08/065
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DECISION
Special Meeting 4 March 2008
Convened Pursuant to Rule 3 of the
Constitution of the Advertising Standards Complaints Board
Complaint 08/065
AWAP 08/003
Complainant: Genesis Energy & Energy Online
Advertisement: TrustPower Limited
Complaint: Two direct mail letters dated 7 December 2007 and 9 January 2008 were
produced and published by TrustPower. The letters were addressed to:
(1) Energy Online Customers and (2) Genesis Customers, respectively.
The headings stated:
“Would you prefer renewable energy for less?”
The letters continued with:
“Switch to TrustPower and you will be supplied by a company that produces
its power supply from wind and water.
Your current supplier Energy Online is owned by Genesis Energy which
produces most of its power by burning fossil fuel. Their Huntly Power station
is recognised as the biggest point source of carbon dioxide in the country.
By joining TrustPower you'll be supporting clean renewable energy, and you
can pay less for your power…”.
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The Complainants, Genesis Energy & Energy Online, said:
1.
“Please find enclosed copies of two direct mail letters that TrustPower
has sent to Energy Online and Genesis Energy customers respectively
(the "Advertisements").
2.
Genesis Energy and Energy Online consider the Advertisements are
among other things, misleading and deceptive and breach the Advertising
Codes of Practice.
Letter to Energy Online customers dated 7 December 2007
3.
The heading on this letter is:
"Attention Energy Online Customers!
Would you prefer renewable energy for less?"
4.
There are three paragraphs directly under this heading, which state:
“Switch to TrustPower and you will be supplied by a company that
produces its power supply from wind and water.
Your current supplier Energy Online is owned by Genesis Energy which
produces most of its power by burning fossil fuel. Their Huntly Power
station is recognised as the biggest point source of carbon dioxide in the
country.
By joining TrustPower you'll be supporting clean renewable energy, and
you can pay less for your power. "
Letter to Genesis Energy customers dated 9 January 2008
5.
The heading on this letter is:
"Attention Genesis Customers!
Would you prefer renewable energy for less?"
6.
There are three paragraphs directly under this heading, which state:
"Switch to TrustPower and you will be supplied by a company that
produces its power supply from wind and water.
Your current supplier Genesis Energy produces most of its power by
burning fossil fuel. Their Huntly Power station is recognised as the
biggest point source of carbon dioxide in the country.
By joining TrustPower you'll be supporting clean renewable energy, and
you can pay less for your power."
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Particulars of Complaint
7.
The headings and the first three paragraphs of the Advertisements
together give the impression that by switching to TrustPower, the energy
consumers receive will be from renewable energy sources. This is
incorrect and exploits most consumers' lack of knowledge as to how the
electricity industry works.
8.
In particular, the heading "would you prefer renewable energy for less?"
creates the direct impression that the energy the consumer purchases
from TrustPower will be from a renewable source, namely TrustPower's
"power supply from wind and water."
9.
While the first three paragraphs do not contain factual errors, they
enforce the misleading heading by discussing the sources of the
respective companies' generation. This is misleading because the energy
generated by each generator is fed into the national grid and distributed
across the country.
10.
In other words, a customer of TrustPower does not necessarily receive
the electricity that TrustPower generates. The total demand for electricity
has to be instantaneously met from a supply of generators across New
Zealand. It cannot be determined that a given unit of energy can be
delivered to a particular customer unless there is a direct connection
between the generator and the customer's premises.
11.
Because most people do not understand how the electricity industry
works, the Advertisements mislead people to believe that the retailer they
choose will have a direct impact on how the electricity in New Zealand is
generated, when in fact it doesn't.
Breach of Advertising Codes
12.
In our view the Advertisements breach Rule 2 of the Advertising Code of
Ethics, in that they create an overall impression which by implication
misleads or deceives or is likely to mislead or deceive consumers, and
exploits their lack of knowledge of how the electricity industry works, for
the reasons described above.
