Federal Court of Australia

Ergon Energy Queensland Pty Ltd v Australian Energy Regulator [2025] FCA 541

ORDERS

THE COURT ORDERS THAT:

1.    The application be dismissed.

2.    The applicant pay the respondent’s costs of the proceedings.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MOORE J:

Introduction

1    These proceedings concern the validity of a notice (the Notice) to produce documents and information issued to the applicant (Ergon) by the respondent (the AER) pursuant to s 206 of the National Energy Retail Law (NERL). The NERL take its form as a Schedule to the National Energy Retail Law (South Australia) Act 2011 and is adopted by certain state and territory legislation, including in Queensland through s 4 of the National Energy Retail Law (Queensland) Act 2014 (which makes certain modifications to the NERL which are not relevant to these proceedings).

2    The Notice states that the AER is investigating possible breaches of s 273 of the NERL and rules 31(1), 31(2) and 31(3) of the National Energy Retail Rules (NERR) in respect of payments received by Ergon through the Centrepay services operated by Services Australia. Rule 31 of the NERR (Rule 31) is concerned with the overcharging of “small customers” by an electricity retailer.

3    Centrepay is a voluntary bill paying service operated by Services Australia for Centrelink customers, whereby those customers can direct that some portion of their benefits (e.g. JobSeeker payments) be paid directly to certain service providers, such as electricity retailers.

4    The AER’s investigation arises out of a letter to the AER from Services Australia of 3 May 2024 notifying the AER that Ergon had received overpayments, being amounts in excess of the customer’s authority or in excess of what the customer could reasonably be expected to pay, from a number of customers of Ergon through Centrepay over a ten year period. That letter:

(a)    stated that the period of overpayments identified by Ergon was from May 2014 to February 2024, and that Ergon had indicated that it first became aware of the overpayments in March 2021;

(b)    identified the value of overpayments held by Ergon at certain points in time between May 2021 and February 2024 and stated that those overpayments exceeded $1.1 million, and that 2,061 customers had been involved in those overpayments;

(c)    asserted that the overpayments occurred because customers ceased to use a service but did not cancel their deductions; and

(d)    asserted that pursuant to the Centrepay Policy and Terms, Ergon was obliged to monitor deductions and to bring them to an end on behalf of the customer if they were no longer required.

5    Rule 31 is in the following relevant terms (with the defined term “the overcharge threshold” identified as $50, to aid comprehension):

(1)    Where a small customer has been overcharged by an amount equal to or above the overcharge threshold [i.e. $50], the retailer must inform the customer accordingly within 10 business days after the retailer becomes aware of the overcharging.

(2)    If the amount overcharged is equal to or above [$50], the retailer must:

(a)    repay that amount as reasonably directed by the small customer; or

(b)    if there is no such reasonable direction, credit that amount to the next bill; or

(c)    if there is no such reasonable direction and the small customer has ceased to obtain customer retail services from the retailer, use its best endeavours to refund that amount within 10 business days.

(3)    If the amount overcharged is less than [$50], the retailer must:

(a)    credit that amount to the next bill; or

(b)    if the small customer has ceased to obtain customer retail services from the retailer, use its best endeavours to refund that amount within 10 business days.

(4)    No interest is payable on an amount overcharged.

(5)    If the small customer was overcharged as a result of the customer’s unlawful act or omission, the retailer is only required to repay, credit or refund the customer the amount the customer was overcharged in the 12 months before the error was discovered.

(6)    The overcharge threshold is $50 or such other amount as the AER determines under subrule (7).

(7)    …

(9)    Application of this rule to standard retail contracts.

This rule applies in relation to standard retail contracts.

(10) Application of this rule to market retail contracts

This rule applies in relation to market retail contracts (other than prepayment meter market retail contracts).

6    Ergon seeks to quash the Notice on the grounds that it has been issued based on an incorrect approach to the construction of Rule 31. In essence, Ergon contends that there are two errors of construction that vitiate the Notice.

7    First, Ergon contends that the persons the subject of the complaint from Services Australia are not “customers” for the purposes of Rule 31, because they were no longer customers at the time of the overpayments, and Rule 31 is limited in its operation to current customers.

8    Secondly, Ergon contends that the overpayments the subject of the Services Australia complaint do not involve incidents of “overcharging” within the meaning of Rule 31, because the payments are not said to be made in response to any account, demand or other assertion of entitlement from Ergon, and do not involve any alleged conduct by Ergon evidencing an intention to permanently deprive the customers of the amount of the overpayments.

9    In relation to its second contention, Ergon contends that the Notice is based on a construction of Rule 31 adopted by Downes J in the decision of Australian Energy Regulator v AGL Retail Energy Limited [2024] FCA 969 (AGL). Ergon submits that this decision is wrongly decided and that I should adopt a different approach to the construction of Rule 31.

10    Ergon submits that the Notice is invalid because the AER issued the Notice relying upon a misapprehension as to the proper construction of Rule 31, and because the matter referred to in the Notice, even after allowing for undiscovered facts, is incapable of amounting to a contravention of Rule 31.

11    In response, the AER says the construction of “customer” and “overcharged” propounded by Ergon is incorrect. In relation to Ergon’s second contention, the AER also says that the Notice is issued pursuant to an investigative power to investigate the relevant facts, and that no occasion presently arises for considering whether a particular factual scenario involves an overpayment within the meaning of Rule 31 because the precise factual circumstances surrounding any Centrepay overpayments received by Ergon are yet to be determined.

12    For the reasons set out below, I do not accept Ergon’s contention that the persons the subject of the complaint from Services Australia are not “customers” for the purposes of Rule 31, because they were no longer customers at the time of the overpayments and Rule 31 is limited in its operation to current customers only. I also do not accept Ergon’s construction of “overcharged” in Rule 31, and find that circumstances falling within the scope of the Notice may amount to a contravention of Rule 31 such that the Notice is valid. Whether the conduct of Ergon in fact gave rise to an “overcharge” of the relevant Ergon customers remains to be seen.

13    It follows that Ergon is not entitled to the relief that it seeks.

Background to the Notice

14    As noted earlier, the AER’s investigation of Ergon arose from a letter to the AER from Services Australia of 3 May 2024. The AER in turn wrote to Ergon on 27 May 2024, notifying Ergon that it had received a referral from Services Australia alleging that Ergon had held Centrepay overpayments from customers in the period May 2014 to February 2024, with the letter noting how Services Australia had defined “overpayments”. The letter noted that the AER would be assessing the conduct by reference to Rule 31, and inviting Ergon to respond.

15    There was then an exchange of correspondence between Ergon and the AER, in the course of which Ergon contended that “to hold a credit balance in a customer’s account does not equate to an overcharging of the customer such that rule 31 of the NERR is triggered”, and observed that the AER had instituted proceedings in this Court against AGL Retail Energy Limited in respect of similar assertions. The AER in response stated, inter alia, that it would await judgment in the AGL proceedings before considering whether to commence an in-depth investigation into Ergon’s conduct.

16    The liability judgment in AGL was delivered on 23 August 2024. Downes J subsequently awarded penalties and other remedies against AGL on 19 December 2024: Australian Energy Regulator v AGL Retail Energy Limited (Relief Hearing) [2024] FCA 1500. On or around 20 September 2024, the AER commenced an “in-depth investigation” of Ergon in relation to the matters raised by the 3 May 2024 letter from Services Australia. On 7 November 2024, the AER issued the Notice.

17    I mention this chronology because it is relevant to Ergon’s contention that the Notice is based on a particular approach to the construction of Rule 31 flowing from the decision in AGL. Ergon says that it can be inferred from this correspondence that the AER was proceeding on a particular construction of Rule 31, being the construction adopted in AGL.

18    The Notice itself is stated to be a notice under s 206(1) of the NERL, and states that it concerns an investigation of possible breaches of Rule 31 and s 273 of the NERL. Section 206 is in a form that is somewhat analogous (although not identical) to s 155 of the Competition and Consumer Act 2010 (Cth) (CCA). Section 206 relevantly provides as follows:

(1)    If the AER has reason to believe that a person is capable of providing information, producing a document or giving evidence that the AER requires for the performance or exercise of a function or power conferred on it under this Law, the National Regulations, the Rules or an application Act, the AER may serve on that person a notice (a relevant notice).

(2)    A relevant notice may require the person to do 1 or more of the following:

(a)    provide to the AER, by writing signed by that person or, in the case of a body corporate, by a competent officer of the body corporate, within the time and in the manner specified in the notice, any information of the kind referred to in subsection (1); or

(b)    produce to the AER, or to a person specified in the notice acting on its behalf, in accordance with the notice, any documents of the kind referred to in subsection (1); or

(c)    appear before the AER… to provide any information or to give any evidence of the kind referred to in subsection (1)…

…

19    Section 204 of the NERL is also relevant. It relevantly provides as follows:

(1)    The AER has the following functions and powers:

(a)    to monitor compliance by persons with this Law, the National Regulations and the Rules;

…

(c)    to investigate breaches or possible breaches of provisions of this Law, the National Regulations or the Rules, including offences against this Law;

…

20    Section 273 of the NERL relevantly provides as follows:

(1)    A regulated entity must establish policies, systems and procedures to enable it to efficiently and effectively monitor its compliance with the requirements of this Law, the National Regulations and the Rules.

