Power gouging claims denied

Last updated 16:38 10/03/2014

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Power companies have denied gouging pre-pay customers despite figures showing some users paying up to 60 per cent more than those paying a regular power bill.

Consumer NZ figures showed families in Northland paid up to 42 per cent more on pre-pay contracts, while those in Dunedin paid 58.7 per cent more, and in Invercargill it was 60.8 per cent more.

In some cases customers on the cheapest pre-pay plan were paying over $1500 a year more than those on the cheapest standard plan.

But power companies claim pre-pay billing systems were expensive and those customers were not subject to late payment fees or fixed daily rates, unlike those who were billed for they electricity use.

James Munro, retail general manager at Mighty River Power, said the company's pre-paid pricing was based on its billable rates. Pre-pay premiums of 40 or 60 per cent, as cited by Labour energy spokesman David Shearer, were "nothing to do with us" and were "insupportable", Munro said.

Mighty River, which supplies about 17,000 homes on a pre-paid basis through its Glo-Bug subsidiary, is New Zealand's largest pre-pay electricity supplier.

However, the pre-paid market was relatively small, accounting for just 4 per cent of Mighty River's residential customers and only 2 per cent of the entire residential electricity market, Munro said.

According to the Powerswitch website the cost of supplying 11,000 kilowatts of electricity to a customer in Dunedin ranged from $2714 to $3505 a year, whereas Glo-Bug would charge $2829, he said.

"We are not the cheapest plan, there is a charge for the technology, but it's not 40 per cent or 60 per cent," Munro said.

"Our experience is that when customers switch from post-pay to pre-pay they save $300 a year on average."

Customers who had switched to pre-pay did not receive early-payment discounts and probably also paid a disconnection fee, he said.

Low-income families who struggled to pay electricity bills on a monthly basis found it easier to top up a pre-pay account every few days in much the same way as they topped up mobile phones, Munro said.

Contact Energy spokesman Shaun Jones said that unlike power that was billed, pre-pay customers were not exposed to late payment fees.

"There are no fixed daily rates for Contact's pre-pay power, unlike post-pay," Jones said.

"This means that fixed costs are built into the variable charge which will tend to benefit smaller users."

Genesis Energy spokesman Richard Gordon said the company had been gradually withdrawing its InCharge pre-pay service which was still used by about 4000 customers. Instead Genesis was offering new online services to help customers manage their energy use.

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The complex and expensive pre-pay billing system also meant customers could be paying more than those who received a bill, Gordon said.

- BusinessDay.co.nz

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