16.33
8.17
83.14
19.77
15.43
10.82
18.04
18.71
10.56
30.68
14. By not comparing like with like, the table confers an artificial advantage on the
advertiser. When a like for like comparison is made, it shows that Genesis
Energy is equal to or cheaper than TrustPower in many of the categories. In
Genesis Energy's view, this is misleading the customer about the price of the
goods being compared, which is in breach of the Code for Comparative
Advertising, and Rule 2 of the Advertising Code of Ethics.
Conclusion
15. Genesis Energy is incensed that this misleading and unlawful advertising
campaign continues at the expense of its customers. TrustPower's disregard
for a previous decision of the ASA which found misleading conduct, plus the
misleading nature of the price comparison, has prompted Genesis Energy to
make this further complaint.
16. Genesis Energy confirms it will not take this complaint to any other forum. We
note that given our success in the earlier complaint, we request that payment
for the hearing fee is sought from TrustPower…”.
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(29 April 2008)
In a letter dated 29 April 2008 the Complainant submitted further information on the
Panel’s Decision 08/065; AWAP 08/003 relating to an Adjudication between the
Genesis Energy and TrustPower dated 4 March 2008.
The Chairman ruled that the following provision was relevant:
Code of Ethics
Rule 2 Truthful Presentation - Advertisements should not contain any
statement or visual presentation or create an overall impression which directly or
by implication, omission, ambiguity or exaggerated claim is misleading or
deceptive, is likely to deceive or mislead the consumer, makes false and
misleading representation, abuses the trust of the consumer or exploits his/her
lack of experience or knowledge. (Obvious hyperbole, identifiable as such, is not
considered to be misleading).
Procedure: The Chairman ruled to deal with the matter by “adjudication with
attendance of the parties” pursuant to rule 3 of the Complaints Procedures of the
Advertising Standards Complaints Board. This system was designed to resolve
disputes between competitors. Accordingly, the Chairman appointed a Panel.
The Panel: Mr R. Thompson, Chairman of the Advertising Standards Complaints
Board. Co-panelists Mr E. Abernethy, Chairperson of the Advertising Standards
Complaints Appeal Board and Mr M. Turner, Alternate Member of the Advertising
Standards Complaints Appeal Board.
The Complainants, Genesis Energy, were represented by Ms D. Malaghan –
Corporate Legal Counsel and Mr D Carroll - General Manager Retail.
The Advertiser, TrustPower Limited was represented by Ms A Rawlings - Legal
Counsel and Mr C Neustroski – National Sales Manager.
The Advertiser, TrustPower Limited, said:
(30 May 2008)
1. “We refer to your letter dated 16 May 2008 which attached a complaint made
by Genesis Energy ("Genesis") concerning a direct mail advertisement dated
14 March 2008 ("14 March Letter") which was issued by TrustPower
("Complaint"). In this letter we set out the written submission which TrustPower
wishes to have considered at the hearing of the Advertising Standards
Authority Panel ("ASA Panel"). We note that the Complaint is related to an
earlier complaint which was upheld by the Advertising Standards Authority in
Decision 08/065 AWAP 08/003.
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2. TrustPower considers that the Complaint should be dismissed because:
a.
TrustPower did not ignore Decision 08/065 AWAP 08/003 and
proceed with direct mail advertising which had been held to
contravene Rule 2 of the ASA Code of Ethics:
i.
The 14 March Letter formed part of a direct mail campaign
which commenced earlier in March. It was issued before
Decision 08/065 AWAP 08/003 was finalised and at the same
time as TrustPower made further submissions on matters of
fact raised in the Draft Decision which was issued on 11
March;
ii.
In any event, the 14 March Letter included modifications which
addressed the concerns discussed with the ASA Panel at the
adjudication of the Complaint held on 4 March 2008 and in
respect of which TrustPower was found in breach in Decision
08/065 AWAP 08/003;
iii.
The Complaint contains allegations which have not been
before the ASA Panel previously; and
iv.
TrustPower discontinued substantially similar direct mail
advertising following receipt of the finalised Decision 08/065
AWAP 08/003.
b.