(2)    The policies, systems and procedures must be established and observed in accordance with the relevant provisions of the AER Compliance Procedures and Guidelines.

21    In the present proceedings, it is common ground that the relevant “requirements” for the purposes of s 273(1) are the requirements of Rule 31, and Ergon’s challenge to the validity of the Notice therefore focuses on the construction of Rule 31.

22    Rule 31 has been set out earlier.

23    It is appropriate to note that rule 32 of the NERR provides that a retailer must accept payment for a bill by a small customer by various specified payment methods. Rule 32(2) provides that a small customer may request the retailer to permit payment by Centrepay, and the retailer may elect to permit this option. The NERR therefore expressly contemplate payment by Centrepay deductions.

The Notice

24    The Notice is 13 pages long. It is not necessary to set it out in its entirety. It commences in the following way:

The [AER] has reason to believe that [Ergon] is capable of providing information and producing documents that the AER requires for the performance or exercise of a function or power conferred on it under the [NERL] or the [NERR], namely to investigate breaches or possible breaches of the NERR.

25    Notwithstanding that last reference to the NERR alone, the next heading refers to an investigation of possible breaches of rules 31(1), 31(2) and 31(3) of the NERR and s 273 of the NERL. The Notice then contains the following relevant paragraphs:

2.    The AER is currently investigating possible breaches of the NERR and NERL by Ergon, in respect of payments received by Ergon through Centrepay in at least the period from 1 May 2014 to the date of this Notice. The AER is investigating the following alleged conduct:

a.    whether small customers (within the meaning of section 5(2) of the NERL) of Ergon have been overcharged by an amount equal to or above the overcharge threshold and, if so, whether Ergon failed to inform those customers within 10 business days after becoming aware of the overcharging in alleged contravention of rule 31(1) of the NERR;

b.    whether small customers of Ergon have been overcharged by an amount equal to or above the overcharge threshold and, if so, whether Ergon failed to:

i.    repay that amount as reasonably directed by the small customer; or

ii.    if there was no such reasonable direction, credit that amount to the next bill; or

iii.    if there was no such reasonable direction and the small customer had ceased to obtain customer retail services from Ergon, use its best endeavours to refund that amount within 10 business days,

in alleged contravention of rule 31(2) of the NERR;

c.    whether small customers of Ergon have been overcharged by an amount less than the overcharge threshold and, if so, whether Ergon failed to:

i.    credit that amount to the next bill; or

ii.    if the small customer had ceased to obtain customer retail services from Ergon, use its best endeavours to refund that amount within 10 business days,

in alleged contravention of rule 31(3) of the NERR; and

d.    whether Ergon established policies, systems and procedures to enable it to efficiently and effectively monitor its compliance with its obligations under the NERL and NERR, in alleged contravention of section 273 of the NERL.

3.    Pursuant to section 206(2)(a) and (b) of the NERL, the AER requires Ergon to:

a.    provide to the AER, in writing and signed by a competent officer, the information specified in Schedule 1 to this Notice, and

b.    produce to the AER the documents specified in Schedule 2 to this Notice,

being information and documents which, the AER has reason to believe, Ergon is capable of furnishing, and the AER requires for the performance or exercise of a function or power conferred on it under the NERL or the NERR.

26    The interpretation of the Notice requires consideration of a set of definitions, which commence on the next page of the Notice. It is not practicable to set out all of these definitions, and I will instead refer to some of the more important ones.

27    An “Account” means an electricity account with Ergon in the name of one or more Customers. A “Customer” is defined to mean a small customer of Ergon as defined in s 5(2) of the NERL. An “Affected Customer” is defined as a “Customer of Ergon with a Relevant Account”. A “Relevant Account” is defined to mean an “Account impacted by the Centrepay Issue”. An “Excess Centrepay Credit” means a Centrepay Deduction applied to a Closed Account. A “Closed Account” means an Account of a Customer who entered a standard or market retail contract with Ergon but has ceased to obtain customer retail services from Ergon. A “Centrepay Deduction” means an amount debited from a Customer’s welfare payments through Services Australia’s Centrepay service and received by Ergon.

28    The “Centrepay Issue” is a key definition that provides some insight into what is being investigated by the Notice. I set it out below, with the definitions of certain other defined terms included in square brackets:

Centrepay Issue means Ergon’s receipt of Centrepay Deductions pursuant to a Centrepay Authority [the consent and instruction from an individual for Centrepay Deductions in respect of a Customer’s Account] in respect of a Customer’s Account in circumstances where, for at least a single Centrepay Deduction, each of the following is satisfied:

•    the Centrepay Deduction was applied as a credit to the Customer’s Account;

•    at the time the Centrepay Deduction was received, the Account the Centrepay Deductions was applied to was a Closed Account;

•    at the time the Centrepay Deduction was received, the Customer did not owe any amount to Ergon under the Account receiving the Centrepay Deduction;

•    at the time the Centrepay Deduction was received, the Customer did not owe any amount to Ergon under any other contract or Account with Ergon; and

•    the Customer did not have an Active Account [an account of a Customer who entered a standard or market retail contract with Ergon but has not ceased to obtain customer retail services from Ergon] with Ergon.

29    There are then requests for information and documents that pick up these definitions. For example, Schedule 1 contains the following:

Details of Affected Customers

1.    In accordance with the template provided at Worksheet 1 of Annexure A, provide for each financial year during the Relevant Period, a breakdown of the total:

a.    number of Affected Customers;

b.    number of Relevant Accounts;

c.    number of Centrepay Deductions received in circumstances where all of the following is satisfied:

i.    the Relevant Account is a Closed Account;

ii.    the Relevant Account contains a zero or credit balance;

iii.    the Affected Customer did not have an Active Account; and

iv.    the Affected Customer did not owe Ergon an amount under any Account the Customer owns with Ergon;

d.    amount of Centrepay Deductions received in response to Question 1(c) of Schedule 1 to this Notice.

…

7.    Provide details of:

a.    the date(s) on which Ergon identified the existence of:

i.    the Centrepay Issue; and

ii.    Ergon’s receipt of Excess Centrepay Credits.

b.    how Ergon identified the Centrepay Issue, including whether Ergon:

i.    was notified by Services Australia of the Centrepay Issue or of Ergon’s receipt of Excess Centrepay Credits; or

ii.    identified the Centrepay Issue or receipt of Excess Centrepay Credits through other means; and

c.    the measures taken by Ergon after identifying:

i.    the Centrepay Issue; and

ii.    Ergon’s receipt of Excess Centrepay Credits.

8.    Provide details of each investigation, audit, quality control test or assurance activity conducted by Ergon, any third parties engaged by Ergon or Services Australia in relation to Ergon’s Centrepay processes, the Centrepay Issue or receipt of Excess Centrepay Credits from 1 May 2014 to the date of this Notice, including:

a.    the date;

b.    who conducted the investigation, compliance audit, quality control test or assurance activity;

c.    the outcome or findings; and

d.    Ergon’s response.

10.    Provide details of all measures taken by Ergon during the Relevant Period to:

a.    inform Affected Customers of the Centrepay Issue or Excess Centrepay Credits, including the dates of any such measures, the information provided to Affected Customers and if any Affected Customers were not informed, why not;

b.    repay, credit or refund Affected Customers Excess Centrepay Credits, including the dates of any such action;

c.    return the Excess Centrepay Credits to Services Australia; and

d.    cancel the Centrepay Deductions on the Relevant Accounts of the Affected Customers through Services Australia, including the dates and outcomes of any such action. If Ergon has been unable to cancel the Centrepay Deductions, explain:

i.    why; and

ii.    what instructions or Communications Services Australia has provided to Ergon to resolve or address the situation.

…

The present proceedings

30    On 5 December 2024, Ergon filed an application seeking various relief, including declarations as to the proper construction of Rule 31, declarations that the Notice was not validly issued by the AER, and orders quashing the Notice. An Amended Originating Application was filed on 24 January 2025, with amended relief including declarations in the following terms:

1.    A declaration under section 16(1)(c) of the ADJR Act or alternatively section 39B(1) of the Judiciary Act 1903 (Cth) that a “small customer” of a retailer as used in section 5(2) of the NERL and rule 31(1) of the NERR does not include individuals who both:

a.    ceased to obtain customer retail services from that customer; and

b.    did not owe to the retailer any amounts under any contract or account with that retailer.

