Aussie Government Watchdog Alleges Sumo Power Misrepresented Renewable Energy Costs

Guest essay by Eric Worrall

The Australian Competition and Consumer Commission has launched legal proceedings against Sumo Power, accusing them of enticing domestic customers into heavily discounted energy supply contracts, while concealing a standard business practice of slamming customers with a 35-40% price hike after they have received their first few electricity bills. Sumo sent alleged victims of this scam a booklet which claimed the price hikes were due to climate change, ageing coal assets and power plant closures.

Sumo Power allegedly misled consumers about electricity pricing

5 August 2020

The ACCC has instituted proceedings in the Federal Court against Sumo Power Pty Ltd (Sumo) alleging it made false or misleading representations to Victorian consumers in relation to its electricity plans.

It is alleged that between June and November 2018, Sumo promoted 12-month electricity plans with low electricity rates and large ‘pay on time’ discounts of up to 43 per cent to residential consumers, while planning to substantially increase the prices charged to those consumers who signed up within a few months, or knowing it was likely to do so.

The ACCC claims that Sumo represented to consumers that it would maintain, or not materially increase these low rates and consumers would get the benefit of the ‘pay on time’ discount for 12 months.

However, in November 2018, Sumo substantially increased the underlying rates for certain consumers, by approximately 30 to 46 per cent. The ACCC alleges the price increases were in line with a pre-determined strategy, which Sumo had not disclosed to consumers. The ACCC also alleges that the price increases substantially eroded or eliminated consumers’ pay on time discount. 

“We allege Sumo enticed consumers to enter into electricity plans with the promise of low cost electricity prices, while planning a significant rate increase which meant consumers were charged significantly more for their electricity than they were led to expect,” ACCC Chair Rod Sims said.

It is also part of the ACCC’s case that Sumo subsequently misled consumers when advising them that the price increases were due to wholesale energy cost factors including generation cost rises and “climate change and ageing assets forcing the closure of cheap coal fired power stations”.

Sumo used telemarking agents to cold-call residential consumers and promote its electricity plans. The ACCC claims that, acting on behalf of Sumo, the telemarketing agents represented they were independent and would perform a comparison of plans across a number of retailers, when in fact they were contracted by Sumo to sell Sumo plans.

“Electricity bills are a major household expense for many consumers,” Mr Sims said.

“We allege that consumers were likely to have been convinced to switch to Sumo, acting on recommendations from purported independent consultants when in fact they came from Sumo telemarketing agents.”

The ACCC is seeking penalties, declarations, publication orders, compliance program orders, consumer redress, and legal costs.

Background

Sumo is an Australian owned energy retailer, which began operating in early 2015.

These proceedings relate to Sumo’s promotion of 27- 43 per cent ‘pay on time’ discount plans, which were promoted to residential consumers in Victoria from at least June to November 2018.

During the relevant period, Sumo contracted a number of telemarketing agents to sell Sumo’s plans. Sumo has since ceased using these agents.

The attached document below contains the ACCC’s initiating court document in relation to this matter. We will not be uploading further documents in the event this initial document is subsequently amended.

Concise Statement

ACCC v Sumo Power Pty Ltd_Concise Statement ( PDF 677.75 KB  )
Release number: 162/20ACCC

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Source: https://www.accc.gov.au/media-release/sumo-power-allegedly-misled-consumers-about-electricity-pricing

Reading the concise statement, the ACCC claims Sumo sales people misrepresented themselves as independent consultants to deceive customers into thinking they were receiving objective advice.

The ACCC claims Sumo secretly maintained three books. New customers were allegedly added to the front book, the cheapest rates, then progressively migrated to the mid book, then the back book. The ACCC alleges customers were not informed the price hikes were pre-planned when they signed up to Sumo’s pricing scheme.

There is no doubt renewable energy has hurt ordinary consumers. It doesn’t matter how cheap renewables become, the need to maintain a complete duplicate set of dispatchable fossil fuel power infrastructure on hot standby is a fatal blow to any claims that renewables are cheaper.

But the alleged crimes Sumo committed are a reminder, don’t be too ready to believe that your latest electricity price hike is just because of the cost of renewables.