The 14 March Letter does not wrongly represent that consumer choice
has the capacity to influence investment in generation because
TrustPower is a vertically integrated organisation which includes as a
factor relevant to its investment decisions, the certainty of revenue
provided through supply in both generation and retail sectors; and
c.
The 14 March Letter includes a price comparison table which contains
sufficient information for consumers to assess the cost of electricity
supplied to them under supply and pricing plans offered by both
Genesis and TrustPower.
We elaborate on each of these matters below.
Summary of adjudication findings
3. The Complaint refers to the adjudication of an earlier complaint recorded in
Decision 08/065 AWAP 08/003. For that reason is it useful to summarise the
matters at issue and the findings in that adjudication.
4. The ASA Panel found that representations contained in two direct mail
advertising letters were technically correct and complied with the requirements
of Rule 2 of the Code of Ethics.
5. However, in the context of the introductory question "Would you prefer
renewable energy for less?" the ASA Panel found that the statements implied,
in breach of Rule 2 of the Code of Ethics, that:
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a.
If a customer switched to TrustPower the household would be
supplied with renewable energy;
b.
The power supplied would be produced by TrustPower's generators;
c.
The switch would result in a reduction in energy produced by burning
fossil fuel and an increase in the production of renewable energy; and
d.
A switch would indicate support for the production of renewable
energy and a vote for sustainability which would in turn encourage
TrustPower to invest in new generation.
The Complaint
6. Genesis accepts that the representations noted at paragraphs 5(a) and 5(b)
above related to "where the energy came from" and are not repeated in the 14
March Letter. They are no longer in issue in the Complaint.
7. The Complaint does not focus upon concerns relating to the representation
noted at paragraph 5(c) above. It seems to be accepted that over time the
transition to renewable generation will reduce reliance on fossil fuels. Instead,
what appears to be most at issue is the question of whether consumer
switching will directly influence the increase in renewable generation.
8. To that end, the representation at paragraph 5(d) continues to be in issue. It
forms the basis for the first part of the Complaint. In respect of that
representation, Genesis says that TrustPower continues to mislead about the
effect on investment in generation of switching retail electricity suppliers.
However, it is important to note at the outset that the original complaint
concerned a broad representation that consumer choice would support
renewable generation. The Complaint concerns an accurate explanation of the
ways in which consumer choice supports renewable generation by growing
TrustPower's customer base. The representation is unique to TrustPower and
explains TrustPower's investment and generation decisions.
9. In Decision 08/065 AWAP 08/003, the ASA Panel commented that it did not
consider that a renewable energy programme could occur if TrustPower
customers showed a preference for renewable energy. The ASA Panel
considered that:
a.
It was neither the individual customer's energy preference nor the
particular retailer that determined an investment in renewable energy;
b.
Any move to increase investment in renewable energy depended on a
number of factors including the economy of change, and, although not
decisive, Government policy; and
c.
If the conditions were right it would be the industry interested in
investing in new generation and not just TrustPower.
10. With respect, TrustPower disagrees. It does not consider that the ASA Panel
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had before it all relevant information required to reach these conclusions. The
question of impact of customer choice on generation investment decisions
arose predominantly out of TrustPower's response to the original complaint and
in the subsequent adjudication hearing. At that stage of the proceeding
TrustPower was denied the opportunity to put before the ASA Panel additional
relevant information concerning the drivers of TrustPower's own generation
investment decisions. This was because that information was not presented in
advance of the adjudication hearing. Additional relevant information contained
in this letter supports the explanation provided to customers in the 14 March
Letter. In reliance on this additional information TrustPower submits that the 14
March Letter was not misleading because it was factually accurate.
11. Allegations concerning comparative pricing tables included in the 14 March
Letter were not previously raised with the ASA Panel. They comprise the
second part of the Complaint and are discussed below.
Claim of disregard of Decision 08/065 AWAP 08/003
12. TrustPower did not ignore Decision 08/065 AWAP 08/003 and proceed with
direct mail advertising which had been held to contravene Rule 2 of the ASA
Code of Ethics.
13. The ASA Panel's adjudication hearing was held on 4 March 2008. The Draft
Decision was dated 11 March 2008. When it received the Draft Decision,
TrustPower took time to consider it and on 14 March 2008 sent a letter to the
ASA Panel seeking clarification in the Draft Decision of several matters of fact
which it considered had been inaccurately recorded.
