The Blog

The Electricity Price Review - 1 year on

It’s been just over one year since the Government announced their decisions off the back of the Electricity Price Review (EPR), highlighting lots of shortcomings in our electricity market and a number of key areas to bring about changes (check out our original blog on all of that over here).

We’re in no doubt that the market needs an overhaul so that it works in the best interests of Kiwi consumers - so what’s happened since then, and has any of it made a dot of difference?

Strengthening customer voice

The Government has announced a $17m fund to implement its decisions based on recommendations from the EPR to strengthen the consumer voice, which includes establishing an energy hardship group and consumer advocacy council to speak on behalf of consumers. It’ll also include community-level initiatives and support services to help those facing energy poverty, including improving energy efficiency in our homes. We like the sound of this!

The EA has also actioned the EPR recommendation to combine the Powerswitch and What’s My Number websites in order to help make switching a little less confusing for consumers.

Reducing energy hardship

We know that energy poverty is a very real problem for many Kiwi households, with an Otago University study finding that 20% of New Zealanders have gone without heating or power because they couldn’t afford it. Thankfully, work is underway on establishing a definition of hardship which’ll make it easier to ensure initiatives target and make a difference to energy hardship.

Prompt payment discounts (PPDs) have long contributed to energy poverty by heavily and unnecessarily penalising those who have trouble paying their bills on time, and this was highlighted in the EPR (and by us for the last few years). These ‘discounts’ (or late payment penalties as they’re commonly known) mask already-inflated power pricing and generally add between 10%-26% on to a customer’s bill if they’re unable to pay on time - that’s some pretty shoddy customer service in our opinion.

So what’s happened since the EPR? There’s been some minor progress in getting rid of PPDs, with Meridian and Contact ditching theirs - although in these cases, we haven’t seen better prices across the board, as was the intent of the change. While a few other companies have said they’re working towards change, almost a year on from the date at which PPDs were due to end, a number of retailers are still offering them, and in August, Energy Minister Megan Woods penned a letter to all retailers asking them to show their progress in getting rid of them. We’re waiting to hear her next steps and at this stage we’d say regulation is needed if companies aren’t taking heed.

There’s also been sneaky behaviour happening where some power companies have shifted the ‘discounts’ to other areas, like a 16% ‘discount’ for paying by direct debit. As with PPDs, we question whether that ‘discounted’ rate is really just the standard rate, and whether some retailers have just found another opportunity to hike prices. In our view, finding ways to skirt the rules doesn’t adhere to the spirit of the EPR in creating an industry that works for the people.

Increasing retail competition

In the EPR last year, the Government agreed to ban winback activity, which means that all power companies have to wait 180 days before they can contact customers who’ve left them to try and entice them back with shiny offers (aka ‘winbacks’). The use of win-backs escalated the problem of a two-tier market which disadvantaged loyal customers, who pay higher charges to prop up the winbacks model, in favour of those who switched retailers.

In good news, there’s been a noticeable drop in winback activity from retailers, although Genesis made a slip-up earlier this year. There have also been cases where the boundaries have been tested and some retailers are contacting customers who’ve switched on the premise of wanting ‘feedback’ - under the ban, this isn’t allowed as it counts as winback activity, and we’re keeping a close eye on what happens here. Our CleverFlickers are also keeping an ear to the ground, and just last week a new customer alerted us that they had a call from their old company skirting the rules in a bid to win them back. We’ve laid a complaint with the EA and will continue to hold these companies to account.

So, will the ban on winbacks impact customers? It’s still early days, but we’re keen to see whether retailers will now deliver all of their customers a better deal for their power upfront, rather than hiking up the rates of loyal customers so that they can throw exorbitant amounts of cash at those who choose to leave. We’d hope to see this play out in a decline in kWh rates over time - watch this space!

Reinforcing wholesale market competition

This part’s all about making sure the generation market operates better, so that retailers like us, who’re trying to deliver fair, innovative, transparent products and pricing for consumers, can keep doing what we’re doing - and that can only happen when the market is fair for all players.

Unfortunately, this is the area where there’s probably still the most work to be done. Vertical integration, where a company like Meridian, Genesis, Mercury or Contact can have both a retail and a generation arm, continues to be an issue for market competition, because the generator arm can sell directly to their retail arm at a cheaper rate and safeguard them from the market volatility that retail-only companies (like us!) face. And that gives our gentailers a whole lotta market power.

In January this year the EA imposed some tighter rules on 4 of the major gentailers (Meridian, Mercury, Genesis and Contact) around the amount of generation they offer and the price they offer at in the hedge market. Other than that, though, little else has been set in stone.

Preparing for a low-carbon future

There’s no denying that electricity and clean, renewable generation will play a big role in Aotearoa’s low-carbon future - and it’s crucial that we have an electricity market that can support such a step up. The EA have recently begun work examining the possible role of large-scale batteries in connecting to the grid as generation, and whether the current market rules (which were most recently adjusted to include wind farms) would work for technologies like batteries and solar. It’s thought substantial work will be needed to get the rules ready to cater to alternative energies. Rest assured, we’ll be watching!

So the big question - are power prices dropping?

We’ve heard talk this year, in the media and other places, that power prices have dropped for residential customers here in Aotearoa. We think it’s some good spin doctoring by the big companies, and it only takes a look at the numbers to see that sadly this isn’t the case. MBIE’s Quarterly Survey of Domestic Energy Prices (QSDEP) shows that in 2019 and 2020 the generation portion of our power bills has increased, while transmission dropped in 2018 and 2019 after several years of increase.

Annual Percentage Change Residential Tariffs NZ

Ultimately, though, the implemented EPR changes haven’t yet had any significant impact on the power bills of Kiwis, and while we can’t expect great price drops overnight, we’d have expected to see some sort of positive change by now. The fact that we haven’t is disappointing and frustrating.

But it only serves to make us here at Flick want to push harder, especially for wholesale market reform. Tinkering around the edges just won’t cut it. It makes us even more determined to use our voice to challenge and disrupt, and keep demanding more until we see those changes make their way into the back pockets of New Zealanders. And rest assured we will.