Pre-pay power plans 'unfair'

Electricity retailer Mercury Energy is using new technology to make pre-paid electricity plans more convenient for customers, but Consumer New Zealand says it isn't in people's interests to pay in advance for power.

Mercury retail general manager James Munro said the Mighty River Power subsidiary was about to extend its hi-tech "Glo-bug" pre-payment system, which is used by 13,000 customers in Auckland, to Christchurch.

It would launch the service in Wellington "as soon as smart meters are deployed in any great numbers" in the capital and hoped it might be able to market it to other electricity retailers.

"Nationwide, we would estimate there would be 100,000 to 150,000 homes that could benefit from a pre-paid service," Munro said.

Mercury has given an assurance that it has no plans to foist the payment option on customers who don't have poor credit histories.

But Consumer NZ testing manager Hamish Wilson said the consumer rights group suspected systems like Glo-bug might mean retailers became more aggressive about channelling customers towards pre-pay. It was also concerned by planned increases in power prices.

"All of this is about making life easier for the electricity companies to do what they already do very well, which is effectively plunder people's bank accounts. We don't think pre-pay is in the best interests of most of the people who are likely to end up on it," he said.

Glo-bug uses "cloud-based" software, smart meters and the pager network to make it easier for pre-pay customers to monitor their accounts. The system also means customers who run out of credit will only have their electricity disconnected at noon, after 36 hours' notice.

Customers are given a wireless in-home display which receives updates on their remaining credit over the "oft-forgotten" pager network. It flashes amber and then red if they are about to be disconnected. The set-up relies on Mercury being able to read, connect and disconnect people's power remotely, using smart meters.

"Customers can top-up their accounts at thousands of retailers. It takes an old concept and brings it into the 21st century," Munro said. "At the moment there is only one retailer deploying smart meters in Wellington, which is Genesis, but I believe the lines companies and other retailers are looking at what to do there."

Retailers often require new customers pay a bond for electricity but they usually only demand people pre-pay if they repeatedly fail to pay their bills on time.

Mercury pre-pay customers pay on average 10 per cent more for electricity than post-paid customers receiving a "prompt payment" discount.

Wilson said that was unfair. "If you are paying in advance, you are paying very promptly aren't you? Plus, electricity companies have taken the money in advance, so there is a small opportunity cost of not having that money in a savings account generating some interest."

Munro said that in Britain, 15 per cent of households pre-paid for electricity and that New Zealanders couldn't pay for products like petrol and groceries in arrears. "Do supermarkets offer free credit for a month?"

Mercury wanted to move customers on to pre-pay only "if it was the best product for them", Munro said.

BusinessDay.co.nz