1A.    A declaration under section 16(1)(c) of the ADJR Act or alternatively section 39B(1) of the Judiciary Act 1903 (Cth) that “overcharge” as used in rule 31 of the NERR:

a.    means an act by a retailer which involves a charge or fee that is levied by the retailer on a customer which is unjustly excessive; and

b.    does not include a payment of an amount of money by a customer to a retailer that was applied as a credit to that customer’s account in circumstances where the customer had ceased to obtain customer retail services from the retailer and did not owe it any amounts under any contract or accounts with the retailer.

31    As noted below, Ergon’s oral submissions advanced a somewhat more nuanced construction of “overcharged” than that set out in declaration 1A above.

32    I note that the preparation of this judgment has been hampered by the extremely poor quality of the transcript of the proceedings, which has not managed to record in any accurate way the exchanges in the course of oral submissions that elucidated the parties’ positions on construction.

Meaning of “customer” in Rule 31

33    The condition for the operation of Rule 31, expressed in the opening words of sub-rule (1), is “Where a small customer has been overcharged…”.

34    I note that the full condition is “Where a small customer has been overcharged by an amount equal to or above the overcharge threshold…” (emphasis added). However, sub-rule (3) commences “If the amount overcharged is less than the overcharge threshold…” without any reference to a small customer, as if the relevant condition has already been satisfied. When read as a whole, although the expression is imperfect, it is tolerably clear that the condition for the operation of Rule 31 as a whole is that a small customer has been overcharged, and that the rule deals in different ways with different scenarios depending on whether the small customer is overcharged $50 or more, or less than $50. Thus, for example, rule 31(5) commences “If the small customer was overcharged as a result of the customer’s unlawful act or omission…”, and then provides that the repayment, credit, or refund, which is clearly the repayment, credit or refund referred to in sub-rules (2) and (3), is limited to the amount the customer was overcharged in the 12 months before the error was discovered.

35    The language of rule 31(1) (“Where a small customer has been overcharged by an amount equal to or above [$50], the retailer must inform the customer…”) identifies that “the retailer” must inform the customer, but does not identify the person who has engaged in the overcharging. However, it is implicit in the structure and language of the rule, particularly given the use of the words “the retailer”, that the relevant retailer who must inform the customer is the retailer who has overcharged the customer.

36    In relation to the meaning of “small customer”:

(a)    s 5(1) of the NERL defines a “customer” as a person to whom energy is sold for premises by a retailer, or who proposes to purchase energy for premises from a retailer; and

(b)    s 5(2) of the NERL defines a “small customer” as a customer who is a residential customer, or who is a business customer who consumers energy at business premises below the upper consumption threshold.

37    The debate as to the proper construction of Rule 31 in the present case is a temporal one: whether the words “Where a small customer has been overcharged…” requires the small customer to be a current customer receiving services from the retailer at the time of the act or circumstances constituting the overcharge.

38    Ergon submits that the term “customer” is a pivotal concept that includes only:

(a)    a person “who is presently in a relationship of purchasing energy from a retailer”, relying on s 5(1)(a) of the NERL;

(b)    a person “who proposes to purchase energy from a retailer”, relying on s 5(1)(b) of the NERL; and

(c)    a person “who may prospectively purchase energy from a retailer”, relying on s 2(3) of the NERL,

and does not include any person who at some former time was a customer.

39    Ergon contends that the word “customer” in Rule 31 does not include any person who previously acquired energy from Ergon but no longer does so, because they are not “customers” for the purposes of Rule 31.

40    Ergon’s tripartite classification of person who are “customers” does not precisely replicate the language of the relevant provision. Section 5(1)(a) of the NERL does not refer to a person “who is presently in a relationship of purchasing energy from a retailer”. Rather, s 5(1)(a) provides that a customer is a person “to whom energy is sold for premises by a retailer”. Section 5(1) provides, in effect, that a customer includes both a person to whom energy is sold by a retailer and a person who proposes to purchase energy for premises from a retailer. It therefore a broad definition that includes both an actual and proposed transactional relationship.

41    Ergon emphasises the words “to whom energy is sold”, and in particular the word “is”, in the definition of customer in s 5(1) of the NERL. Ergon submits that the reason for imposing a temporal limitation on the category of persons who are customers is apparent from the context, in that the NERL and NERR impose on retailers a detailed regulatory regime which includes ongoing obligations (e.g. the obligation to issue regular bills) and include civil penalty provisions.

42    In that regard, Ergon points to:

(a)    rule 20(2) of the NERR, which provides that a retailer must use its best endeavours to ensure that actual readings of the meter of a small customer are carried out as frequently as is required to prepare its bills consistently with the metering rules and in any event at least once every 12 months; and

(b)    rule 24 of the NERR, which provides that a retailer must issue bills to a small customer at least once every 100 days.

43    One may accept that temporal issues of the sort raised by Ergon could be important. For example, it would be odd if these obligations required the provision of a regular meter reading or the regular issuing of bills to a person who switched their supply of electricity away from the retailer in question some years earlier.

44    However, equally, the process of discerning the requisite temporal relationship may require consideration of the whole of the relevant provision in the context of the regulatory scheme as a whole, rather than giving a fixed and literal meaning to the word “is” in s 5(1)(a) of the NERL. The proper approach to construction of the NERR is not one of slavish textural literalism focussing on the word “is”.

45    There are other textual indications that a “customer” for the purposes of the NERR is not always limited to a person presently consuming energy from a retailer. Rule 45 relevantly provides as follows (emphasis in original):

(1)    If a small customer has been required by a retailer to pay a security deposit, the retailer must repay to the small customer in accordance with the small customer’s reasonable instructions the amount of the security deposit, together with accrued interest, within 10 business days after the small customer:

…

(b)    vacates the relevant premises… or transfers to another retailer, where the security deposit or any part of it is not required in settlement of the final bill referred to in rule 44(1)(b).

46    Rule 45 proceeds on the footing that a small customer could still be a “customer” of a retailer for at least 10 business days after the person had transferred to another retailer and therefore is no longer “presently in a relationship of purchasing energy” from the retailer. Ergon’s suggestion that a “customer” is always limited to someone who is a current or potential acquirer of energy from a particular retailer is inconsistent with rule 45. It is also inconsistent with the text of Rule 31 itself, as considered further below.

47    There are various means by which the standard retail contract comes to an end. Rule 70 of the NERR concerns the termination of a standard retail contract, and relevantly provides that a standard retail contract terminates:

(a)    in a case where the small customer gives the retailer a notice stating that the customer wishes to terminate the contract, on a date advised by the retailer (which must be at least 5 but not more than 20 business days from the giving of a termination notice);

(b)    on a date agreed between the retailer and the small customer;

(c)    when the small customer starts receiving customer retail services for the premises under a different customer retail contract with the retailer or a different retailer; or

(d)    when a different customer starts receiving customer retail services for the premises under a customer retail contract with the retailer or a different retailer.

Thus, under (c), a customer who switches to a different retailer will cease to be in a standard retail contract (and will cease to receive the services of the supply of energy) from the previous retailer at the point that the customer starts receiving customer retail services from the new retailer.

48    In its submissions, the AER suggests an approach to the construction of “customer” for the purposes of the NERR which is not subject to any temporal limitation, and thus is at the opposite end of the temporal spectrum from the Ergon position. For example, the AER submits that it is not absurd for the obligation to provide regular bills to apply to former customers because “the billing and meter reading rules plainly do not apply where a person does not owe money which the retailer needs to bill or is not using electricity which the retailer needs to read the meter for”. To the extent that this submission suggests that all obligations continue to apply to former customers, in my view that would go too far. Rather, the correct approach is not to utilise the term “small customer” to drive all temporal relationships in the NERR in some absolute sense, but rather to construe the relevant rules including by considering their language as a whole.

49    I consider that the proper construction of Rule 31 is in accordance with its ordinary meaning. As a matter of ordinary language, a retailer can overcharge its “customer” after the customer has ceased receiving services from that retailer. For example, a person formerly consuming Ergon services can be overcharged if Ergon sends them an unwarranted and excessive invoice some time after that person ceases receiving energy from Ergon and switches to another retailer. That would properly and conventionally be described as a situation in which an Ergon customer has been overcharged by Ergon, even though the customer is receiving electricity from a new retailer. As a matter of ordinary language, one would describe the customer being overcharged as an Ergon customer because the very assessment of whether the person has been overcharged relates back to the person’s receipt of services from Ergon and whether the amounts charged to them are properly referable to those services. Put another way, Ergon has overcharged its customer if it sends an excessive demand to a customer previously receiving services from Ergon, which exceeds any amount that the customer is liable to pay Ergon.