14. The 14 March Letter formed part of a direct mail campaign commenced after
the adjudication hearing but before the Draft Decision was issued. The 14
March Letter and others in the same campaign addressed concerns which had
been raised in the Complaint and at the adjudication hearing on 4 March 2008.
Genesis acknowledges in the Complaint that the 14 March Letter addressed
many of its concerns, namely:
a.
It did not imply that electricity purchased from TrustPower would in
fact be renewable energy; and
b.
It did not imply that electricity purchased from TrustPower would come
from TrustPower's generators.
15. Further, the 14 March Letter explained in greater detail TrustPower's own
generation decisions and the role of consumer choice in those decisions.
16. This chain of events demonstrates that TrustPower took direction from the
content of the original complaint and the ASA Panel's initial comments during
the adjudication hearing. It made a genuine attempt to change its direct
marketing material. TrustPower does not accept the allegation contained in the
Complaint that it disregarded the findings of the ASA Panel. It takes the
process and the findings of the ASA Panel seriously and took steps to
implement the decision.
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17. TrustPower considers it reasonable to expect some time lag between the
receipt of advice from the ASA Panel and modification of marketing material.
For example, Genesis itself continues to promote its retail electricity business
with representations that it is able to provide certainty of supply direct to its
retail customers as a consequence of its diverse range of generation
resources. In fact, Genesis customers are also supplied electricity from the
national grid. Following the reasoning adopted by the ASA Panel, the national
grid can not guarantee certainty of supply to Genesis' retail customers even if
Genesis' generation is more reliable than the generation of its competitors
(which in any event is denied).
18. We attach a copy of material posted on the Genesis website and printed on 30
May 2008 which reads, for example:
... we want you to be comfortable that we can deliver a reliable supply of ...
electricity to your home for many years to come.
In fact, we have plans in place to help meet New Zealand's evolving energy
requirements. If lake levels drop, for instance, we can rely on our other energy
sources, such as wind, gas, and coal.
Switching as a driver of investment in generation
19. As noted above, Genesis accepts that the 14 March Letter addressed its
concerns regarding physical supply and the nature of the pool.
20. It seems common ground that an increase in the production of renewable
energy will lead, over time, to a decrease in reliance upon energy generated by
burning fossil fuels. For example, Genesis also represents that the construction
of new-renewable power stations, over time, reduces the need for fossil fuel
and gas fired power stations. For example, in relation to their Hau Nui wind
farm a statement from the Genesis website records:
Wind farms lessen the need for fossil fuel generated electricity, thereby
reducing greenhouse gas emissions and supporting New Zealand's
commitments to the Kyoto protocol.
21. What remains at issue in the Complaint is Genesis' allegation that TrustPower
misrepresents that consumer switching between electricity retailers would
demonstrate support for the production of renewable energy and sustainability
which would in turn encourage TrustPower to invest in additional renewable
generation.
22. TrustPower considers that the 14 March Letter makes clear that there would
not be an instantaneous increase in renewable generation and a requisite
reduction in the amount of fossil fuel used to produce electricity as a result of
consumer switching. However, over time consumer choices can impact upon
investment in renewable energy generation and reduce the need for generation
reliant upon fossil fuel.
23. TrustPower's claim regarding the impact of switching is stated is as follows:
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So Why Bother?
TrustPower is a 100% renewable generator, and by becoming a
TrustPower customer you show your support for renewable generation.
You also help us to build more renewable generation by growing our
customer base - we currently have four new renewable projects in the
planning stages, which over time can reduce the need for fossil fuel (coal
and gas) power stations.
24. Fundamental to this statement is the explanation that a greater retail electricity
customer base will assist TrustPower to invest in new renewable generation
resources. This is a representation that is true. When customers switch to
TrustPower they improve revenue certainty which is key to investment.
TrustPower has a number of generation projects which are ready to action,
unlike a number of other New Zealand generators who struggle to locate
suitable development sites or resource consents. This means that revenue
certainty has a strong impact on the decision to action established plans for
new generation. Financial security can bring forward investment decisions.
