Prepaid leaves families cold
We’re concerned that for households having trouble paying, prepay might not be ideal.
Vulnerable households are cutting down on their use of heaters rather than risk using up their prepaid power, prompting health concerns.
Watchdog Consumer NZ and University of Otago researcher Kim O’Sullivan want more oversight of the prepaid electricity market, after issuing a joint report.
The market is growing in New Zealand – there are about 40,000 households using prepaid power meters, three-quarters of which are with Mighty River Power’s Globug.
Customers install a prepaid meter and top up via phone or app. The minimum topup is $20.
Globug’s customer numbers increased 56 per cent this year.
Whether prepaid power is a good deal depends on whether you qualify for a Community Services Card (CSC).
Globug is the cheapest provider and offers a 15 per cent discount to cardholders, which makes it among the best-priced power in Hamilton, Auckland, Dunedin and Christchurch.
Wellington CSC customers pay $90 more a year for Globug than they would on Mercury’s cheapest plan, with prompt payment discounts applied.
Without the CSC, Globug is much less appealing.
At full Globug price in Auckland, Wellington and Christchurch, customers pay 12 per cent to 22 per cent more than they would with the cheapest monthly-billed power.
Genesis, with 3800 prepaid customers, charges 10 per cent to 11 per cent more for prepaid than for monthly power, Consumer NZ said.
Although Contact cut its prepaid rates in August, Consumer NZ estimated they were still 12 per cent higher than the company’s monthly plans in Wellington, and between 3 per cent and 6 per cent higher in Auckland, Christchurch and Dunedin.
Some customers have little choice about using prepaid power.
More than 20,000 customers had their electricity cut off last year due to nonpayment. A prepaid provider that does not perform credit checks can be their only solution.
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But making the top-ups last can be problematic.
O’Sullivan conducted a survey that found just over half the prepaid customers who responded had run out of credit in the past year.
One third had no power for at least 12 hours and one in six would run out six or more times a year.
She said the extra transparency around the cost of power was both positive and negative.
She said prepaid customers had a good idea how much it would cost them to wash and dry their clothes, cook a roast or how much they would spend on power on an average day.
‘‘The control of power use and ability to budget with prepay is why most people like it even if they might run out of credit.’’ But that could be a problem, too, she said. ‘‘We’re concerned that for households having trouble paying, prepay might not be ideal. That’s because our research found more than half said prepayment encouraged them to cut back on heating, and adequately warm, dry homes are important for health.
‘‘Sometimes people are going to great lengths to save on electricity, and prepayment encourages this.’’
Research showed consumers using prepaid power reported cold housing – 67.5 per cent said they were shivering on at least one occasion, and 57.2 per cent reported being able to see their breath condensing inside on at least one occasion in winter.
Globug general manager Luke Blincoe said most customers did not run out of power before they topped up. The average top-up was $30.
He said the company saw its place in the market as similar to that of prepaid mobile phones.
‘‘Our offer is on average 5 per cent cheaper than the average post-pay price based on the [Ministry of Business, Innovation and Employment] survey.
‘‘A lot of assessments assume that everyone on a post-pay contract gets the prompt payment discount, but that is just not true. To access the best post-pay prices, people have to pay online and on time … that is not the reality for everyone.’’
He said prepaid was popular with people who wanted to avoid ‘‘bill shock’’ but also was used by people wanting supply to their holiday rentals.
Raewyn Fox, chief executive of the Federation of Family Budgeting Services, said prepaid power worked well for some people.
She said many of the families she worked with were facing choices about whether to pay bills or feed their children. ‘‘If people are making choices to use less power so they can afford to feed their kids, that’s not necessarily a bad choice.’’
She said people who were on low-user schemes would usually find prepaid more expensive.
Contact spokeswoman Kaapua Smith said the company calculated the difference between its prepaid and best post-pay price was less than 1 per cent.
She said the Consumer NZ survey seemed to use a high consumption rate in its calculations.
‘‘Customers choose PrePower for a number of reasons. Some choose it as a way of controlling spend, some choose it because they have moved into a house where the prepay meter is already installed so they carry on using that service, some landlords use PrePower as a means of ensuring that power can be easily connected for new tenants,’’ Smith said.
‘‘Our PrePower product is competitive, and you do not need a community services card to receive our best prepaid pricing.’’
Genesis spokesman Richard Gordon said the company was no longer accepting new prepaid customers.
‘‘In our view it is misleading to compare [prepaid plan] Incharge with a new offer deal. A better comparison is between Incharge and Household Anytime. The difference is around $152 per year. The difference is largely due to the higher costs of running the pre-pay system.’’
O’Sullivan and Consumer NZ want more oversight of the prepaid electricity sector.
‘‘At present there is not enough consumer protection for residential electricity consumers in NZ, especially for prepay,’’ O’Sullivan said.
‘‘Electricity companies are not required to report how often people disconnect, or for how long when they’re on prepayment like they do for post-payment billing.
‘‘If more people who are disconnected for late or non-payment are moving to prepayment we won’t be able to tell if prepay is fixing or hiding the problem of electricity disconnections as this information is not collected centrally.’’