13.
In summary, Genesis Energy believes the heading and first three
paragraphs of the Advertisements together potentially create three
misleading impressions;
a.
That the actual energy the customer receives is generated from
a renewable source;
b.
That the source of this energy is electricity generated by
TrustPower;
c.
That by switching from Genesis Energy or Energy Online to
TrustPower, less electricity and therefore less carbon dioxide will
be produced by Huntly Power Station.
14.
As discussed, the above impressions are false, as all electricity
generated in New Zealand is effectively 'combined' once fed into the
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National Grid, and the sale of this electricity by retailers does not directly
impact on who generates it or by what methods.
15.
Huntly provides a key role in meeting the country's electricity demand,
without which, New Zealand's electricity security and quality could not be
sustained. If Huntly Power Station and other thermal generators were not
dispatched, TrustPower would be unable to supply electricity to its
customers as the grid quality and security would be compromised.
Conclusion
16.
Genesis Energy and Energy Online consider this complaint should be
upheld, and that no further direct mail in the current form of the
Advertisements be distributed…”.
The Chairman ruled that the following provision was relevant:
Code of Ethics
Rule 2 - Truthful Presentation - Advertisements should not contain any
statement or visual presentation or create an overall impression which directly
or by implication, omission, ambiguity or exaggerated claim is misleading or
deceptive, is likely to deceive or mislead the consumer, makes false and
misleading representation, abuses the trust of the consumer or exploits his/her
lack of experience or knowledge. (Obvious hyperbole, identifiable as such, is
not considered to be misleading).
Procedure: The Chairman ruled to deal with the matter by “adjudication with
attendance of the parties” pursuant to Rule 3 of the Complaints Procedures of the
Advertising Standards Complaints Board. This system was designed to resolve
disputes between competitors. Accordingly, the Chairman appointed a Panel.
The Panel: Mr R. Thompson, Chairman of the Advertising Standards Complaints
Board. Co-panelists Mr E Abernethy, Chairperson of the Advertising Standards
Complaints Appeal Board and Mr R Moffat, Member of the Advertising Standards
Complaints Appeal Board.
The Complainants, Genesis Energy & Energy Online, were represented by Ms D.
Malaghan - Legal Counsel and Mr D Carroll - General Manager Retail.
The Advertiser, Trustpower Limited was represented by Mr C O’Hara - Manager
Retail Division and Mr C Neustroski – Sales Manager.
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The Advertiser, TrustPower Limited, said:
“The complainant, Genesis Energy, claims that the headline, together with the first
three paragraphs of the direct mail advertisement (DMA) are misleading.
TrustPower disputes this assertion.
The headline and text of the DMA goes to the customer's preference for renewable
energy, and the customer's preference to support renewable energy producers, as
opposed to energy producers that use non-renewable materials that create carbon
emissions
At no point in the DMA does TrustPower assert that the actual electricity that the
customer receives will be from renewable sources, or that the electricity will be
produced directly by TrustPower.
The DMA invites consumers to show their preference for renewable energy (and
support of renewable energy producers).
Increasing consumer preference for renewable energy will lead, over time, to a
reduction in the consumption of energy produced by non-renewable resources as
renewable energy sources meet more of New Zealand's energy demand.
This is a simple outcome of market demand leading to changes in consumer
products and services, as can be expected to occur in any market. An analogy is the
expected significant rise in consumer preference for hybrid and electric cars which is
likely to lead to major changes in the auto industry over the next 20 years.
TrustPower therefore disputes the claim made under point 11 of the complaint that
the retailer chosen by consumers will not impact how electricity in New Zealand is
generated, as consumers clearly have the ability to show their preference for
renewable versus non-renewable energy through their choice of energy producer and
therefore retailer.
TrustPower has conducted market research that clearly demonstrates these
preferences.
Furthermore, the assertion made under point 13c of the complaint that no less
carbon dioxide will be produced from the Huntly power station is, over time, untrue if
consumers exert a preference for renewable generation. The need for the Huntly
power station will diminish as renewable generation capacity increases.
