Controversial power discounts persisting
Some of New Zealand’s biggest power retailers still offer some form of prompt payment discount, nearly a year after the Government said it wanted to see major changes to them.
Electricity companies have long offered seemingly generous discounts to customers who pay their bills on time, but they were considered a marketing deception and late payment penalty by the Government, Consumer NZ and other consumer organisations.
They were offered so widely that critics claimed that the price of power minus the prompt payment discount was the real power price.
In November, Energy Minister Megan Woods gave power companies six months to make changes to the prompt payment discounts (PPD) before the Government decided whether to regulate.
While many homeowners benefited from the discounts, it effectively rewarded wealthier customers at the expense of those whose income did not cover monthly expenses, said Chris Walsh, founder of price comparison site Moneyhub.co.nz.
‘‘Anything above 0 per cent is too much for power companies to offer, as the discounting comes at the expense of financially challenged customers,’’ he said.
‘‘The ability to pay a $200 or $300 power bill within the PPD period is not an option for many New Zealand families, so missing out on a 10 per cent, 12 per cent or even 18 per cent discount has always been unfair.’’
Lower prices overall for everyone was a much fairer approach, he said.
Meridian Energy replaced prompt payment discounts in October 2018, moving to lower ‘‘flat’’ rates, a move the company said cost it about $5 million a year which was not recovered elsewhere.
Prompt payment discounts were introduced with good intentions, the company said, but they had come to disproportionately affect those who struggled to pay their bill from time to time.
Losing a prompt payment discount had happened to 59 per cent of Meridian customers.
Mercury still offers the prompt payment discount to customers who choose it or it can be exchanged for offers that do not have PPDs.
Most customers chose to join Mercury with a prompt payment discount but about 30 per cent chose another offer, a spokesperson said. The company cut its discount to 10 per cent from 12 per cent to accurately reflect what it cost to recover a late payment, a spokesperson said.
Contact Energy stopped offering prompt payment plans to new residential customers in May 2019. Some existing customers still had the discounts as part of legacy plans, which they could change.
About half its residential customers – about 185,000 – were on plans without the discount. ‘‘At the same time as we stopped offering PPD plans to new residential customers, we also introduced a simpler set of plans which represents a fairer and more transparent energy market,’’ a spokeswoman said.