Reforms will require the Electricity Authority to lift game

Independent electricity retailer Electric Kiwi is cautiously optimistic the Government has identified the right issues for improving competition in the electricity market.

Electric Kiwi Chief Executive Luke Blincoe says, “This report shows a willingness to clean up some big issues, and these changes, if implemented, could deliver about half a billion dollars to Kiwi families.”

‘Saves’ and ‘win-backs’ are set to be banned, mirroring the telecommunications industry, and Blincoe sees this as a positive step.

“These allow big players to keep prices high and to retain customers only when they find a better deal,” says Luke.

“Without win-backs, the big guys can expect to lose even more customers to retailers like us, or they can lower their prices and compete. Either way the customer wins.”

Blincoe has reservations about the implementation, and points to the Electricity Authority’s demonstrated lack of commitment to date on these issues, which he says are already well known and well defined.

It will be critical the Government provides clear direction to the Electricity Authority about when it expects saves and win-backs and mandatory market-making to be implemented, says Blincoe.

“Addressing the two-tier retail market will save Kiwis millions, so the Electricity Authority needs to overcome its long-standing inertia and show a willingness to act.”

Blincoe says that the range of recommendations to resolve hardship are admirable but could be unnecessary if the Authority acted promptly to address market failures and promote competition.

“Spending the taxpayer’s money on helping consumers pay inflated power bills, however admirable, could actually perpetuate the issue, whereas prompt measures to improve market efficiency will address overall cost and equity issues.

“The incumbent retailers will happily bank taxpayer funds and continue making record profits.”

While sceptical that progress would occur if left to the Electricity Authority, Blincoe says the threat of intervention via a backstop power may be critical to establishing credible progress towards better consumer outcomes.

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