As a case in point, TrustPower is currently well advanced in the development of four
new renewable energy projects. The success of these projects relies on consumer
preference for TrustPower as a retailer, and TrustPower`s position as a renewable
energy producer and retailer is a key factor in determining that consumer
preference.”
Oral Submissions
Ms Malaghan and Mr Carroll representing the Complainant and Mr O’Hara and Mr
Neustroski representing the Advertiser presented oral submissions and responded
to questions posed by members of the Panel. Both presentations included a
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background to the electricity industry, how the electricity is supplied and how
financial instruments are used in the market.
Deliberation
The Panel confirmed that prior to this Deliberation, it had taken into account all the
submissions made in relation to the complaint. It also identified the two
advertisements, which were the subject of the complaint, and the Rule against which
the advertisements were assessed.
The Panel observed, in particular, that the advertisements, in the form of letters,
were addressed to the Complainants’ customers. It also observed that the disputed
aspects of the two advertisements were identical and included the following question
together with the subsequent statements:
(1) Would you prefer renewable energy for less?
(2) Switch to TrustPower and you will be supplied by a company that
produces its power supply from wind and water.
(3) Your current supplier Energy Online is owned by Genesis Energy
which produces most of its power by burning fossil fuel. Their Huntly
Power station is recognised as the biggest point source of carbon
dioxide in the country.
(4) By joining TrustPower you'll be supporting clean renewable energy,
and you can pay less for your power…”.
The Panel considered it appropriate to reiterate its role when determining a
complaint. Particularly that it was required to consider the advertisement from the
point of view of the consumer, which in this instance was extended to include the
consumer’s understanding of the Advertiser’s message. In addition, it was required
to examine the issues raised by the Complainants, in terms of Rule 2 of the Code of
Ethics.
Code of Ethics - Rule 2.
The Panel turned to Rule 2 of the Code of Ethics. The relevant aspects of Rule 2
required the Panel to determine whether, in its view, the advertisement contained any
statement or created an overall impression, which directly or by implication was likely
to mislead or deceive the consumer … or exploit his/her lack of experience or
knowledge.
The Panel considered each of the following statements.
1. “Would you prefer renewable energy for less?
In the Panel’s view, this was simply a straightforward question. Furthermore, it was
implicit in the question that if a consumer responded “yes” and completed the
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appropriate supply agreement, then the consumer would be supplied with
“renewable energy for less”.
2. Switch to TrustPower and you will be supplied by a company that produces
its power supply from wind and water.
The Panel noted the Advertiser’s oral submissions. In particular that Trustpower is
an exclusively renewable producer. The Panel was therefore satisfied that this
aspect of the advertisement was accurate.
3. Your current supplier Energy Online is owned by Genesis Energy which
produces most of its power by burning fossil fuel. Their Huntly Power station
is recognised as the biggest point source of carbon dioxide in the country.
The Panel noted that this statement was not disputed. Therefore it concluded that it
was technically correct.
4. By joining TrustPower you'll be supporting clean renewable energy, and
you can pay less for your power…”.
The Panel examined this statement and concluded that any switch to Trustpower
would result in support, actual or otherwise, for clean renewable energy. However,
and although not material, it considered that the customer‘s switch could be
precipitated, not by any desire to support renewable energy but solely by the lure of
paying less.
Having examined the four statements, the Panel was satisfied that individually, at
least, they were technically correct and complied with the requirements of Rule 2 of
the Code of Ethics.
The Panel then considered the statements in light of the leading question, “Would
you prefer renewable energy for less?”. In the Panel’s view, it is this question that
set the tone for the statements in the advertisement. On the face of it, the
advertisement required the recipient to consciously consider an energy preference.
The fact that the power would cost less, although attractive to the consumer would
not, in the Panel’s opinion, necessarily take priority over the consumer’s energy
choice. Particularly today with both a national and international emphasis on
sustainability.
