Retail separation better for electricity customers

MEDIA RELEASE

Thursday 5 March 2015

Retail separation better for electricity customers

Flick Electric Co. chief executive Steve O’Connor is calling on the ‘Big Five’ gentailers to consider separating their generation and retail businesses in the interests of customer experience and a more dynamic retail market at a major industry conference in Auckland today.

“The generation and transmission parts of the industry do a brilliant engineering job of providing New Zealanders with a highly-reliable, moderate-cost, low-carbon electricity supply. But electricity continues to be a low-engagement, high-cynicism category for customers. Why?”

O’Connor believes the answer is that the electricity reforms of the 1990s allowed generators to be retailers as well. “The unfortunate consequence is that the gentailers – which at their heart are generation focused – treat their customer bases as a financial hedge for their production. The result is opaque pricing and a low-level of retail innovation.”

He highlights the failure of the gentailers to use the full capability of smart meters that are now installed in more than 60% of homes. “Basically they’re just being used as automated meter readers. That’s like using your smart phone to only make phone calls. It completely misses the point.”

O’Connor says that structural separation of the telecommunications industry shows that competition increases when infrastructure and retailing are distinct, and the playing field is levelled in retail. “It’s not just about price, it’s also about innovation and differentiation of products and services. Customers have more control because they’re being given real choices.”

Currently 96% of ICPs are serviced by the gentailers despite there being 19 retailers in the market. “Given the gentailers all fundamentally offer exactly the same thing, you just can’t say that we have a competitive, customer-centric market.”

He says that allowing generators to own retailers was a line call in the 1990s that has not served consumers well. “Being free of the shackles of generation allows retailers to focus purely on things that are in their customers’ very best interests, to innovate and to create really dynamic retail businesses. Times have changed and technology has changed, it will be interesting to see if the industry giants are willing to change and step up to the plate for customers too.”

ENDS

© Scoop Media