50    That is not because the word “customer” has some broad temporal operation such that it includes all prospective, current and former customers. Rather, it is because the word “overcharged” in Rule 31 supplies its own temporal operation and connection. A customer can be overcharged after that person ceases to receive services, but any assessment of whether they have been overcharged will inherently involve an assessment of proper charges for services supplied while that person was receiving services. There is no indeterminate temporal operation of Rule 31. Nor does Ergon become liable under Rule 31 for anything other than its own overcharging of its own customers in the ordinary sense of those terms.

51    The Ergon approach is not in accordance with the ordinary meaning of the language of Rule 31. Rather, the Ergon approach involves a gloss on that language. The Ergon approach seeks to read the words “Where a small customer has been overcharged…” as if they provided “Where a small customer has been overcharged while still a current customer…”. But that is not the language used.

52    If an Ergon customer is overcharged by Ergon after the customer ceases to receive services from Ergon, Ergon has still overcharged its customer. In that regard, focussing solely on whether the customer is a current customer distracts attention from the proper meaning of the rule as a whole, including the composite phrase “Where a small customer has been overcharged…”. The proper construction of Rule 31 is not driven by the meaning of “customer”, but rather by consideration of what it means to overcharge a customer. A retailer could overcharge its customer either while the customer was receiving services from that retailer, or after the customer ceases receiving services from that retailer.

53    That approach to the construction of Rule 31 is reinforced by other aspects of Rule 31 itself. Sub-rule (2) relevantly provides as follows (emphasis added):

(2)    If the amount overcharged is equal to or above [$50], the retailer must:

(a)    repay that amount as reasonably directed by the small customer; or

(b)    if there is no such reasonable direction, credit that amount to the next bill; or

(c)    if there is no such reasonable direction and the small customer has ceased to obtain customer retail services from the retailer, use its best endeavours to refund that amount within 10 business days.

54    Rule 31(3)(b) is to similar effect, but in circumstances where the amount overcharged is less than $50.

55    The words in italics are significant. First, they indicate that the relevant retailer who is to credit or refund the amount in question is the retailer who supplied the services in respect of which the customer has been overcharged (i.e. referable to what is properly chargeable by that retailer), and could be different from the customer’s current retailer. Secondly, they indicate that a “small customer” of a retailer could be a person who has ceased to obtain customer retailer services from that retailer. On Ergon’s approach, the words in italics would be meaningless and self-contradictory because a person who has ceased to obtain customer retail services from a particular retailer could not properly be described as a “small customer” of that retailer.

56    Ergon seeks to escape the difficulty for its construction caused by the words of Rule 31 itself by contending that the “small customer” in 31(1) is a reference to a current customer, but the “small customer” in 31(2) and 31(3) is merely a reference back to person identified in 31(1), and does not mean that the “small customer” remains a customer after ceasing to obtain customer retail services. That approach involves a strained reading of Rule 31, and one that is both contrary to the ordinary meaning of the words and unnecessary in light of the proper operation of the rule.

57    The proper construction of Rule 31 does not involve any indeterminate liability of a retailer. Rule 31 focusses attention on the amounts that are properly payable to the relevant retailer, and creates a contravention if the retailer has overcharged its customer. Nor does the proper construction of Rule 31 produce any indeterminate liability under any other rule, because it is the word “overcharged” that connects the retailer to the person to whom services were formerly provided and limits the extent of its responsibility to that customer.

58    By contrast, the construction advanced by Ergon produces a strained and artificial result. It means that any overcharging of customers at any point after they switch energy retailers would not be covered by Rule 31. The most common scenario in which this might occur is in the final bill. A final bill is an obvious potential source of overcharging in the ordinary sense of that word. Because the calculation of the final bill frequently involves a step of collecting usage information (for example, by way of a physical reading of the customer’s meter), the final bill would commonly only be issued after the customer has commenced receiving services from a new retailer. In a conventional case, it is only once the customer has changed service provider that the customer’s consumption of electricity with the previous retailer has concluded and can be calculated. On Ergon’s primary construction, any overcharging in the final Ergon bill to its customer after the customer has switched retailers does not satisfy the statutory condition of “Where a small customer has been overcharged…” because the overcharging occurs after the person has ceased to be a customer of Ergon.

59    To say that overcharging in a small customer’s final bill does not satisfy the expression “Where a small customer has been overcharged…” is contrary to the ordinary meaning of that phrase and produces an artificial and odd distinction between historical overcharging and overcharging in the final bill.

60    Perhaps recognising this difficulty, Ergon propounds a fallback construction of Rule 31 whereby a customer is still a customer for the purposes of Rule 31 until he or she has received (and potentially paid) the final bill. This is advanced by Ergon on the basis that receiving the final bill is such an integral aspect of being a customer that the notion of a “customer” could extend in a temporal sense to capture the process of final billing. On this approach to construction, the operation of Rule 31 still pivots around the temporal operation of the term “small customer” and is still conditional on the “small customer” being a current customer at the time of overcharging, but the notion of a current customer is extended to the point of receiving a final bill, or potentially to the point of paying the final bill. I say “potentially” because this depends upon the proper construction of “overcharge”, which is dealt with later in these reasons, and upon whether an “overcharge” occurs at the point of an excessive bill or requires a payment to be made.

61    Either way, Ergon’s alternative construction has little to commend it. There is nothing in the ordinary meaning of the words “Where a small customer has been overcharged…” that limits the relevant overcharging to the moment at which the final bill is issued but not a moment longer. Further, whilst temporally limiting the operation of Rule 31 to only overcharging of customers while a customer is a “current” customer, Ergon’s fallback construction extends the temporal operation of this concept to accommodate the final billing process and thereby gives an uncertain operation to the notion of a “current” customer (including for other provisions of the NERR), such that a person could simultaneously be a current customer of more than one energy retailer. That would cause potential uncertainty in the operation of other provisions of the NERR. Nothing in the language of Rule 31 dictates that approach. Further, the somewhat strained and complex temporal operation of this construction – extending “customer” to a person who receives a notional “final” bill but not to a person who receives any subsequent bill – is neither required nor provided for by the simple words used in the relevant Rule.

62    In the course of his oral submissions, senior counsel for Ergon directed my attention to various other provisions of the NERL and the NERR, in support of a submission that:

(a)    the relationship between a retailer and a customer is essentially a contractual relationship, with the relevant provisions regulating that contractual relationship but not altering its essential nature; and

(b)    the NERL and NERR incorporate a regulatory structure whereby a retail contract has a commencement point and an end point, and the obligations of retailers do not extend past the end point.

63    None of those provisions to which I was taken are inconsistent with the interpretation of Rule 31 set out above. In particular, they are not inconsistent with the proper construction of the composite phrase “Where a small customer has been overcharged…”, and the role of “overcharged” in providing the temporal and subject matter connection between the retailer and the customer’s consumption of energy. Nor are these provisions inconsistent with the express provisions in the NERR (e.g. rule 31(2)(c), rule 31(3)(b) and rule 45(1)) that refer to a retailer taking steps in relation to a small customer after that customer has ceased to acquire services from the retailer.

64    I therefore reject both Ergon’s primary construction and its fallback construction.

Meaning of “overcharge”

65    I turn to the second construction issue, which concerns the meaning of “overcharged” in Rule 31.

66    Like “customer”, the term “overcharged” is not defined. The most obvious form of overcharging results from an excessive bill (i.e. the billing by the retailer of an amount to a customer in excess of what the customer is liable to pay for services provided to that customer). However, the constructional debate in the present case relates to circumstances that do not involve excessive billing or charging but rather involve excessive payments made by the customer in the absence of a bill.

67    Whether a receipt of overpayments amounts to overcharging may require a process of characterisation. As emerged in the present hearing, one issue in relation to that characterisation can be whether the retailer is dealing with the overpayment for the purposes of a refund or return to the customer as soon as is practicable. If a retailer promptly returns an isolated accidental overpayment, then it might be difficult to say as a matter of ordinary language that a customer has been overcharged. By contrast, if the retailer simply retains the overpayment, a different characterisation might result, depending upon the circumstances. It was in this somewhat difficult area that the debate occurred in the present case.

68    In oral submissions, senior counsel for Ergon, Mr McKenna KC, contended that the term overcharge is “built upon the concept of some action by a supplier in charging for some service, whether that’s by debiting an account, sending a bill or otherwise asserting an entitlement to payment.” He contrasted that with the receipt of a mistaken payment, which is “conceptually different”, and which does not change “merely by the passage of time”. More specifically, he described a situation involving an ongoing mistaken payment (such as a recurring debit) coupled with silence from a retailer receiving the payment as not conveying any assertion by the retailer of an entitlement to the money mistakenly paid, and therefore not amounting to an overcharge. As it emerged during the hearing, and subject to the clarification that the assertion of the entitlement could be express or implied, that was Ergon’s construction.

