Electricity market favours big players
Residential power consumers are getting a raw deal on their bills compared with business customers.
Data from the Ministry of Business, Innovation and Employment (MBIE) shows power prices that households pay have shot ahead of what businesses are charged.
In inflation-adjusted terms, residential power bills have increased 15 per cent over the past 10 years, compared with 4 per cent for industrial customers and a drop of 4 per cent for commercial consumers.
Electricity market commentator Geoff Bertram, of Victoria University, said it was a sign of market power.
‘‘Residential consumers have none and so can be price-gouged without serious short-term consequences.
‘‘Under New Zealand’s Commerce Act 1986 outright profiteering by monopolists was legalised – by overriding the old English common law precedents – and this remains the case today. Blame our Parliament for that.
‘‘The big electricity companies are just maximising shareholder value while the sun shines.’’
Saveawatt chief executive Tim Rudkin, who this week launched ‘‘The Big Switch’’ in New Zealand, said it made sense that businesses were getting a better deal because they had the scale to negotiate, the infrastructure to help them reduce costs and the skills and experience to negotiate supply agreements.
‘‘It’s simply leverage. Big businesses have much bigger turnover, dedicated client managers, more say.’’
He said there was not as much competitive pressure as switching data might indicate. Only 9 per cent of households moved power supplier in search of a better deal. Most switches were still people moving house.
Rudkin said there were 20,000 different electricity pricing plans in the market and it was hard for the average householder to understand what they were paying.
The Electricity Authority said regulated costs had risen over the past 10 years. The competitive part had been flat in real terms for the past seven, it said.
The MBIE data had not included all prompt payment discounts and retailer specials, the authority said.
The Electricity Retailers Association said industrial and commercial customers were highvolume users. One big customer was cheaper to serve than many smaller ones.
Reasons for power price increases included economic growth requiring infrastructure, the emissions trading scheme and the GST increase.
Across the Tasman, the Australian Competition and Consumer Commission has released a report calling for new powers allowing the Australian regulator to target ‘‘market manipulation’’. It said the state of the market there was unsustainable.
Electric Kiwi chief executive Luke Blincoe said many of the issues applied in New Zealand, too, particularly around the behaviour of big firms offering incentives to ‘‘win back’’ customers who tried to switch to a new provider.
Blincoe said the situation was getting worse in New Zealand. The amount of savings Kiwi households could make if they switched to the cheapest deal available to them had increased year-on-year by $82 million to $372m.
‘‘The gap between switcher offers and stayer offers is actually growing.’’