Customers win big in power war

Former Mercury customer Louise Nind, who was offered $200 to switch back.

Relevant offers

Consumers are the big winners from an aggressive poaching campaign by power companies, who are luring customers back with offers of hundreds of dollars of credit, huge discounts off power bills, and tickets to sports games and films.

Aucklander Richard Beckmannflay accepted a $50 incentive in June from online electricity retailer Powershop to leave Mercury Energy  then took a $250 credit counter-offer from Mercury two weeks ago to change back. There was a catch  the business development manager had to sign an 18-month contract with Mercury. But he said the offer, which equalled a month's free power for his family, was too hard to turn down.

"I thought it was almost a prank call because of the amount. I thought if someone was going to counter-offer, they might offer double. But that amount gobsmacked me and I thought, I'm in."

Of the five big power companies, Contact Energy also goes after former customers, offering them free credit, fuel discounts and guarantees against price hikes. And Meridian Energy woos customers back with offers of free DVDs, shopping vouchers and magazine subscriptions. Genesis Energy declined to talk to the Sunday Star-Times.

Trustpower's communications manager, Graeme Purches, said it had a deliberate policy of not chasing people: "No, we don't, because all you do is annoy people. Three-quarters of people are offended by the fact that someone's ringing them up after they've made a decision to change supplier and is offering them money."

Powershop  a new, smaller electricity company that sells power from different retailers via the internet  gives new customers $50 credit. Chief executive Ari Sargent said targeting individuals was "underhand", and that Mercury, Contact, Meridian and Genesis were probably cherry-picking the best customers  those who used lots of power and were reliable bill-payers.

But Mercury's general manager, James Munro, said that was normal behaviour given the level of rivalry in the industry. He denied "win-backs" were bribes. "When people get that aggressive in the market place, obviously others are going to counter it ... I see it as a commercial response. One of the things that the electricity industry is often criticised for is an apparent lack of competition but this is indicative of the fact that we do have a very competitive market."

Sargent said bribes of $200-$300 amounted to "silly money", and the companies' other customers would pick up the tab. "They obviously expect to make that back there's no free lunch." He said the companies were rewarding disloyal customers at the expense of loyal ones.

Beckmannflay said Mercury must be making a "stinking" amount of money off him to be able to give away a month's worth of free power, but Munro said the offers could not continue for long. "We can't afford it. It's unsustainable over a long period of time."

Mercury has also given new customers tickets to Canterbury's Tactix netball games and movie passes. But the biggest deals are from Contact: new customers get a fuel discount of 40c a day, 12% prompt payment discount, 8% off power prices, free credit if they sign up for 12 months, and a two-year price freeze for customers in Hawke's Bay, Eastland/Gisborne, Wellington and Christchurch.

Contact launched those offers six weeks ago, following a mass exodus of customers which started late last year when the company decided to almost double its directors' fees while putting prices up. Customers dropped from 529,000 last September to 491,000 in May.

An industry source said the cost to Contact of its mega-discounts far outweighed that of losing nearly 40,000 customers, and the real reason Contact was desperate to get people back was because shareholders were worried the backlash could affect its share price.

Powershop's launch in February and its promise to choose the lowest-priced power from a range of suppliers is also feeding the price war.

Between January and May, Mercury gained 18,000 new customers while Contact, Genesis and Meridian collectively lost 23,000 customers. Munro put that down to Mercury expanding into Dunedin and Christchurch. Only Trustpower has held its market share since January.

Another former Mercury customer, Louise Nind, turned down a $200 credit to return after she joined Powershop. She told the Star-Times a series of battles with Mercury's customer service department led to her decision never to return.

An Auckland woman, who asked not to be named, was called by Mercury two weeks after she moved to Powershop and asked to come back. She said it was too soon.

Mercury phoned back a month later and upped its offer of free credit to $250, which she intends to accept. Powershop's Sargent said the entire country should switch retailers. "The more people decide to leave, the more those guys are forced to deliver a better offer to all their customers."

Poor public perception of power companies was compounded in May when the Commerce Commission revealed Meridian, Genesis, Contact and Mighty River Power (which owns Mercury) overcharged New Zealanders by $4.3 billion between 2001 and 2007.

TELL US YOUR EXPERIENCE: Have you been offered enticements to return to your former power company? Email us at news@star-times.co.nz

- © Fairfax NZ News