The Blog

The Electricity Price Review and you

Flicksters! It’s been a big few weeks in electricity, with spring heralding the start of daylight savings, longer days and warmer evenings, and as a result lower power bills - hooray! And, of course, the Electricity Price Review final report and the government’s response was released last week.

The release won’t mean any changes just yet, but we’re provisionally breaking out the bubbly because this report has finally put customers at the heart of the market. And that’s a massive win!

So does this mean my power bills will get cheaper?

Eventually, we hope so. But at the moment it’s looking like the effects of this report won’t be felt for a while (and trust us, we’re not happy about that). It will take at least a few months for you to see any changes to your bills, and until the final details are released we can’t make any predictions about individual power bills. Overall, we think prices will come down - but how much, and for who, we can’t say just yet.

What’s all the fuss about then?

The government has laid down a challenge to the regulatory bodies involved in the electricity industry and asked them to fix the market, and fast.

Top of the list sits the Electricity Authority (EA), which has been tasked with actioning a number of industry improvements. According to its own website, the EA is “an independent Crown entity responsible for the efficient operation of the New Zealand electricity market. We are the electricity market regulator.” In a nutshell, that means they should be ensuring Aotearoa’s electricity industry does all that it can to balance and meet the needs of people, business and the environment.

And are they?

Nope. In fact, the EA’s recent media release (in response to the Government’s announcement) states that “We know we can do better and we agree more can be done to put the consumer at the centre of regulatory decisions.” While it’s flickin’ fantastic to see the EA make this statement, it goes without saying that theirs is a crucial role in the progression of the electricity industry. So we’re keen to see the EA move faster, and more decisively, to ensure the electricity market actually works. To put it bluntly - it’s time for action, people!

Here at Flick, we’re under no illusion that there’s an enormous amount of work to do, and lots of changes to be made, in order to see a well-functioning market. But many hands and minds make light work, and there are lots of us throughout the industry who’re willing to pitch in and help. We, for one, are waving our hand high to help out as the EA progresses through the changes, and to be a part of the push for quick, decisive action.

First and foremost, though, that change has to be driven by the regulatory body who’s entrusted with the job - the EA. It’s what they’re there for, after all. And now it’s time for them to walk the walk.

So what needs to change?

The changes fall into some general categories, including strengthening the customer voice, reducing energy hardship, increasing retail competition, reinforcing wholesale market competition, improving transmission and distribution, improving market regulation, and preparing for a low-carbon future.

There’s a bunch of technical details under each heading, but overall we reckon the recommendations and report are moving us in the right direction, so long as this work becomes more than just idle chitchat. Because more talk won’t help. We need action NOW.

Can change happen that soon?

Absolutely - and it needs to. The issues raised in the report are nothing new, and there’s already been lots of work by the Minister and EA in planning the implementation of a number of these changes.

First up, and immediately actionable (the Government thinks this should happen in the next 3 months - whoop!), is to get rid of saves and win-backs. What exactly are saves and winbacks? We’d call them grovelling, but they’re otherwise known as the grand offers - like cash, TVs, washing machines, and waaay lower power prices - that your old power company will use to beg you to stay with them once you’ve let them know you’re switching to a new retailer.

These tactics might look good on the surface, especially for those who’re proactive when it comes to switching. But, ultimately, saves and winbacks have only fuelled the fire of a two-tier market that privileges those who switch retailers at the expense of those who don’t.

How so? Well, the research shows that consumers who change retailers are rewarded by saves and winbacks, benefitting from lower power prices and shiny new whiteware. Good for those folk, right - but loyal customers who stay with the same retailer wear the brunt of the scheme, paying higher power prices that prop up the saves and winbacks model. In fact, the Government’s EPR response states that “The average gap between the cheapest retailer’s price and the incumbent retailer’s price has risen about 50 per cent since 2002.” In short, while one tier benefits, the other tier suffers, and that’s what we call a bullsh*t power deal.

What about the rest of the stuff? Sounds hard.

Yeah, it will be. But it’s time for the EA to roll up their sleeves. They’ve known about these issues for a long time, they have a work programme in place to address it, and so all that’s needed now is action.

Good stuff. Where to from here?

We’ve got ya, Flick Fam. We’re all over the report and we’ll be running a series of blogs explaining the issues and why they matter to you - and all of us. After all, it’s what we do here at Flick: kick down those dusty, closed, industry doors, and tell it like is. Because consumers have a voice, and it’s about flickin’ time it was heard.