Exploring consumer duty in energy: Opportunity, challenge, and pathways forward

Across regulated industries, a consumer duty is emerging as a powerful idea: an overarching obligation for businesses to act in the best interests of their customers. In financial services, the concept has reshaped how products are designed, marketed, and supported. In energy, a consumer duty is not yet in place, but its potential introduction raises profound questions about the role of retailers, the nature of regulation, and the pathways to improved consumer outcomes. 

For an industry that delivers an essential service, the prospect of a consumer duty invites reflection: Could this framework help build trust, ensure fairer outcomes, and strengthen customer protections? And just as importantly, how could it be applied in ways that enhance, rather than complicate, the energy transition? 

This article explores how a consumer duty might operate in the energy sector—its opportunities, risks, and the conditions required for it to deliver meaningful benefits. While the Australian Energy Council is still developing its position on what form of consumer duty it would support, this article offers some ideas about ways to progress that discussion. 

The Promise of Principles 

At its heart, a consumer duty is about principles, not prescription. Rather than dictating every possible scenario in rules, it asks businesses to step back and ask: What is the right outcome for this customer? 

This shift from compliance box-ticking toward customer-centred decision-making could be transformative for energy retailers. It opens the door to: 

• Flexibility in edge cases, where rigid rules can create perverse outcomes (e.g., disconnection where a customer disputes the bill in good faith). 
• Proactive problem-solving, where retailers act quickly to correct errors rather than waiting for prescriptive directions. 
• Cultural alignment, embedding fairness and customer interest into the DNA of energy businesses rather than treating obligations as minimum standards. 

In an industry often criticised for inconsistency, complexity, and lack of trust, a consumer duty offers a chance to reset expectations. 

Building on Existing Strengths 

The energy sector is not starting from scratch. Retailers already operate within a highly regulated framework with strong consumer protections around hardship, family violence, billing, and disconnection. In some cases, it is worth exploring whether the addition of a consumer duty would enhance existing obligations or replace them. 

For example: 

• Hardship programs already require flexibility and tailored approaches. Could a consumer duty encourage more consistent application or greater innovation in support? 
• Family violence provisions have already introduced principles-based flexibility. Would extending this mindset through a duty strengthen the safety net? 
• Life support obligations highlight the value of outcome-focused discretion. Would a consumer duty legitimise proactive, customer-centred decisions when rigid rules create unhelpful results? 

The UK experience reinforces that prescriptive protections for vulnerable customers remain essential, even under a broad consumer duty. The Financial Conduct Authority’s (FCA) framework does not exempt these customers — rather, it embeds vulnerability as a cross-cutting consideration across all of its four duty outcomes. Businesses must identify and respond to vulnerability, ensuring their products, communications, and support genuinely deliver good outcomes. Importantly, the duty operates alongside existing rules, adding a higher standard of accountability rather than replacing detailed protections. For Australia, this suggests that a future consumer duty would be likely to complement - not dilute - obligations relating to hardship, family violence, and life support, while encouraging retailers to demonstrate that their culture and decisions actively protect those most at risk. 

This point leads to the caution many industry participants feel that introducing a consumer duty could simply add another layer of obligation on top of an already dense regulatory landscape. Retailers point out that they are already subject to extensive prescriptive rules covering hardship, billing accuracy, life support, family violence, and complaint handling - all designed to ensure fairness and prevent harm. Without careful integration, a new duty could create uncertainty about which standard applies or expose retailers to retrospective enforcement based on subjective interpretations of “good outcomes”. For a duty to be effective, it must simplify and align the regulatory framework - articulating how principles relate to existing prescription and offering clarity about how compliance will be assessed. The aim should not be to multiply obligations, but to provide a coherent organising framework that makes the system more consistent, transparent, and outcomes focused. 

This dual perspective - recognising the need for prescriptive safeguards while addressing regulatory layering - highlights why any future duty must balance flexibility with accountability, ensuring retailers can tailor solutions responsibly while maintaining clear standards of conduct. 

The Challenge of Clarity 

Of course, principles come with challenges. Retailers need clarity and certainty to build efficient, automated processes. If a consumer duty is framed too vaguely, it risks leaving businesses guessing what regulators will later decide was “fair.” 

The disconnection process is a good example. Everyone agrees disconnection should be a last resort, but what counts as “reasonable steps” before disconnection? Without clear guidance, different retailers may take different approaches, producing inconsistent outcomes. 