69    That construction was a little more nuanced than the construction the subject of Ergon’s proposed declaration in paragraph 1A of its Amended Originating Application, which is in the following form:

“[O]vercharge” as used in rule 31 of the NERR:

a.    means an act by a retailer which involves a charge or fee that is levied by the retailer on a customer which is unjustly excessive; and

b.    does not include a payment of an amount of money by a customer to a retailer that was applied as a credit to that customer’s account in circumstances where the customer had ceased to obtain customer retail services from the retailer and did not owe it any amounts under any contract or accounts with the retailer.

70    Mr McKenna quite properly conceded that a customer could be “overcharged” without the retailer issuing an excessive bill or demand. He also accepted that if the retailer was aware that the customer was paying an excessive amount by mistake and accepted that excessive amount as payment for the customer’s liabilities, that might amount to an overcharge. The example that emerged in the course of oral submissions involved a customer in a café who says “I can’t believe you are charging $10 for a coffee” and tenders $10 for a $5 coffee, which the shopkeeper accepts and places in the till, before handing over the cup. Mr McKenna accepted that if this customer later said he had been overcharged, that would not be an unreasonable use of that term. Mr McKenna did, however, add that some conduct by the retailer was required, and that “mere silence” was insufficient, because it would then be ambiguous what approach the retailer was taking to the overpayment.

71    Ergon’s contention in its written submissions was that an overcharge requires the person who is doing the overcharging (i.e. the retailer) to assert a right or entitlement to payment. In oral submissions, it was explained by Ergon that the expression of entitlement could be express or implied, but had to be communicated to the customer. On the example just given, it might be communicated by the actions of the retailer in accepting the money and placing it in the till, rather than by any express demand.

72    Ergon contended that the mere holding by a retailer of an overpayment, including in conjunction with placing a customer’s account in credit, was not an express or implied expression of entitlement because it is consistent with the retailer intending to return the overpayment to the customer. The crediting of an account could be an intermediate step on the road to organising a refund of the amount in credit. I accept this submission, so far as it goes.

73    Although Ergon’s concession that a customer could be “overcharged” without the retailer issuing an excessive bill or demand was appropriately made, the concession makes Ergon’s task in setting aside the Notice a formidable one. That is because the concession recognises that conduct by a retailer short of issuing a bill or demand might give rise to an overcharge. Whatever that conduct is, it might be present in the present case. The AER is entitled to investigate this. Until the AER conducts its investigation, the facts are unknown. Ergon’s case before me at times proceeded on the basis of implicit assumptions about its conduct which do not arise from the face of the Notice.

74    For example, Ergon submitted that accounts with credit balances are, in its system, indicative of amounts being owed by Ergon to the customer and, accordingly, are treated by Ergon as liabilities. That may or may not turn out to be so. It is the sort of thing that the AER is entitled to investigate and test.

75    At the other end of the constructional scale, senior counsel for the AER, Mr Arnott SC, quite properly conceded that mere overpayment alone is insufficient to amount to an overcharge. For example, if a customer accidentally makes a direct bank transfer into a retailer’s bank account of an amount exceeding that which the customer is liable to pay, then it may be difficult to say, as a matter of ordinary language, that the customer has been “overcharged” the moment the money arrives in the account and before the retailer has had any opportunity to respond.

76    The debate in the present case thus involves a consideration of potential conduct (including inaction or delay) by a retailer in addition to simply receiving money. Such conduct could take a variety of forms. For example, it could involve processing payments, or crediting customer accounts (or not crediting them), or simply holding money while failing to take any steps to return it, or express or implicit assertions of entitlement to the funds, or the failure to take reasonable steps to prevent regular payments from being made by people who are no longer receiving services. Because the present proceedings involve a challenge to the validity of a notice seeking the production of documents and information, the question of construction falls to be considered in the absence of any factual findings as to the conduct engaged in by Ergon. In that respect, the context for the present proceedings differs in important respects from that in AGL. It is unnecessary, and indeed undesirable, that I express any conclusions as to the precise boundaries of conduct that would, or would not, amount to overcharging.

77    However, as Ergon contends that, on a proper construction of Rule 31, none of the conduct which the AER seeks to investigate by the Notice could constitute a contravention of that rule, it is necessary to consider whether matters potentially falling within the ambit of the Notice could constitute a contravention. It is also necessary for that purpose to consider the proper scope of the Notice.

78    In its ordinary meaning, “overcharge” simply means to charge too much. Charging does not necessarily require a bill or a demand. For example, a customer can tender payment which is subsequently accepted, and thereby be “charged” for a product or service. However, I consider that overcharging requires some conduct on the part of the retailer, which could be inaction (including in circumstances where action is called for): for example, a failure to take any steps to return an overpayment. As the AER accepts, mere overpayment, without more, is insufficient. If a customer leaves a $20 note on the counter for a $10 item and walks out, the customer is unlikely by that fact alone to have been “overcharged” (unless potentially the retailer is aware that the customer is labouring under a mistake and takes no reasonable steps to rectify that), because the payment could include a tip or a gift (“keep the change”).

79    I also accept that conduct by the retailer that is consistent with the return to the customer of an overpayment as soon as is practicable is unlikely to amount to an overcharge. I say “as soon as is practicable” because the retention of an overpayment for an unnecessarily long period means that the retailer is obtaining the economic benefit of the overpayment at the customer’s expense. In those circumstances, it is possible that the retailer’s conduct could be characterised as overcharging the customer.

80    The matters discussed above illustrate that the question of whether someone has been overcharged may involve a process of characterisation. It could also require a consideration of detailed factual circumstances in context, and potentially give rise to subtle distinctions.

81    In AGL, there was consideration of the proper construction of “overcharged” in the context of Rule 31, based on the particular facts before the Court in that case. Ergon submits in the present case that AGL was wrongly decided.

82    Unlike the present case, AGL did not concern the validity of a notice. The AER alleged that AGL had contravened Rule 31 in respect of overpayments from Centrepay. The relevant circumstances, as summarised in the judgment, were as follows (at AGL [24]-[33] and [60]-[61]):

(a)    Certain AGL customers were the recipients of welfare payments through Services Australia (Affected AGL Customers). Each of the Affected AGL Customers had:

(i)    authorised deductions to be made through the Centrepay service in favour of the relevant AGL entity to pay bills from AGL;

(ii)    ceased to obtain energy from AGL, and their accounts were closed or inactive; and

(iii)    been issued a final bill by AGL.

(b)    Neither AGL nor the Affected AGL Customers had cancelled the deductions through Services Australia, although AGL was required to do this by the terms of the AGL Centrepay Agreement (i.e. the Centrepay Agreement provided that if a customer no longer receives the goods or services the subject of the deduction, AGL must cancel the deduction before the next payment).

(c)    After the customer accounts with AGL had been closed, AGL continued to receive payments through the Centrepay service in respect of the Affected AGL Customers, notwithstanding that the Affected AGL Customers were no longer being supplied energy by AGL and had paid all outstanding bills.

(d)    AGL processed these payments and credited the accounts of Affected AGL Customers such that (given no further amounts were owing) their accounts were placed in credit.

(e)    AGL’s system was designed such that AGL would apply payments to accounts even if they were inactive and final-billed, and would apply payments to accounts even if the account was in credit or with a zero balance.

(f)    AGL was aware, from at least 14 June 2013, when Services Australia wrote to AGL, that AGL had been obtaining deductions through Centrepay in circumstances where customers had ceased to be a current customer or use any services provided by AGL. Internal AGL documents discussed this issue, including that credit was accruing on accounts, and that AGL had an obligation to Centrelink to notify it to cancel a deduction when a customer no longer uses AGL services, which obligation was not being met.

83    It is of some relevance that the constructional debate between the parties in AGL was different from the debate in the present case, in that (as set out in the summary of their position by Downes J) each party in AGL adopted a more extreme position than that adopted in the present case. As recorded in AGL at [87], AGL adopted the position that a customer being “overcharged” within the meaning of Rule 31 will only occur where, first, an energy retailer makes a demand or request for payment, in particular by issuing a bill for services provided by the customer, of an amount greater than the amount which the customer owes the retailer for those services, and, second, the customer makes a payment in response to that demand or request. Ergon’s contention in the present case was more nuanced, including because Ergon (appropriately, in my view) accepts that a demand or request for payment is not essential. That approach by AGL led Downes J to consider aspects of the NERR that bear upon whether an overpayment absent a demand or request for payment could constitute an overcharge. For example, it caused her to reject AGL’s contention that relevant provisions of the NERR were “singularly concerned” with billing, observing that the very rules that refer to both “billing” and “overcharging” highlight that Rule 31 is not limited in its terms to “billing”, and are instead concerned with the return of excessive payments: AGL at [102]-[103].

