Small business sector pays too much for power, experts say

Small to medium-sized businesses are getting a raw deal from power retailers and need to wake up to potential savings, industry figures say.

Energy analyst Molly Melhuish said businesses that did not negotiate special deals with power retailers were no better off than domestic consumers.

"They are very significantly exploited."

Online energy retailer Powershop said it had surveyed 40 Wellington-based businesses and estimated it could shave 9 per cent off their annual power bills.

Ms Melhuish said 9 per cent was only a fraction of what businesses would save if pricing was fair.

Businesses that spent more than 5 per cent of their total costs on power should first look to make savings in their own infrastructure rather than switch providers.

Upgrading refrigeration or air conditioning equipment could deliver big savings, she said.

Ari Sargent, chief executive of Powershop, said smaller businesses were overpaying hundreds of thousands of dollars to power providers.

Ms Melhuish said any business that was prepared to put some effort into scoring better power deals should give Powershop a try.

Powershop, owned by Meridian Energy, lets customers buy power online from a range of suppliers, for example on a daily, weekly or monthly basis, and take advantage of special deals.

Ms Melhuish said she had saved about 9 per cent on her bills as a customer of Powershop so its claim was credible, and businesses prepared to chase the discounts could save even more.

Powershop was generally pre-paid so firms with tight cashflow might struggle but the pre-pay system gave businesses and people better control over what they spent on electricity, she said.

Business NZ chief executive Phil O'Reilly said businesses might not be paying the absolute minimum for power but it was difficult to say whether they were being overcharged.

Power was a relatively small cost for the average small business. "It doesn't surprise me if they haven't been out on the market looking for the very best deal."

Powershop would be particularly useful for smaller energy-intensive businesses such as dry cleaners.

Major Electricity Users' Group executive director Ralph Matthes said it was incorrect to assume larger users negotiated tariffs.

Smaller users took electricity at a lower voltage than bigger users, requiring more infrastructure such as transformers and lines to deliver it and that was why they paid more.

The Government has announced a major shake-up of the power sector in an attempt to increase competition and drive down prices, including a $15 million fund to encourage people to shop around.

An Economic Development Ministry quarterly survey of electricity prices last year showed Powershop was the cheapest in all but one of the areas where it operated.

- © Fairfax NZ News