25. The most certain source of revenue for the vertically integrated TrustPower
business, even in the presence of a highly competitive retail electricity market,
is a large base of retail customers. It follows that the greater the number of
customers that switch to TrustPower, the greater the certainty of revenue
available to support capital investment in generation resources. Because
TrustPower's generation is all renewable generation, a strong customer base
will support investment in renewable generation. Over time, building more
renewable generation will reduce the need for fossil fuel power stations. These
are the maters explained in the 14 March Letter and TrustPower considers
each such representation to be true.
26. The ASA Panel previously formed the view that neither the individual
customer's energy preference nor the particular retailer dictates investment in
renewable energy. Rather, investment is dictated by factors such as the
economy of change and Government policy. Finally, the ASA Panel decided
that if the conditions were right, it would be the industry interested in investing
in new generation and not just TrustPower. Put another way, it is suggested
that no matter which retailer customers choose, incentives for investment in
generation will be the same for all generators.
27. With respect, TrustPower disagrees. It is simply implausible to expect that all
generators have equal ability, are looking for the same conditions, have the
same opportunities and the same incentives to invest at exactly the same point
in time. Generation is competitive. While there are many factors that determine
viability of a project three essential factors include the quality of the site itself,
the ability to secure rights and consents for the site and the ability to sell the
output with a significant degree of certainty of future income. The availability of
income from other sources is also important. Not all generators weight these
factors in the same way. Not all have access to the same sites or the same
consents and other rights. Not all generators make the same investment
decisions. In a general sense new generation will be built by the "industry"
when "market conditions were right for investment in new generation".
However, what makes the market conditions "right for investment" will be
different for different generators.
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28. For example, TrustPower and Genesis from their public statements can be
seen clearly to have different requirements for investment. Genesis has only
one renewable development. project noted on its website which it refers to as
follows:
The Awhitu Wind Farm project is currently on hold until market conditions
improve. Genesis Energy has decided to defer construction of the wind farm
to allow time to reassess the project's economics. Currently the proposal to
build the Awhitu Wind Farm is not commercially viable.
29. During the same period that Genesis has been preparing to construct the
Awhitu Wind Farm, TrustPower and Meridian have between them constructed
or commenced construction of several hundred Mega Watts of renewable
generation. They clearly deemed it economically viable to invest in that
generation while Genesis placed its renewable generation project on hold.
30. The extent to which support derived from retail customers impacts upon
generation investment decisions also varies. TrustPower has developed plans
for renewable generation projects on designated sites with consents and rights
which it expects to be finalised in the short term. They are projects which are
not hypothetical but real, accessible and viable. When applicable consents and
rights are finalised, TrustPower's decision to invest in actioning those projects
will be directly influenced by consumer choice which provides certainty of
revenue through the retail market. This certainty supplements the revenue
expectations that TrustPower has as a generator selling into the national grid.
TrustPower's position is that a switch to TrustPower will accelerate the
development of renewable generation because the greater customer base
provides TrustPower with certainty of income (away from the volatile spot
market) and provides the incentive to develop renewable generation on sites
for which rights are held which will not proceed unless "market conditions" in
the form of revenue certainty are right for TrustPower.
31. Examples of those projects and their status include:
TrustPower Project
Status
Mahinerangi Wind Farm
Consent granted but appealed to the
Environment Court with decision of the
Environment Court pending
Kaiwera Downs Wind Farm
Council decision pending
Arnold Hydro Project
Consent hearing in progress
Wairau Hydro Project
Awaiting final consent conditions
Deep Stream Hydro Project
Final stages of construction and
commissioning
32. TrustPower's position is markedly different to the position of a vertically
integrated generator which does not have suitable sites and/or existing
consents or rights. Certainty of revenue and retail customer base can only have
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limited impact on the generation decisions made by those generators. A
generator that is not vertically integrated and can not rely on revenue certainty
provided through retail consumer choice is in a different position again, even if
it does have access to suitable development potential.
33. In summary:
a.
TrustPower holds rights to develop renewable generation in a number
of locations;
b.
TrustPower has recently completed renewable projects while other
generators such as Genesis have placed their projects on hold;
c.
TrustPower will not build new generation without securing or expecting
to secure new supply agreements with customers in order that we
gain certainty of revenue to support that development;
d.