This is where regulators and retailers must work together. A consumer duty could be designed with shared understandings, co-developed guidelines, and upfront engagement, ensuring principles are not left to retrospective interpretation. 

Opportunity for Innovation 

One of the most promising aspects of a consumer duty is its potential to support innovation rather than stifle it. 

The energy system is evolving rapidly. Consumers are becoming active participants through solar, batteries, electric vehicles, and smart appliances. New products and services are emerging to help households and businesses manage energy use, reduce bills, and participate in the grid. 

Yet these innovations come with complexity. Product design may involve assumptions about usage patterns, grid conditions, or government incentives. A well-designed consumer duty could give retailers the confidence to innovate, by focusing on whether products genuinely deliver value to consumers rather than whether they meet every prescriptive rule. 

For example, retailers launching vehicle-to-grid (V2G) offerings may face uncertainty about how to disclose risks and benefits. A consumer duty, applied proportionately, could guide them toward transparent communication and fair product structures without stifling creativity through over-prescription. 

Improving the Regulator–Retailer Relationship 

For a consumer duty to succeed, it must be accompanied by a new style of regulatory engagement. 

Historically, retailers have sometimes developed compliance approaches under principles-based rules, only to be later directed by regulators to adopt specific formats or methods. This has created mistrust and discouraged collaboration. 

A consumer duty requires the opposite: a collaborative, open relationship where retailers can seek guidance early, test ideas, and adapt approaches without fear of retrospective penalty. Regulators will need to: 

• Provide clear frameworks for assessing compliance with principles. 
• Be open to industry dialogue and case-by-case questions. 
• Recognise good faith efforts by retailers to act in customer interests, even if approaches vary. 

This cultural shift could ultimately benefit both regulators and retailers, creating a more dynamic and trust-based system of consumer protection. 

Managing Risks Positively 

Subjectivity and consistency 

Yes, reasonable minds will differ in applying broad principles. But this does not have to be a weakness. If regulators encourage industry collaboration on best practice, subjectivity could become a driver of learning and evolution rather than a source of conflict. 

For example, if different retailers trial different approaches to hardship engagement under a consumer duty, regulators could evaluate outcomes, share insights, and refine expectations in partnership with industry. 

Retrospectivity 

Concerns about retrospective enforcement are real. But here, too, the solution lies in regulatory transparency. Clear communication about expectations, combined with recognition of retailers who act proactively in line with duty principles, can reduce the chilling effect of retrospectivity. 

Customer experience 

While some fear a duty could lead to long, complex disclosures, there is also an opportunity to do the opposite: simplify communication. It is worth considering whether a duty framed around “fair, clear and not misleading” would encourage retailers toward concise, consumer-friendly explanations instead of legalistic terms. 

Learning from the UK Consumer Duty 

The United Kingdom’s Financial Conduct Authority (FCA) introduced its Consumer Duty in 2023 as a cultural and behavioural shift in regulation — setting a higher standard for how businesses treat their customers. Rather than prescribing detailed rules, it establishes an overarching principle that firms must act to deliver good outcomes for consumers, supported by four outcomes focused on products and services, price and value, consumer understanding, and consumer support. 

The FCA’s model demonstrates how a duty can reshape industry conduct by embedding fairness, transparency, and customer understanding into everyday decision-making. For Australia’s energy sector, it is worth exploring if this could provide a useful blueprint: a duty that both protects and empowers consumers, while creating space for innovation and trust-building in a rapidly changing market. 

Relating Design Principles to the UK FCA Consumer Duty 

While the UK’s Consumer Duty was developed for financial services, its structure and intent provide valuable insight into how an Australian energy-sector duty could be designed. The following principles reflect similar objectives — tailored to the context of energy retail, consumer energy resources (CER), and essential service regulation.

1. Clarity and Consistency → Consumer Understanding

The FCA duty emphasises clear, timely communication that enables consumers to make informed decisions. Similarly, obligations in energy must be understandable and actionable for all retailers, regardless of size. Regulators should articulate expectations clearly, provide practical examples, and avoid leaving compliance to retrospective interpretation. Shared guidance between industry and regulators can bound flexibility and ensure consistent consumer outcomes.

2. Proportionality and Practicality → Products and Services + Price and Value

Under the FCA duty, products must meet consumer needs and offer fair value. The same logic applies in energy: a duty should be proportionate to risk and scale, allowing retailers of different sizes to achieve outcomes through different processes. Expectations should be realistic and support efficient, repeatable compliance. Proportionality should also extend to product innovation — particularly for emerging CER services — to ensure consumer protection without stifling development.

