Big power retailers unfazed by competition
New power retailers offer customers choice – but don’t expect them to shake up the market, one commentator says.
There are now more than 40 retail brands in the New Zealand electricity market, up from 22 five years ago.
But small and medium-sized companies still only make up about 11 per cent of all connections. Genesis Energy alone has more than a quarter of the market, while Contact Energy has just over 20 per cent and Mercury has just over 18 per cent.
Electricity market commentator Geoff Bertram, of Victoria University, said the new entrants were ‘‘doing what they set out to do’’ but he said they were never going to be dominant and would not be able to make a serious dent in the operations of the big players in the current market structure.
He said the big firms were happy to allow up to about 8 per cent of the market to be held by small providers but there was little hope of getting beyond that.
‘‘They will never allow an independent to make a serious dent.’’
Nova, the biggest of the smaller players, only has 4 per cent market share nationwide.
Bertram said any real change would require political will and new legislation to require big operators to put customer interests first. But with more members of the public holding shares, due to the recent sharemarket listing of gentailers, that was less palatable.
Bertram said a better disruptor of the industry would be solar power as the technology to go ‘‘offgrid’’ and not require a connection at all became more economical and accessible.
Energyclubnz, in which Stuff has a stake, is launching in Wellington this week. Stuff also publishes the Nelson Mail.
Energyclubnz founder and chief executive David Goadby said he was pleased with the progress to date. It is already operating in Auckland and Christchurch, and expected to be in Hamilton and on another eight of New Zealand’s networks in the next few months.
Competition may be increasingly keeping pressure on prices. Prices rose 2.4 per cent for residen- tial customers in 2017 as the lines component increased 3.6 per cent. Prices fell in 2016.
In 2011, when there were half the current number of brands, prices increased 6.6 per cent.
But Goadby said big retailers kept their best prices to offer to new customers. Those that had been with them for a long time missed out unless they threatened to leave. ‘‘A lot of people don’t realise they can switch and don’t realise how easy it is.’’
Energyclubnz customers were typically saving between 8 per cent and 13 per cent on their power bills, he said.
That was not always reflected in its Powerswitch ranking because other retailers loaded up their offers on the comparison site so they looked more appealing. Often the deals were not available to existing customers.
Energyclubnz passes on its own wholesale price of power, plus a flat fee. Its model smooths out the movements in spot prices that comes with Flick and Paua to the People’s system of passing on fluctuating spot prices.
‘‘We effectively give customers an everyday low price and manage the risk on their behalf.’’
Electricity Authority chief executive Carl Hansen said, when retailers competed, it gave good outcomes for consumers.
‘‘Companies are forced to innovate on price and service delivery to win and retain customers.
‘‘A record 440,000 people switched providers in 2017. We encourage everyone to check whether they’re on the best electricity deal for their situation.
‘‘We’re also working to create opportunities where consumers have even more choice. At the moment people are only able to have a contract with one electricity service provider.
‘‘We’re looking to open this up so people may be able to buy electricity from one provider, but sell excess electricity from solar panels to another, for example.’’
There are almost twice as many brands in the New Zealand power market compared with five years ago.