Other generators are unable to build on the sites TrustPower has
secured and the number of sites available for commercial
development is limited;
e.
While other vertically integrated generators including Genesis may be
exploring, or have intentions to build renewable projects one day, only
a limited number of projects are on the table and few are at consent
stage. These projects will take some time to bring to life, yet
TrustPower has projects it could start this year provided consents are
finalised and our view of the right economic conditions exist; and
f.
It is not disputed by Genesis that renewable developments once built
reduce the need for fossil fuel generation. Therefore it can not be
disputed that the sooner those renewable developments are built the
sooner emissions will be reduced.
34. When customers switch to TrustPower they assist TrustPower in meeting one
of the most important criteria for a commercial project - revenue certainty.
Because TrustPower's projects can be built sooner than others in the industry,
revenue certainty has a real impact on investment decisions. For these
reasons, TrustPower does not consider that it is misleading to state in the 14
March Letter that customers help TrustPower to build more renewable
generation by growing its customer base in breach of Rule 2 of the Code of
Ethics or any other advertising code.
Price table and comparative advertising
35. The Complaint raises for the first time allegations that the comparative price
table shown at the conclusion of the 14 March Letter and earlier letters
("Table") breaches the Code for Comparative Advertising and the Code of
Ethics.
36. The Table includes all information required to enable a customer to compare
the cost of various supply plans offered by Genesis and TrustPower using the
format for each retailer that is used in their own marketing material. In the case
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of Genesis this includes the Electricity Commission Levy and in the case of
TrustPower it does not.
37. To avoid any potential for confusion, where required asterisks are used to
guide the customer to information which will ensure that they are able to
accurately calculate the cost of electricity supplied by each company in respect
of each supply plan including depending upon whether they pay by credit card
or not. TrustPower considers it appropriate to have used the standard 15%
prompt payment discount as a guide to TrustPower prices because between
2% and 4% of its customers pay by credit card incurring a lower prompt
payment discount. Those customers are alerted to the application of a lower
discount in additional information provided.
38. The comparative table included in the Complaint is inaccurate in that it adds to
the fixed daily charge for both domestic and domestic low use plans an
Electricity Commission Levy. The Electricity Commission Levy in TrustPower's
pricing is in fact a variable charge based only on consumption. We attach a
revised table showing TrustPower's prices including the Electricity Commission
Levy.
39. It is important to note that only the Anytime and Composite plans in the case of
Genesis, and the 24 Hour and All Inclusive plans in the case of TrustPower,
are usually used alone. Other plans are used in combination. Based on the
composition of its own Wellington customer base, TrustPower expects that the
vast majority of customers would combine a 24 Hour or All Inclusive pricing
plan with a fixed daily charge rendering TrustPower the cheaper option. In
respect of two electricity plans shown, TrustPower is slightly more expensive
than Genesis. These are pricing plans for night time use under which the
majority of customers use very little electricity. Night time plans are not used
alone but in conjunction with other price options to create an overall package.
Whether a customer saves money or not depends on which retailer offers the
best overall package or option. In the case of night time use plans, the overall
cost will depend on the other plans used in conjunction with night time use
plans.
40. TrustPower does not consider that the information that it has provided relating
in the Table breaches any Advertising Code.”
Oral Submissions
Ms Malaghan and Mr Carroll representing the Complainant and Ms Rawlings and Mr
Neustroski representing the Advertiser presented oral submissions and responded
to questions posed by members of the Panel.
Deliberation
The Panel confirmed that it had carefully considered all the submissions made in
relation to this complaint. It identified the advertisement, which included a two page
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“Electricity Supply Agreement”, and the Rule against which the advertisement was to
be assessed.
The Panel noted and highlighted those aspects of the advertisement that were at
issue and therefore relevant to this deliberation. They included the following:
“Would you prefer to support renewable energy?”
“Switch to TrustPower and you will be supplied by a company that produces its
power supply from wind and water.
If you are a Genesis Energy customer; your power supplier produces most of its
power by burning fossil fuel. Their Huntly Power station has been identified as the
biggest point source of carbon dioxide in the country.
Will I actually receive renewable energy if I switch to TrustPower?
