Powershop plugs consumers into buying electricity online

Meridan Energy, through its subsidiary Powershop, is boasting the world's first online electricity shop. The carrot is a potential $200-plus savings in your annual power bill, depending on how much power you use, and where you live.

The stick is having to spend time sitting at your computer, making decisions about how, and from whom, and for what period of time, you will buy electricity.

The success of internet banking, and the huge popularity of sites such as TradeMe, suggests Powershop could have a future. It's no surprise that three former TradeMe employees have put skin in this particular net-based game.

But consumer reluctance to use the net-based PowerSwitch site, which allows consumers to compare different power company prices and plans, and act accordingly, suggests otherwise.

The big drawback with Powerswitch is that consumers could go to the trouble of switching to another supplier to get a marginal price saving, only to find a better deal is posted a week, or month later by another power company.

"But with Powershop you are never tied to a single power company," says Powershop chief executive Ari Sargent. Customers could buy electricity online sufficient for the next day, or the week or month ahead if they chose, and then switch to another offer online if a cheaper deal came along.

Sargent's problem for the moment at least is that the deals on offer are either from Meridian, Powershop itself, or a new private company called Kiwi Power which is making its first venture into electricity retailing. And while Kiwi Power is setting its own pricing structure, it too is having to buy wholesale electricity from Meridian.

But energy analyst Molly Melhuish says the absence of other big retailer names offering deals on Powershop is not necessarily critical to its success.

"The deal with Powershop is not the brand of the suppliers, but the ability of the offerings, from whatever source, to achieve lower prices through the backroom savings that a net-based operation can achieve," she says.

Melhuish compared the price she was paying Meridian for power in Wellington (22.24c/kwh plus fixed charges for a total unit charge of 24c) with that offered online through Powershop last week 19.79c per unit.

"I must say that's pretty darn good, based on an annual usage of 8000kw/h," she says.

Powershop is a Meridian special project two-and-a-half years in development, the brainchild of Sargent and run by a senior management team as a wholly-owned subsidiary.

Once transferred from a retailer and signed on to Powershop, a customer is presented online with a range of three different products from five competing supply options (two each from Meridian and Kiwi Power and one from Powershop).

The Everyday product is electricity that can be used straight away. There are also special deals that are posted from time to time.

And Powerpacks allow customers to buy electricity at current prices for use at a later date. Winterpacks, for example, would allow customers to buy electricity now (late summer) at current prices for use during June-August.

Sargent said this would allow customers to smooth monthly payments out over a period of time. "You are also locking in power prices like a fixed mortgage does," he says.

He says Powershop was able to allow some seasonal pricing flow through to rates on offer. So units bought now in a Winterpack might be lower than rates set during a dry winter when wholesale prices sky-rocketed.

"On the other hand, it might be a wet winter and prices might be lower," he says.

But the main thrust of Powershop was to allow customers to save money over the long term, rather than achieve short-term cheaper deals.

Powershop customers also have monthly calendars online which show days (in red) where power has been supplied but not yet paid for, and green where power had been bought ahead.

Powershop electricity is bought on a per-unit basis, which represents one kilowatt hour charge, plus fixed charges.

Payment is made by credit card, internet banking or direct debit.

Powershop will automatically provide power at the cheapest rate on offer to customers who make no selection.

Payment alerts will be sent for monthly accounts not paid for. 

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