Bargain hunting Dads most likely to switch

Lines charges are often blamed for soaring electricity costs. But not all retailers charge for them the same way.
Marion van Dijk

Lines charges are often blamed for soaring electricity costs. But not all retailers charge for them the same way.

Do you hunt for bargains or prefer the status quo?

Market research shows dads in their 30s and early 40s are among the most likely to seek power bill savings, while low-earning single women over 60 tend to be happier staying put.

Regular surveys by UMR for the Electricity Authority have divvied the country into market segments based on switching behaviour.

The point is work out how to win over people who are currently not interested in switching.

Chief among these is the group UMR has unflattering dubbed the "Old, Status Quos". These lovers of continuity (18 per cent of people) are more likely to be women aged over 60 on low incomes who are divorced or widowed. Only one in five of them has switched power companies recently and close to half say they are not interested in doing so, despite their low incomes and the possible savings. Few have visited independent price comparison websites.

At the other end are "Bargains Hunters", the 12 per cent of Kiwis who have absolutely no trouble shopping around. As of the latest survey 56 per cent had switched in the past two years and 76 per cent used price comparison websites. Bargain Hunters tend to be men with children aged 30-44.

Next most likely to switch are so-called "Battler Parents" - currently 27 per cent of the country - who are open to switching but need a bit of prompting. Like Bargain Hunters, Battler Parents tend to be aged 30-44 with kids. They can be men or women, are likely to be married and frequently feel under financial pressure.

Then there are Gen Ys (16 per cent of New Zealanders) who are often single women aged younger than 29 earning less than $40,000. They, too, feel financially squeezed but don't tend to be proactively looking around for cheaper options.

Finally we have the clunkily-named "Affluent Time-Poor Sceptics" (26 per cent) who are often male higher earners aged 45-59 with good educations. Service is more important to this group than saving a few dollars.

The surveys reveal only 31 per cent of the overall population switched power companies in the last two years, despite potential savings of hundreds of dollars annually.

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But they also show the ranks of the Battler Parents' are growing, while the Old Status Quo group is shrinking. Maybe New Zealand is growing more switching-friendly.

TRUE COMPETITION?

The switching campaign proceeds on the basis that retail competition can curb power prices. But a recent report commission by the Business Innovation and Employment Ministry found consumer switching had had no significant effect on prices and only a small effect on retail competition.

Electricity prices merrily sky-rocketed throughout the early years of the consumer switching campaign, even as hoards of electricity salespeople were knocking on our doors.

Lynne Taylor, a utilities specialist at PWC, says competition for customers is real but does not always translate to lower prices for everyone.

For a start, rising infrastructure and distribution costs are largely out of retailers' control.

But retailers have a choice about how and when to pass them on, and to whom. One major factor is where you live, another is whether you happen to meet the profile of customers that an electricity retailer is targeting. 

"Retailers are free to choose how they recover their underlying costs and how they share their costs between different groups of consumers, if they are interested in targeting a particular group of customers who they believe is having a poor deal from another retailer," says Taylor.

"Auckland is where traditionally there has been active competition because of the size of the market, you can disaggregate and focus on different components because it is big enough. You go somewhere like Westport and you'll find a different electricity market because there aren't really enough consumers for a number of retailers to develop an offering."

Still, pricing methods are growing more transparent because retailers are under pressure from the Electricity Authority to be more honest about where price rises are coming from, says Taylor.

In the latest round of price announcements, many retailers did not put up their own share of electricity costs, she says. "The big retailers made pricing announcements at April 1 and four of the big five say they have made no change to the retail component to their price. What that tells me is they are price conscious at the moment."

Taylor says people should not expect price hikes from the electricity component of their bills in the near future.  "We have flat demand in New Zealand and plenty of supply at the moment so we won't be looking at significant moves up in the wholesale price in the short term."

So is it still worth switching?

Figures from PowerSwitch, as at April 20, show there are savings available in all major regions from switching to the cheapest retailer.

People who don't compare prices may be ignoring potential savings of between $136 and $870 a year.

Actual savings depend on power use, region and which company you currently use. For example the latest price table shows a medium-sized Auckland household could save $204 a year by switching from Nova Energy to Flick Electric co, the cheapest option in the area.

Flick is a new entrant to the power market and unusually charges ever-changing electricity rates reflecting the rapid changes in wholesale prices from fluctuating lake levels, weather and time of day. Other power retailers pick a unit price and stick to it, absorbing both the benefits and costs of fluctuating wholesale prices.

In Wellington, as in Auckland, Flick is also currently the cheapest option for a medium household and Nova is again the most expensive in the table. The Powerswitch table compares the cheapest available plan for each retailer, finding Flick's cheapest plan costs $282 less over a year than Nova's cheapest. Some plans have special conditions. (This paragraph has been clarified from a previous version of the story)

In Wellington, as in Auckland, Flick is also currently the cheapest option for a medium household and Nova is again the most expensive. Flick costs $282 less over a year.

In Christchurch the difference is a whopping $584 but this time Trustpower is the costliest retailer for a medium household and Energy Online is cheapest.

Taylor says, for those living in areas where Flick operates, the variable option works if people don't mind fluctuating bills.

"The thing about Flick is the variability, so if you are able to manage that and are prepared to take the swings and roundabouts that is ok. But I suspect the average consumer wouldn't want that and of course that's what other retailers do for you - you know what your price per unit is at least for the coming year"

Other retailers charge a margin for that certainty. "Of course they do," says Taylor.

PowerSwitch graphs show the big four companies still dominate the market. But the market share of the new mid-sized retailers has been growing steadily since 2010.

"I think retailers are very focussed on encouraging customers to switch...and also stopping their existing customers switching," says Taylor. "It is a volume game, unless you are a very niche retailer."

 - Stuff

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