84    By contrast, as summarised by Downes J (AGL at [85]), the AER submitted in AGL that a customer may be “overcharged” where, inter alia, (a) a retailer receives regular payments (whether through Centrepay or otherwise) and those regular payments ultimately exceed the amount that the retailer is entitled to charge for electricity or gas supplied to the customer, or (b) a retailer receives a payment from a customer who has ceased to obtain electricity or gas that exceeds what the retailer is entitled to receive under the customer’s contract for the electricity or gas consumed by it (i.e. that exceeds the final bill). Again, the AER’s contention in the present case is more nuanced, in that the AER accepts that a mere overpayment by itself is insufficient.

85    Therefore, the arguments in the present case are more closely focussed on the circumstances (if any) in which an overpayment could give rise to an overcharge. This also means that the criticisms directed by Ergon at the reasoning in AGL must be approached with some caution in light of AGL addressing a somewhat different constructional debate.

86    In AGL at [97], Downes J observed that the ordinary meaning of “overcharged” typically involves a situation in which “one party asserts an entitlement to be paid more than they are entitled to be paid… and the other party responds by paying more than they should”.

87    Her Honour noted (AGL at [98]) that AGL submitted that an overpayment which occurs as a result of an omission or error by the customer does not amount to an “overcharge”. Downes J observed that this was not consistent with rule 31(5), which provides that “[i]f the small customer was overcharged as a result of the customer’s unlawful act or omission, the retailer is only required to repay, credit or refund the customer the amount the customer was overcharged in the 12 months before the error was discovered”, stating (AGL at [99]) that: “As rule 31 applies to amounts overcharged as a result of a customer’s unlawful act or omission (which are treated differently by rule 31(5)), rule 31(1) must also apply to a customer’s lawful act or omission by necessary implication”.

88    There is a potential difficulty with this reasoning. Rule 31(5) does not specify that a customer’s act or omission amounts to an overcharge. Rather, if there is an overcharge (in accordance with whatever is its proper meaning), rule 31(5) limits the recovery of amounts if the overcharge “results from” (i.e. is caused by) an unlawful act or omission by the customer. For example, an excessive bill could “result from” an unlawful act or omission (for example, if a customer unlawfully tampers with a meter). Rule 31(5) does not operate so as to render any payment which results from a customer act or omission (lawful or unlawful) to be an overcharge.

89    This aspect of the judgment in AGL has some role in the reasoning of Downes J. It is mentioned in AGL at [99]-[100], [108] and [119]. However, it is by no means the only matter relied upon by Downes J, who also relied upon a variety of textual and contextual considerations, including satisfaction of the national energy retail objective.

90    In AGL, the ultimate conclusions of Downes J on the proper construction of Rule 31 and their application to the facts of the case are contained in five paragraphs. Having regard to the centrality of AGL to Ergon’s attack on the validity of the Notice, it is worthwhile setting out the entire passage, which is as follows (AGL at [126]-[131]):

126.    On its proper construction, a customer “has been overcharged” within the meaning of rule 31(1) of the Retail Rules, and there is an “amount overcharged” for the purposes of rules 31(2) and 31(3), where a retailer has received, processed and retained a payment of an amount of money from a customer that exceeds the amount that the retailer is in fact entitled to charge the customer under any contract which it has with that customer. The determination of whether a customer “has been overcharged” within rule 31(1) necessarily involves looking at what the retailer is entitled to charge compared to what the retailer has received from the customer, but it is not limited, either in its terms or by implication, only to excess amounts that arise from the payment of an erroneously generated or miscalculated bill. Rather, one looks at the economic substance of the relationship between the retailer and the customer, and whether the retailer has received and is in possession of a sum of money that belongs to the customer and which the retailer does not have any contractual entitlement to retain.

127.    Having said that, I observe that it would suffice for the purposes of this case to construe rule 31(1) on the basis that a customer “has been overcharged” within the meaning of rule 31(1), and there is an “amount overcharged” for the purposes of rules 31(2) and 31(3), where a retailer asserts an entitlement to the payment of an amount of money from a customer (which assertion is not confined to the issue of a bill) and the retailer has received, processed and retained a payment of an amount of money from a customer that exceeds the amount that the retailer is in fact entitled to charge the customer under any contract which it has with that customer.

128.    The conduct of the AGL Entities which the AER alleges to have given rise to customers having been “overcharged” in this proceeding is comprised of the following:

(1)    the customer has ceased to be a customer of the AGL Entities at all: that is, they no longer receive the supply of energy from an AGL Entity. The AGL Entities would not be issuing any further “bill’ to a customer in these circumstances claiming an entitlement to an amount for energy supplied (which happened to be greater than the amount to which they were entitled), as they had already issued a final bill for the account (in accordance with rule 35);

(2)    the customer did not have any other active account with AGL;

(3)    the customer did not owe any amount to the AGL Entity in respect of their closed account;

(4)    the AGL Entities continued to receive deductions and processed and applied them as payments for energy supplied by them, even though all of the energy they had in fact supplied had already been paid for and they were no longer supplying energy to the customer.

129.    Based on my construction of “overcharged” and “overcharging” in rule 31(1), the Affected Customers were “overcharged” because the AGL Entities received, processed and retained payments for amounts that exceeded the amount that they were entitled to charge the customers. AGL, through a deliberate design in its payment system methodology in its SAP system, treated each deduction as a payment for a bill, even when the final bill had been paid, and then rather than refunding that excess money to the Affected Customer at that point, AGL, through its payment methodology, applied the amount as a credit to a future bill, even when there was not going to be one. That is important because the effect of applying that amount to an account that has been final billed is to increase, as a matter of economic substance, the amount that the Affected Customer has paid to AGL for electricity or gas consumed during the life of the contract. The AGL Entities had no entitlement to receive and retain these amounts, and the Affected Customers were required to be notified and the amounts otherwise dealt with in accordance with rule 31.

130.    If, contrary to my finding as to the proper construction of “overcharged” and “overcharging”, it is necessary for a retailer to assert an entitlement to the payment of an amount of money from a customer for the customer to be “overcharged”, the Affected Customers were “overcharged” within the meaning of rule 31(1) because:

(1)    the failure by the AGL Entities to cancel the deductions as they were required to do when the customer closed their account was an omission that caused the “overcharges” to arise;

(2)    the continued receipt and processing of the deductions as payments for energy when nothing was owed to the AGL Entities by the Affected Customers (to the knowledge of the AGL Entities, which, through senior management, had caused the SAP system to be designed so as to achieve this result) and therefore they had no ongoing entitlement to receive any money from the Affected Customers;

(3)    the ongoing failure by the AGL Entities to (a) cancel the deductions after each new deduction was received and (b) cause the SAP system to be designed in a manner so that it took the steps identified in rule 31; and

(4)    the holding on to these excess amounts for months or (in some cases) years before any attempt was made to return them to the Affected Customers, especially in the circumstances described in section 4.5 of these reasons,

was conduct that constituted an express or implied assertion of entitlement to the funds.

131.    For these reasons, I am satisfied to the required standard that the relevant conduct by the AGL Entities resulted in the Affected Customers being “overcharged” within the meaning of rule 31(1).

91    These paragraphs from AGL reflect to a considerable extent the particular constructional debate with which Downes J was dealing, rather than the constructional debate with which I am dealing. They do not, for example, contain any analysis of the distinction between the processing and temporary retention of monies for the purposes of refund and the processing and retention of monies not for that purpose. Further, as identified by Ergon in the present case, it is not apparent that the matters set out in the sub-paragraphs of AGL at [130], of themselves, constitute any express or implied assertion of an entitlement to payment, but that does not appear to have been the subject of close attention in AGL.

92    The receipt and processing of a mistaken overpayment and the crediting of a customer account (being a closed account) with that payment would not, of itself, necessarily amount to overcharging, because those steps could be steps preparatory to the refunding of the overpayment to a customer. In an administrative sense, it may well be necessary to process a payment and credit it to a particular customer account, so that a retailer can connect payments to particular customers for whom the retailer holds contact information. (Whether crediting an account is merely preparatory to a refund would be a factual question for an individual case). If a retailer merely takes steps preparatory to a refund, it may be difficult to conclude that a retailer has “overcharged” its customer in the ordinary sense of that term, and none of the matters identified by Downes J in earlier parts of AGL would seem to suggest any different meaning to the term. In those circumstances, in the context of the constructional debate before me, it is perhaps not entirely clear how AGL’s design of its SAP system, or at least the particular features of that system described by Downes J, would amount to positive conduct giving rise to a conclusion of overcharging, rather than neutral conduct in the nature of processing of payments that might thereafter be promptly refunded.

93    However, it is also the case that the mere fact that an overpayment is credited to a customer account would not necessarily prevent the customer from being overcharged, particularly if the retailer took no steps to refund the overpayment to the customer. In such circumstances, the customer has, in a practical sense, paid too much for the electricity which it used and the retailer has, in a practical sense, received the benefit of an excessive payment.

