The power of punctuality
Electricity companies offer great savings for prompt payments, but the discount tactic is coming under fire. Rob Stock reports.
RACHEL Rich left her power company after missing out on prompt payment discounts.
She has multiple sclerosis, which has left her partially blind on one eye, subject to weakness and tiredness, and with an erratic short-term memory.
Rich, who’s raising two school-aged children on her own, missed a couple of payments deadlines, and tried to get the power company to reverse its charges, but it wouldn’t, even when she provided medical evidence of her illness.
‘‘Quite a few times I would be a day late, and there would be no prompt payment discount,’’ she said.
She doesn’t want to name her former power provider, having shifted to Flick Electric, but it’s one of the big ones, and almost every power provider plays the prompt payment game.
Rich believed prompt payments discounts were discriminatory, and that the Government should look very carefully at them in its ongoing power price review.
Although the discounts sound like they reward those who pay their bills on time, some believe they are actually a marketing deception.
So many people get them now, Steve O’Connor from Flick Electric says, that the price of power minus the prompt payment discount is the real power price at each of the big companies.
For example, 89 per cent of Genesis customers regularly get prompt payment discounts each month.
‘‘A lot of people believe they are getting great savings and discounts,’’ O’Connor said.
But he likened the situation to fake sales by retailers, which artificially mark up prices, only to ‘‘slash’’ them so they can run near-constant ‘‘sales’’.
Instead, O’Connor believed the prompt payment discount system should be more properly seen as a disguised late payment fee system which was resulting in effectively 10 to 20 per cent in late fees for people who struggled to pay on time.
North Shore Budget Service adviser Sue Deason agrees they were actually a late payment in disguise.
‘‘Once again, the people not managing their money well, or who don’t have enough coming in, are penalised. The people doing well get a bonus.’’
Many were also in crisis mode, failing to see their options clearly.
The budgeting service takes a ‘‘total money management’’ approach with many clients, effectively paying their bills for them, which means once they get help, they all end up getting prompt payment discounts.
Power companies said they took steps to help customers get the prompt payment discounts, and will listen sympathetically in hard-luck cases.
‘‘We do remind customers to pay so they can receive their prompt payment discount,’’ Genesis said in a statement.
‘‘We send texts if we have their mobile number, or we call their landline if this is their preferred contact number.’’
Mercury said: ‘‘A bill being paid on-time allows us to avoid costly follow-up processes, and we want to share that value with customers.’’
While there appears to be next to no cost to a power company from getting a payment a day late, a lot of staff time appears to be taken up reversing prompt payment discounts.
Genesis said it would reverse lost prompt payment discounts if there was good reason. ‘‘In fact, since 2017, Genesis has reversed over 35,000 missed prompt payment discounts.’’
Mercury said its staff were also empowered to reinstate prompt payment discounts.
‘‘If it has happened several times, we might first work with the customer to put measures in place that suit them, so that we can make sure they’re getting these discounts – for example, setting up direct debit.’’
But O’Connor said prompt payment discounts were also being used as a tool to suppress competition.
Some big incumbents use the carrot of higher prompt payment discounts to keep customers from defecting to rivals. ‘‘The retailer goes back and says ‘We will give you $300 in cash and deepen our prompt payment discount to 22 per cent’.’’
In some cases, that results in deals Flick can’t match, making O’Connor suspicious.
‘‘The incumbents’ approach is ‘we wait at the beaches and if anything approaches we smoke it’,’’ he said.
‘‘The Government price review will probably get to the bottom of that. They have asked
Rachel Rich with her children Xavier and Anastasia. Her power provider refused to reverse a decision over a missed prompt payment discount despite medical evidence – something Steve O’Connor, chief executive of Flick Electric, believesare a marketing...