Accordingly, it was the Panel’s opinion that the issues for determination were
twofold and related to (a) where the energy came from and (b) the effect of
switching retailers.
The Panel referred to the oral submissions presented by the Parties that provided a
background to the electricity industry.
In essence, the Panel established that the electricity generators sell energy to the
electricity pool, which is governed by the Electricity Commission, and the electricity
retailers buy energy from that pool to sell to its customers. There is only one pool
and various electricity generators provide energy to the pool on any given day. This
is determined by what is essentially a price/quantity bidding process. Separate to,
but associated with this process is a market of financial instruments, which
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moderate the volatility of the electricity market and enable retailers to provide
customers with a reasonably stable and sustainable price structure. In the Panel’s
view, the way the market works is extremely complex but it is essentially the supply
and financial instruments that support the process.
The submissions also clarified the phrase that the electricity pool was a “buyer to all
sellers and a seller to all buyers”. Consequently, the Panel was able to conclude that
the energy supplied to customers was derived from a combination of all generation
supplied to the pool at any given time and on any given day. Therefore the Panel
concurred with the Complainant that to imply that power supplied by any one
generator would reach any particular retailer was simply incorrect
The Panel then turned to the second issue relating to the effect of switching
retailers. The Panel referred to the Advertiser’s oral submissions. It noted that in the
Advertiser’s view, a renewable energy programme could occur if its customers
showed a preference for renewable energy. However, in light of the submissions on
the operation of electricity industry, the Panel disagreed. In its view it was neither
the individual customers energy preference nor the particular retailer that
determined an investment in renewable energy. Any move to increase investment in
renewable energy depended on a number of factors including the economy of
change, and, although not decisive, Government policy. Therefore the Panel
concurred with the Complainant’s submission that if the conditions were right, it
would be the industry interested in investing in new generation and not just the
Advertiser.
The Panel also considered the statement which related to the burning of fossil fuel.
In the Panel’s view, the statement implied that a switch to TrustPower would result
in a reduction in energy produced by burning fossil fuel and a corresponding
increase in the production (particularly by TrustPower) of renewable energy.
However the Panel disagreed. With reference to the submissions relating to the
electricity industry, it appeared to the Panel that any change in the characteristics of
the energy supplied, would be dependent on the economy of that change. In other
words, when market conditions were right for investment in new generation.
Therefore, although the Panel was of the view that, on their own, the statements
were technically correct, it concluded that when read in light of the opening question;
“Would you prefer renewable energy for less? the statements implied something
different. In other words, if a customer switched to TrustPower the household would
be supplied with renewable energy. In addition, the power supplied to the household
would be produced by TrustPower’s generators. Similarly, the switch would result in
a reduction in energy produced by burning fossil fuel and an increase in the
production of renewable energy. Finally, it suggested that a switch to Trustpower
would indicate a support for the production of renewable energy and a vote for
sustainability. This in turn would encourage TrustPower to invest in new generation.
In the Panel’s view, the electricity market is extremely complex, and it was
unacceptable for TrustPower to oversimplify the operation and imply an outcome
that was simply not accurate. In the Panel’s view the Advertiser should have
explained or at least provided access to an explanation that would allow a customer
to make a proper informed choice.
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The Panel also noted Decision 92/68 where the Deliberation said (in part): “…the
statements which were the subject of the complaint had simplified the new situation
to the extent that they were ambiguous and that by omission of certain
qualifications, had resulted in a breach of the rule…”. Similarly, Decision 07/091,
where the Board held that the advertisement put forward an oversimplified message
which by omission would be likely to mislead the consumer, thereby breaching Rule
2 of the Code of Ethics.
Accordingly. the Panel concluded that, in this instance, the advertisements were, by
implication, misleading and in breach of Rule 2 of the Code of Ethics.
The Panel ruled to uphold the complaint.
Decision: Complaint Upheld