94    In AGL at [126], the word “retained” is used, in the phrase “where a retailer has received, processed and retained a payment”. Retained is a broad term. If an overpayment is held in a manner which is inconsistent with the prompt return to the customer of the overpayment – for example, if the retailer fails to take any reasonable steps to refund – then the retention of funds might amount to overcharging. If, by contrast, the overpayment is held for a period (even potentially a lengthy period) because the retailer is experiencing unavoidable difficulties in contacting the customer, or in ascertaining a bank account into which monies can be deposited, then it might be more difficult to conclude that there has been overcharging, because the retailer may be using reasonable endeavours to return the funds.

95    If, by the use of “retained”, Downes J was referring to a retention in a manner inconsistent with a prompt return of the overpayment, then I agree with Downes J that this could amount to a contravention of Rule 31.

96    There was an additional factor in AGL, which is that AGL had failed to take steps to stop the automatic deductions through Services Australia, notwithstanding it was contractually required to do so. If a retailer has not simply received an unexpected overpayment, but instead becomes aware that it is receiving overpayments through Centrepay and that it will continue to receive those payments unless steps are taken to turn off the erroneous deductions, then a retailer may, by its inaction, be contributing to the overpayment by customers. It may be necessary to consider that type of conduct in combination with conduct relating to the retention of the overpayments.

97    Where, as appeared to be the case in AGL, a retailer fails to take reasonable steps to prevent erroneous deductions and fails to take reasonable and prompt steps to return overpayments received, it may be the case (depending on the circumstances) that the relevant customers might properly be said to have been overcharged. This is on the basis that the retailer has, through inaction, brought about a situation whereby the customers have paid excessive amounts for the services provided by that retailer and that particular economic reality has persisted to the detriment of the customer and the benefit of the retailer. That is of significance when considering the validity of the Notice. The conduct of Ergon described in the definition of the “Centrepay Issue” could constitute a contravention of Rule 31. Whether it does or not is a matter that is properly the subject of investigation.

98    In light of this, I do not accept that overcharging can only arise where a retailer has expressly or impliedly asserted an entitlement to the money overpaid by the customer. Conduct falling short of an assertion of entitlement to be paid might result in a customer being overcharged.

99    It is otherwise unnecessary and undesirable, and indeed impracticable, to seek to define in advance the boundaries of circumstances that will, or will not, give rise to overcharging.

100    I should, however, deal with one matter. In support of its approach to “overcharge”, Ergon observed that one thing that supported a distinction between an overcharge and an overpayment is that an overcharge does not require a payment at all. Ergon submitted that a customer may be said to be “overcharged” if a retailer renders an excessive bill, without the customer needing to pay under protest in order for the customer to attain the status of a person overcharged. I accept that, as a matter of ordinary language, a customer may be overcharged by the rendering of an excessive bill, rather than only upon payment. As a matter of ordinary language, a customer would not have to pay under protest in order to be able legitimately to complain about being “overcharged”. However, that does not mean that overcharging only occurs when an excessive bill is rendered, and indeed Ergon concedes that this is so. In light of that, the point does not really take the matter any further.

101    I note, in any event, that the construction of Rule 31 in this regard is a little complicated, because rule 31(2) and 31(3) specify steps that must be taken by the retailer to refund or credit “the amount overcharged” (i.e. assuming that an amount has, at least at that point, been paid, not just billed). Rule 31(2) and (3) also require the retailer to use its best endeavours to refund the amount overcharged “within 10 business days”. Ergon says that the words “to the extent any payment has been made” are implicit in sub-rules (2) and (3), but does not address the timing question.

102    The operation of Rule 31 may be contrasted with the operation of clause 12.2 of the model terms and conditions for standard retail contracts contained in Schedule 1 to the NERR. Clause 12.2(a) refers to the retailer’s obligations in respect of overcharging, and states that “[w]here you have been overcharged by less than [the current overcharge threshold], and you have already paid the overcharged amount, we must credit that amount to your next bill”, and clause 12.2(b) provides that “[w]here you have been overcharged by [the current overcharge threshold] or more, we must inform you within 10 business days of our becoming aware of the overcharge and, if you have already paid that amount, we must credit that amount to your next bill”. That wording distinguishes between the overcharging and the payment by the customer of the overcharged amount.

103    I would prefer to reserve the question of how this particular aspect of the scheme operates in a practical sense to a case in which that issue squarely arises, and where the Court has the benefit of full argument on the question.

104    For the reasons set out in this section, I do not accept Ergon’s construction of “overcharge” in Rule 31.

Validity of the Notice

105    Ergon contends that:

(a)    the decision to serve the Notice on it involved errors of law for the purposes of s 5(1)(f) of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act) because in making the decision the AER misconstrued the meaning of the word “customer” for the purposes of the NERL and the NERR, or further or alternatively misconstrued the meaning of the word “overcharge” for the purposes of Rule 31 of the NERR;

(b)    further or alternatively, the decision to serve the Notice involved a jurisdictional error in proceeding on an incorrect interpretation of the word “customer” or the word “overcharge”; and

(c)    further or alternatively, on the basis of the same errors of construction, the AER did not have the jurisdiction to make the decision to issue the Notice for the purposes of s 5(1)(c) of the ADJR Act, or further or alternatively the decision involves a jurisdictional error, because the Notice requires the provision of information or documents which are not, on a proper construction, required for the performance of or exercise of a function or power conferred on the AER, such that the decision was not properly made under s 206 of the NERL.

106    The relevant parts of s 206 of the NERL have been set out earlier. Section 206 provides that if the AER has reason to believe that a person is capable of providing information, producing a document, or giving evidence that the AER requires for the performance of exercise of a function or power conferred on it under, inter alia, the NERL or the NERR, the AER may serve on that person a relevant notice. This may be contrasted with s 155 of the CCA which relevantly provides that a person may be served with a notice if the Australian Competition and Consumer Commission (ACCC), or the Chairperson or a Deputy Chairperson of the ACCC, has reason to believe that a person is capable of furnishing information, producing documents or giving evidence “relating to a matter referred to in subsection (2)”, which relevantly includes a matter that constitutes or may constitute a contravention of the CCA.

107    The relevant inquiry is sufficiently similar that authorities on s 155 of the CCA are pertinent, as both parties accepted. However, s 206 of the NERL does not refer to a “matter”, but rather to an exercise of a function or power. The AER has broad functions and powers, including, pursuant to s 204 of the NERL, to monitor compliance with the NERL and the NERR, and to investigate breaches or possible breaches of the NERL or NERR. The language of the authorities dealing with s 155 of the CCA, including insofar as they refer to the need for the information or documents to relate to a “matter”, may need to be adapted for the purposes of s 206 of the NERL.

108    The principles applicable to the validity of notices issued in reliance on s 155 of the CCA are conveniently summarised by Sackville and Emmett JJ in Seven Network Limited v ACCC (2004) 140 FCR 170 (Seven Network) at [49], where their Honours relevantly observed (omitting citations):

The authorities have established a number of propositions concerning the interpretation of s 155(1) of the [CCA]. They include the following:

(i)    In a context where refusal or failure to comply with a s 155 notice is punishable by imprisonment or fine, the notice must:

(a)    convey with reasonable clarity to the recipient the information that must be furnished; and

(b)    disclose that the ACCC is entitled to require the recipient to furnish the specified information

…

(ii)    The second of these requirements will not be satisfied unless it appears from the notice that the information sought is information “relating” to one or more “matters” of a kind described in s 155(1)… However, the question whether a notice discloses the necessary “relatedness” is not to be approached in an “over-technical or hypercritical way”… Moreover, the “relatedness” is to a proper inquiry into the suspected offences…

(iii)    … The Chairperson must… have reason to believe that the relevant person is capable of furnishing information relating to the matter specified in the notice… It follows that the Chairperson or other officer must believe that the person to whom the notice is directed is capable of furnishing information relating to the facts known or suspected… In addition, there must be facts in existence which are sufficient to induce that belief in a reasonable person…

(iv)    The word “matter” in s 155(1) is to be construed in its ordinary sense of an affair or thing… It refers to a body of facts which constitutes or may constitute a contravention of the [CCA]. Whether or not the relevant body of facts constitutes a contravention is a matter of law and does not turn on the perception or knowledge of the ACCC or its officers...

