Powershop finds consumers pay too much

JAMES WEIR
Last updated 05:00 24/12/2013

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Tens of thousands of people are paying hundreds of dollars a year extra in power bills because they are with the most expensive retailer, not the cheapest, according to a small electricity company.

In the worst case, more than 2000 people in the Wairoa district on the East Coast are paying about $655 a year more than they could if they were with the cheapest supplier, according to an analysis of government figures by Meridian Energy offshoot, Powershop.

But Trustpower, which is the dominant retailer in Wairoa, says the claimed gap between its prices and the cheapest is "absolutely ridiculous". Nobody could save that much by switching power company because almost none of their customers in the region would be on a standard pricing plan and using a set amount of power, which was the basis of the government price survey.

The Powershop analysis of latest Ministry of Business, Innovation and Employment figures suggests up to 187,000 households are with the most expensive retailer in their region, paying a combined average of 16 per cent more than households with the cheapest retailer.

That would be worth "hundreds" of dollars a year on average, Powershop said.

Big retailers "are trading on customer apathy," Powershop boss Ari Sargent said yesterday. "They get away with it for as long as customers don't do something about it".

In the Wellington region the gap was just more than $100, with Trustpower the most expensive, though it had very few customers.

But Trustpower spokesman Graeme Purches said Powershop was using government figures in a way they were never intended to be used.

The MBIE survey was meant to show a "rolling" picture of pricing in a region, not to compare prices between retailers in each region or across regions. The figures were based on 8000 units of power use a year, but in some regions like Buller the average was less than 5000 units a year. That meant fixed line costs could distort the figures.

"If you take real customers and their actual [power] consumption then he is wrong," to say Trustpower charges are higher, Purches said. "We are about middle of the road".

And it was not correct to suggest that Trustpower was the most expensive retailer in about half the regions in the survey, as the Powershop analysis suggested. Purches said that was backed up by a Treasury analysis of power prices a year ago.

Powershop had been "pushing the boundaries" of how to interpret the government data, Purches said.

Trustpower says that the Quarterly Survey of Domestic Electricity Prices takes no account of its "Friends Extra" 5 per cent discounts for customers who sign up for a five year fixed contract. About 70 per cent of Trustpower's customers get that discount. Trustpower has the lowest customer "churn" rate of the big retailers.

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Neither does the Quarterly Survey account for Contact Energy's prompt payment discounts for its customers, because it was not a standard option, Purches said.

Sargent said as far as he was aware, the MBIE figures did include prompt payment discounts, but not loyalty discounts.

"Yes, it is just a survey and it doesn't mean everyone is paying that, but it is indicative of what is going on in the market. . . . They [Trustpower] are the most expensive retailer in many areas," Sargent said.

Despite the analysis suggesting Trustpower was the most expensive in 24 of 45 regions, a Treasury report carried out a year ago said private power companies offer the cheapest electricity in most parts of New Zealand.

According to Treasury's figures, last year in 21 of 45 regions, private sector companies were, on average, cheaper than the state-owned enterprises.

Private sector companies had the cheapest offerings in 29 of the 45 regions.

Waitaki has the highest percentage of customers with the most expensive retailer at 73 per cent, (Meridian Energy) followed by Tauranga (70 per cent, Trustpower). After Wairoa, the biggest gap between cheapest and dearest was Christchurch at $623 a year and Buller at $597.

- BusinessDay

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