TrustPower’s renewable generation is fed into an overall pool that includes energy
from all major New Zealand generators. The electricity that flows through the power
lines to your property is a mix of energy, because it’s supplied from this overall
generation pool through the national grid and into your local line network.
So Why Bother?
TrustPower is a 100% renewable generator, and by becoming a TrustPower
customer you show your support for renewable generation.
You also help us to build more renewable generation by growing our customer base we currently have four new renewable projects in the planning stages, which over
time can reduce the need for fossil fuel (coal and gas) power stations.
TrustPower can save you money
So long as you pay by the due date you will receive TrustPower’s 15%* on time
payment discount. This means you will pay less than you currently do with Genesis.
We also promise to keep our charges the same for at least 12 months from now. Its
that simple…”.
The Panel also referred to the “Electricity Supply Agreement” in particular the
following claim:
“I understand that once I have switched, TrustPower will give me a 15%* discount
for paying on time instead of the 10% Prompt Payment Discount I get now, however,
after the 15% discount the rates will be the same or lower. A summary of prices is
shown in the table on the back of this agreement”.
As a preliminary matter, the Panel described its role when making a determination.
In particular, that it was required to consider the advertisement from the point of
view of the consumer, or, in other words, establish the consumer’s understanding of
the Advertiser’s message. In addition, it was required to examine the issues raised
by the Complainant, in relation to Rule 2 of the Code of Ethics.
Code of Ethics - Rule 2.
The Panel turned to Rule 2 of the Code of Ethics. The relevant aspects of Rule 2
required the Panel to determine whether, in its view, the advertisement contained any
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statement or created an overall impression, which directly or by implication was likely
to mislead or deceive the consumer … or exploit his/her lack of experience or
knowledge.
The Panel examined the following questions and responses and after a thorough
and lengthy deliberation, was divided on the accuracy of the statements in relation
to consumer understanding.
1.
“Would you prefer to support renewable energy?”
In the Majority view, this was clearly the overarching question. The claims that
followed simply provided the encouragement and/or incentive to “switch” to
TrustPower.
In the Majority opinion the statements, “Switch to TrustPower and you will be
supplied by a company that produces its power supply from wind and water.” and,
“…If you are a Genesis Energy customer; your power supplier produces most of its
power by burning fossil fuel. Their Huntly Power station has been identified as the
biggest point source of carbon dioxide in the country…" were simple statements of
fact.
2.
“Will I actually receive renewable energy if I switch to TrustPower?”
The response associated with this question was, in the Majority view, a simplistic but
fair interpretation of one aspect of the electricity industry.
3.
“So Why Bother?”
The Majority considered the claim that “…by becoming a TrustPower customer you
show your support for renewable energy…”. In the Majority view, this statement,
although marginal, was considered plausible when read in association with the
overarching question, “Would you prefer to support renewable energy?”. In addition,
and even more importantly, when the word “support” was interpreted in light of the
“revenue certainty” that comes from a solid customer base. In the Majority view, this
notion is supported by the subsequent paragraph. In other words, by becoming a
TrustPower customer you provide the fiscal support required for, among other
things, the construction of more renewable generation.
While the Majority also accepted that society today was more aware of
environmental issues and that choice could be based on that aspect of generation
alone, it was of the view that a more realistic basis of choice was fiscal.
Consequently, the Majority did consider that care should be taken with statements of
this nature as they could lead to an ambiguity which at best is confusing and at
worst is misleading.
However, the Majority of the Panel concluded that in this instance, this aspect of the
advertisement was not misleading or deceptive and therefore did not effect a breach
of Rule 2 of the Code of Ethics.
A Minority of the Panel disagreed. In the Minority view, this aspect of the
advertisement was confusing, particularly when contemplated from the consumer’s
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perspective. Of particular concern, was the Advertiser’s failure to clarify the fact that
it had both a generating arm and a retail business which essentially operated
independently of each other. This confusion, in the Minority view, was amplified by
the overarching question “Would you prefer to support renewable energy?” and the
accompanying statement, “Switch to TrustPower and you will be supplied by a
company that produces its power supply from wind and water” (emphasis added). In
its current form, it was the Minority view that the advertisement created the
impression that by “switching” to TrustPower” the customer would receive a
renewable product in the home. The Minority concluded that by so doing, the
Advertiser exploited the consumer’s lack of knowledge and, further, its explanation
of the electricity process under the heading, “Will I actually receive renewable
energy if I switch to TrustPower?” only added to the confusion.