3. Collaboration and Transparency → Cross-cutting FCA Principles

The FCA’s governance expectations encourage openness and early engagement with regulators. Energy regulators can mirror this through a “no surprises” approach, providing clarity on how principles will be interpreted. Retailers, in turn, could share innovative practices and customer-centric approaches so that lessons can inform evolving guidance. This reflects the FCA’s emphasis on culture, accountability, and acting in good faith.

4. Innovation and Future-Readiness → Products and Services + Price and Value

The FCA framework requires that products continue to meet consumer needs as those needs evolve. A consumer duty for energy could similarly enable innovation, not restrict it. As electrification and digitalisation transform the market, principles should focus on fairness, transparency, and value - allowing flexibility for experimentation while maintaining consumer confidence and trust.

5. Trust and Customer Experience → Consumer Understanding + Consumer Support

The FCA duty requires firms to design communications and support services that promote good outcomes. In energy, the goal should be to rebuild consumer trust through plain, empathetic communication and accessible support. Obligations should steer retailers away from complex, legalistic disclosures toward language and tools that customers actually understand - reinforcing trust, understanding, and fairness.

6. Flexibility with Accountability → Overarching Principle + Governance Expectations

The FCA duty balances flexibility with evidence: businesses must demonstrate how their actions deliver good outcomes. Energy retailers likewise need space to tailor solutions to individual circumstances - such as hardship or family violence - but may also need to show that decisions align with duty principles. Regulators should recognise good-faith conduct taken in the consumer’s interest, echoing the FCA’s focus on culture and proportional accountability.

7. Continuous Learning and Evolution → Monitoring Consumer Outcomes

The FCA requires firms to monitor outcomes and continuously improve. In energy, a consumer duty should be treated as a living framework, evolving as technologies and consumer expectations change. Ongoing feedback loops between regulators, retailers, and consumer groups can refine expectations and ensure the duty remains relevant. Pilot programs - for instance, in CER offerings - can build shared confidence before broader application. 

A Duty That Builds on, Not Replaces, Protection 

Together, these principles suggest that a consumer duty for energy could follow the FCA’s lead in driving cultural change rather than replacing existing safeguards. Prescriptive rules - particularly for vulnerable consumers - are likely to remain essential. But a duty can lift the entire system’s expectations of fairness, empathy, and accountability, encouraging retailers to act not merely within the rules, but in the spirit of serving customers well. 

Connecting to Australian Reform 

Australia is already moving in this direction. The Australian Energy Regulator (AER) and Essential Services Commission in Victora are starting to place greater emphasis on consumer outcomes in their regulatory design, while Energy Consumers Australia has proposed a duty of care for essential services to ensure that customers receive fair treatment and value. The Treasury’s exploration of outcomes-based regulation in other sectors further reinforces this shift from compliance to accountability. 

Adapting the UK Consumer Duty model to energy would not require starting anew — it would build on these domestic initiatives, providing a coherent framework that links customer experience, fair value, and innovation. A well-designed duty could unify existing obligations under a single principle: that every decision made by retailers and regulators alike should demonstrably lead to better outcomes for consumers. 

Bringing It Together 

Together, these principles could help form a framework for introducing consumer duty in energy in a way that is workable, positive, and future-ready. They acknowledge the legitimate concerns of retailers about subjectivity, retrospectivity, and cost - but they also outline a path toward a more flexible, trust-based, and innovation-friendly regulatory model. 

If applied well, a consumer duty could become a cornerstone of the energy sector’s transformation: guiding retailers to not only meet obligations but to actively shape a customer-centric future. 

Conclusion: A Path Worth Exploring 

The idea of a consumer duty in energy is not without risks. Subjectivity, retrospectivity, and regulatory overreach are genuine concerns. But the potential benefits - a stronger culture of fairness, flexibility in serving customers, and improved trust between consumers, retailers, and regulators - make it a path worth exploring. 

If designed carefully, a consumer duty could: 

• Encourage customer-first decision-making beyond compliance checklists. 
• Create flexibility where it is needed. 
• Provide a principles-based framework for innovation, ensuring CER products and new services deliver real consumer value. 
• Strengthen the relationship between regulators and retailers, fostering dialogue and collaboration. 

Ultimately, consumer duty is not about replacing rules—it is about raising the standard of care and enhancing fairness into the everyday decisions of energy businesses. In an era of transition and complexity, it could be the tool that aligns innovation with consumer trust, ensuring the energy system evolves in ways that truly serve the people it exists for.