Loyal Power Customers Getting Ripped Off

25 May 2018

If you haven't switched power companies in the past two years, you are probably getting ripped off, says Electric Kiwi’s chief executive, Luke Blincoe. The customer retention behaviours of the big market players only benefits those who are active about switching but penalises loyal customers who stick with their provider year-in, year-out.

“Householders are being ripped off if they haven’t looked at switching power companies in the past two years,” says Blincoe, who has written to the Electricity Authority’s Market Development Advisory Group about the issue. “The current save programmes result in market failure, because loyal customers get no benefit from competition and there is a lost opportunity to create downward pressure on price. “The incumbent players only have to compete after a customer decides to switch. Consumers would be better off across the board if incumbent players felt they had to retain all of their customers not just that ones that try to leave.”

Blincoe says the issue is something the Electricity Authority should urgently address, particularly as the customers who suffer the most are those who can least afford high power prices, such as the elderly and people on low incomes.

“Just this week we’ve seen research showing more than half of NZ households cut back on heating their homes in winter due to the cost. So it doesn’t seem right that the big power companies are ripping off their most loyal customers to fund discounts and payments to people who switch away.”

Blincoe says in-market activity has increased to the point where some retailers are saving as much as 50% of the customers they lose – or would have otherwise lost.

“The more successful they are at this strategy, the less need there is to offer competitor prices to all consumers. The best-value offers are only available to new customers, while loyal customers pay higher prices to fund the good deals and saves. Surely in a healthy, properly-functioning competitive market, all consumers should benefit from increased competition?”

He says the Electricity Authority should regulate “with urgency” to address the issue.

ENDS

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