(v)    When s 155(1) speaks of a matter which may constitute a contravention, it refers to a body of facts not fully known and which may, when fully known, reveal themselves as constituting a contravention… The words “may constitute” enable a court to judge from the material in the notice whether, if other facts which may or may not have occurred come to light, the whole body of facts would constitute a contravention… It is not necessary for the court to determine whether a contravention has occurred; but equally it will not “idly speculate” or “draw on improbably circumstances” to uphold a notice… An alternative formulation is that the court can take account of facts which may “reasonably be suspected” to have occurred…

(vi)    Where the matter referred to in the notice, after allowing for undiscovered facts, is incapable of amounting to a contravention, the issue of the notice is not a valid exercise of the power conferred by s 155(1)…

(vii)    In view of the principle that a court should not adopt an “over-technical or hypercritical approach” to the construction of a notice, there is no requirement that the notice “plead” all the facts necessary to constitute a contravention or possible contravention of the [CCA]…

(viii)    Information which tends to negative a suspected contravention or liability to conviction or which tends to exculpate a person suspected to be a party to a contravention, is within the ambit of s 155(1). It follows that an inquiry under s 155 may relate to a defence or possible defence available to the suspected person…

109    One relevant aspect of these observations for present purposes is that I accept that, in the same way that the ACCC cannot investigate something that would not be a “matter” because it would not, even allowing for undiscovered facts, amount to a contravention, the AER’s power to investigate breaches or possible breaches of the NERL or NERR does not extend to the investigation of matters that could not constitute a breach of the NERL or NERR. At a general level, I accept that if the Notice necessarily proceeds on the basis of an incorrect interpretation of Rule 31 of the NERR then that will be sufficient for Ergon’s purposes. In those circumstances, the AER would not have reason to believe that Ergon was capable of providing information or producing a document that the AER required for the performance or exercise of a function or power conferred on it. The AER has no power pursuant to its investigation power to investigate something that could never amount to a breach of the NERL or NERR. Nor would the AER have reason to believe that Ergon was capable of providing information or producing a document that the AER required for the exercise or its investigation power or its monitoring power, if the document related to something that could never amount to a contravention.

110    In relation to the definition of “customer” for the purposes of Rule 31, for the reasons set out earlier, I do not accept Ergon’s construction. I likewise do not accept that the Notice proceeds on any erroneous basis in connection with the meaning of “customer” in Rule 31. It is apparent from the definition of “Centrepay Issue” in the Notice that the AER wishes to investigate a potential situation whereby Ergon has been receiving Centrepay deductions from customers of Ergon who do not owe any money to Ergon and whose accounts with Ergon had been closed prior to the receipt of the Centrepay deduction. Ergon contends that such persons are not “customers” for the purposes of Rule 31. That involves an incorrect approach by Ergon to the construction of Rule 31.

111    It follows that Ergon’s attack on the validity of the Notice in relation to the definition of “customer” fails. There is no relevant error of law for the purposes of s 5(1)(f) of the ADJR Act. There is no jurisdictional error. The AER also does not lack jurisdiction for the purposes of s 5(1)(c) of the ADJR Act.

112    I turn then to Ergon’s case in relation to the definition of “overcharge”. The central definition of the “Centrepay Issue” indicates that the Notice is not concerned with a situation of excessive billing by Ergon, but rather is concerned with an allegation that Ergon has received overpayments by way of Centrepay deductions continuing after the customer’s account with Ergon has been closed. That definition also refers to the following alleged circumstances:

(a)    the customer does not have an active account, whereby Ergon is currently providing electricity services to that customer;

(b)    the customer’s account is closed;

(c)    the customer did not owe any money to Ergon, either on the closed account or on any other account or under any other contract; and

(d)    the Centrepay deduction is applied as a credit to the customer’s (closed) account.

113    The Notice does not otherwise set out any detailed factual aspects of Ergon’s alleged conduct in relation to whether any customers of Ergon have been overcharged, including the sorts of matters considered in AGL. That is unsurprising, given that the AER is investigating Ergon’s conduct and the Notice seeks the production of information and documents that might be relevant, inter alia, to the question of whether Ergon’s customers have been overcharged. The structure of the Notice does not confine the AER’s investigation, or any subsequent allegation of contravention, to the bare facts alleged in the Notice. The Notice does not proceed on the footing that the definition of the “Centrepay Issue” is an exhaustive statement of all the conduct engaged in by Ergon. It merely proceeds on the footing that Ergon’s conduct includes these elements.

114    For this reason, once it is recognised that overcharging for the purposes of Rule 31 is not limited the rendering of an excessive bill or the making of an excessive demand, Ergon might have engaged in whatever conduct otherwise constitutes overcharging. The AER is entitled to investigate Ergon’s conduct in this regard.

115    The question of whether a customer has been “overcharged” involves a process of characterisation that could involve subtle distinctions and the consideration of detailed factual circumstances in context. It cannot be said, allowing for undiscovered facts and without drawing on improbable circumstances, that Ergon’s conduct is incapable of giving rise to overcharging of its customers. The possible conduct of Ergon falls within a wide range.

116    Conduct plainly falling within the scope of the Notice may amount to a contravention of Rule 31. For example, if Ergon had: (a) failed to take steps to bring Centrepay deductions to an end when customers closed their accounts, including by operating a system that was deficient in that regard; (b) retained the deductions for an extended period (particularly with knowledge that they were being so retained); and (c) failed to take reasonable steps to return the deductions, thus having the economic benefit of the payments and depriving the Ergon customers of that economic benefit credited those deductions to customer accounts, then Ergon’s customers might well, as a matter of proper characterisation, be said to have been overcharged.

117    It is also possible that Ergon’s conduct amounted more directly to at least an implied assertion of an entitlement to the overpayment.

118    There are two additional matters.

119    First, the AER advances the more adventurous proposition that because paragraph 2 of the Notice expresses the conduct being investigated as “whether small customers… have been overcharged”, adopting the language of Rule 31, the Notice is valid because it captures whatever might amount to an “overcharge”, on any interpretation. Thus, for example, Mr Arnott SC submitted that, whilst the Notice was drafted in light of a complaint from Services Australia about overpayments, not excessive bills, the Notice is broad enough to capture excessive bills if that was required for there to be an overcharge.

120    I do not accept this submission put at that level of generality. Whilst paragraph 2 of the Notice uses the language of Rule 31, it is clear from the balance of the Notice, including the central definition of “Centrepay Issue”, that the Notice is concerned with investigating conduct that involves overpayments where there are no bills (because the relevant accounts are closed and the customers are no longer receiving services), rather than any situation involving excessive billing. The Notice is not investigating excessive billing, and if excessive billing is required for an overcharge then the Notice would be invalid because the conduct that underpins the Notice is not a contravention.

121    Secondly, Ergon contends that if any error is shown in the reasoning in AGL, the Notice is invalid, on the footing that the Notice is based on the correctness of AGL. Ergon relies upon the following contentions in that regard:

(a)    in its correspondence with Ergon on 18 July 2024, the AER said that it would “await judgment in the AGL Centrepay proceedings before considering whether to commence an in-depth investigation into Ergon’s conduct”;

(b)    the decision on liability in AGL was delivered on 23 August 2024;

(c)    the AER commenced its investigation into Ergon’s conduct on or around 20 September 2024;

(d)    “it is apparent from the face of the Notice that the “Centrepay Issue” it described is substantively the same as the facts which were considered in AGL”, such that “the Court should conclude that the AER adopted the same definition of “overcharge” as was found by Downes J in AGL”; and

(e)    in those circumstances, if the construction adopted in AGL is incorrect, the Notice is invalid.

122    It is not entirely clear whether Ergon is advancing a free-standing attack on the Notice such that, even if conduct consistent with the definition of the Centrepay Issue might amount to a contravention on the proper construction of Rule 31, any error in AGL vitiates the Notice because the actions of the AER in issuing the Notice were based on an assumption of the correctness of AGL. If this is the contention, then I reject it on a number of grounds.

123    First, in assessing the validity of a notice under s 206 of the NERL, the relevant belief of the AER is a belief that a person has information or documents, being information or documents that the AER requires for the performance of its functions or powers, not a belief about the contravention. The question of whether the matter sought to be investigated (consisting of known facts and undiscovered facts) would constitute a contravention is a matter of law, and an objective question for the Court, not a question as to the belief or understanding of the AER: Seven Network at [49(iv)]; WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175 at pp 179 – 180 Brennan J, Bowen CJ agreeing. Still less is the AER’s subjective views on the law relevant to the assessment.

124    Secondly, there is nothing in the chronology identified by Ergon to support an inference that the AER believed in the correctness of every aspect of AGL, or that it relied on that belief in deciding to issue the Notice.

125    Thirdly, the decision in AGL is not relevantly erroneous, as discussed earlier in these reasons.

126    It follows that Ergon’s attack on the validity of the Notice in relation to the definition of “overcharged” fails. There is no relevant error of law for the purposes of s 5(1)(f) of the ADJR Act. There is no jurisdictional error. The AER also does not lack jurisdiction for the purposes of s 5(1)(c) of the ADJR Act.

Conclusion

127    Ergon is not entitled to any of the relief sought in its Amended Originating Application dated 24 January 2025. The proceedings should be dismissed, with costs.

Associate:

Dated:    27 May 2025