The Minority was also concerned with the notion that a “switch” to TrustPower could
be interpreted to mean that all customers who do, show unqualified support for the
notion of renewable generation, regardless of the cost to the individual. This in the
Minority view would be wrong and therefore in terms of the Code, misleading.
However in accordance with the Majority view this aspect of the complaint
was not upheld.
As a preliminary matter relating to the second issue, the Advertiser produced a
revised Table of Pricing Options for the benefit of the Panel which included the EC
Levy.
The Panel turned to the following claims and statements, “TrustPower can save
you money. So long as you pay by the due date you will receive TrustPower’s 15%*
on time payment discount. This means you will pay less than you currently do with
Genesis. We also promise to keep our charges the same for at least 12 months from
now. Its that simple…”.
Also, the second paragraph of the “Electricity Supply Agreement” stated, “…after the
15% discount the rates will be the same or lower. A summary of prices is shown in
the table on the back of this Agreement.”
The Panel noted at the outset that there was a discrepancy between the two
statements. On the one hand the Advertiser stated that the customer would pay
less than it did with Genesis and on the other that it would pay the same or lower
than it did with Genesis. Clearly one of these statements was incorrect and therefore
misleading to the consumer.
The Panel then turned to the “Table” of the Summary of Prices provided in the
Agreement. In particular it observed that the comparison was between the Genesis
Pricing Option and the TrustPower Pricing Option Equivalent (emphasis added).
The Panel noted that although the Advertiser provided all the information it deemed
necessary for a prospective customer to accurately compare costs, what it failed to
appropriately and clearly convey, was that its own prices did not include the
mandatory EC Levy. What is more, the Advertiser failed to provide any information
on the cost or effect of the EC Levy on its own pricing details. The Panel
acknowledged the asterisk reference indicating that Genesis figures included the EC
Levy, but as this information was buried in the small print at the bottom of the
“Table”, and, as there was no reference indicating the cost of the Levy, the Panel
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was left with the conclusion that the Advertiser deliberately calculated to advertise
artificially reduced prices. In addition, even if the cost of the EC Levy had been
provided in the small print, to expect the customer to recalculate the figures, if they
had the sufficient knowledge to do so, was in the Panel’s opinion, totally
unreasonable. Furthermore, it was the Panel’s view, that rather than assist the
customer, the asterisk references in their current form, merely distorted any
comparison the customer attempted to make.
To enable the Panel to determine the merit of the claims made in respect of the
price differentiation, the Panel referred to the Advertiser’s “Revised Table” attached
to its submission. Again the Panel reiterated the need to consider matters from the
consumer point of view.
Of the 14 possible pricing options, the Panel noted the following:
5 pricing options were identical.
2 TrustPower options were fractionally cheaper
5 TrustPower options were cheaper
2 TrustPower options were more expensive
Clearly, in the Panel’s view, the Advertiser’s statements relating to the comparison
costs between Genesis and TrustPower were not only confusing by virtue of the
discrepancy in the claims made in the advertisement but they could not be justified
by the information obtained from the revised “Table”.
The statement that “TrustPower can save you money” was fundamentally untrue,
because only 50% of the options were cheaper. In addition, as two of the options
were more expensive the statement that the “rates will be the same or lower” was
also untrue.
Similarly, the headings in the “Table” - Genesis Pricing Option and TrustPower
Pricing Option Equivalent were misleading because the TrustPower's Pricing
Option was not “equivalent” to the Genesis Pricing Option. TrustPower had
artificially reduced its prices by omitting the mandatory EC Levy. Therefore the
“Table” in the Agreement was fundamentally flawed and did not provide a true or fair
comparison between the two providers.
The Panel registered its concern with the inclusion of a table of this nature in an
advertisement which was published solely for consumer attention.
In the Panel’s view this was a serious breach of Rule 2 of the Code of Ethics as the
“Table” was not only misleading, but it was also deceptive. The Panel ruled
unanimously to uphold this aspect of the complaint.
Decision: Complaint Upheld (in part)