Power pricing not just a rip-off, it’s immoral

Written By: Simon Louisson - Date published: 3:23 pm, March 22nd, 2019 - 43 comments
Categories: Economy, uncategorized - Tags: electricity, electricity market, inequality, market failure

Submissions for the final report on the Electricity Price Review closed today at noon.

My recent experience with Genesis Energy reveals pricing by power company majors not only rips customers off, but is immoral.

The initial report of the EPR is unlikely to address this issue.

My enlightening experience began with Genesis informing me late last year that the pricing regime applying to my account was being “reviewed”- ie the gas price was being hiked to $0.0809 cents per kWh from $0.0483 – a 67% hike.

When I wrote to Genesis to tell them I thought the hike was outrageous, especially considering my electricity bill had gone up 14% over the last year, and that I would be “reviewing” my relationship with the company, I received an email from the Genesis “movers team” offering me a new contract at the old price.

Only because I am the sort of person who roughly knows my way around systems was I able to get the price hike revoked (though I wasn’t smart enough to stop Genesis hiking my electricity price 14% in 2017 when the inflation rate was under 2%).

When I asked for an explanation of how, suddenly they were able to offer me a new deal at the old, much lower rate, I received this response: “The reason why you (sic) rates were increasing in price as those are our non-contracted standard rates. With (sic) accepting out (sic) eSaver contract, we were able to fix your rates onto our lowest regional rates available.”

The question is: what happens to people with less ability to push back? Essentially we have a system where the vulnerable end paying higher power prices than the less vulnerable.

Exploitation of the vulnerable also happens via the widespread practice of prompt-payment discounts, which Genesis still operates. These can be as high as 26% of the bill. Budgeting and advocacy groups say those discounts are really late-payment penalties. The discounts again favour those in society who are organised and have the wherewithal to always pay on the due date.

This unwelcome practice was highlighted in the current industry review that came about as a result of NZ First’s decision to go with a Labour-led government.

Meridian Energy responded to the review’s recommendation to end the practice by giving everyone the discount rate, at a cost of $5 million to the company. Those of Meridian’s 18,000 customers who will no longer be penalised for paying their bills late will save around $20 to $30 every month.

The review’s initial report highlighted the market has developed into a two-tiered beast between those who shop around to enjoy the benefits of competition and those who do not and pay higher prices.

Genesis, known in the jargon as a gentailor (because it is generator and retailer), is the largest electricity retailer, with around a quarter of the electricity market and 40% of the gas market. The 51% government-owned company is the third largest electricity generator. It was formed as part of the 1998–99 reform of the New Zealand electricity sector, taking its one generation capacity from the breakup of Electricity Corp of New Zealand (ECNZ). In April 2014, the National Government sold a 49% stake at $1.55 per share (today $2.68, and that is another sordid story).

Since deregulation of the energy sector began, households are paying 80% more for power today than in 1990, after adjusting for inflation. It is estimated about 103,000 households spent more than 10% of their income on domestic energy – a situation described as “energy hardship”.

The first stage of the industry review was delivered in September. According to Energy Minister, Megan Woods, “the report is a clear demonstration that the market is not working for everyone. New Zealanders deserve affordable electricity, but too many households are struggling to pay their bills.”

In her news release, Woods alluded to the problem identified in my pricing “review”.

“For residential customers it appears that a two-tier retail market is developing. People who actively shop around enjoy the benefits of competition, and those who don’t are stuck with prices.”

The average gap between what you might be paying, and the cheapest on offer, has increased by about 50% since 2002.

“The review has found that some households struggle to understand the various plans and how to choose the one that’s best for them, and low-income consumers miss out more often on prompt-payment discounts – which can be as high as 26 per cent of the bill, and which budgeting and advocacy groups say are really late-payment penalties,” Woods said.

According to the review, electricity prices have essentially stabilised since 2015. (That clearly did not stop Genesis hiking my price by 14% in 2017.)

Stabilisation has resulted from people shopping around when confronted with a hike. The industry is plagued by very high rates of “churn”, where customers jump from retailer to retailer to avoid the kind of hike Genesis tried to push onto me. That trend is encouraged by public campaigns such as “What’s my number” and pro-market advocates would argue that this shows the market is working.

Acquiring new customers by providing incentives, or by knocking on their front door until they jump ship, is expensive and is again essentially paid for by vulnerable customers. Estimates range from $200-300 to acquire a new customer up to the thousands that Z Energy recently paid for Flick in its desperation to diversify.

In August, all the big retailers, except Meridian, lost customer connections. Contact Energy reported the largest loss of more than 3700 customers, although 2000 of those were due to the Auckland Council moving to Trustpower. The biggest gainers were the Tier Two retailers – Electric Kiwi, Pulse Utilities, Energy Club, Switch Utilities, Ecotricity, Nova and Flick Electric.

Customer churn can also be very disruptive to power companies. Flick lost 3,500 customers in two months following wholesale power price spikes in October. Companies are aware of the dangers of large-scale customer loss and price their offerings according. So we all end up paying for this churn, but generally some pay more than others.

Simon Louisson is a former reporter who worked for The Wall Street Journal, AP Dow Jones Newswires, New Zealand Press Association and Reuters and as a political and media adviser to the Green Party

43 comments on “Power pricing not just a rip-off, it’s immoral ”

Comments are now closed

Ad 1

22 March 2019 at 3:39 pm

Great to see Vector get a $3.5 million fine for the power outages last year.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12215296

Big ups to the Commerce Commission litigation team for the win.

Also thankyou Justice Duffy.

Now, I know this post is about pricing, not lines and supply.

But it’s so rare these days to see a major get one in the eye for the consumer.
They could have spent that fine on undergrounding their lines in Auckland’s west.

Vector you are a shit organisation and your customer service and commitment to Auckland sucks wholesale.

Hope every bit of that fine comes off your bonuses.
- Dukeofurl 1.1
  
  22 March 2019 at 4:23 pm
  
  Not for last years ‘hurricane’ , was earlier
  
  “which resulted in it breaching the Commission’s regulations on quality standards in the 2015 and 2016 financial years.”
- Paaparakauta 1.2
  
  23 March 2019 at 9:03 am
  
  Is that Jacinda in the image above saying ‘Help’ ?
- Graeme 1.3
  
  23 March 2019 at 1:10 pm
  
  Waiting on the “naughty step” for the same sort of prosecution is Aurora, the Central Otago and Queenstown Lakes lines company.
  
  https://www.odt.co.nz/regions/central-otago/aurora-explains-itself-codc
  
  Aurora’s owner, Dunedin City Holdings ripped the guts out of the company to fund the Dunedin Stadium, resulting in no maintenance on a network that already had a huge deferred maintenance issue. So there’s been poles fall over outside Clyde School (fortunately no kids standing there at the time, if it had gone a few hours earlier would have been messy), poles come down with someone working on them (fatal) and in some streets most of the poles with red, “No Climb” tags.
  
  And then they had the cheek to go to the Electricity Commission wanting to put charges up to fix it. That’s gone strangely quiet.
Siobhan 2

22 March 2019 at 3:39 pm

“For residential customers it appears that a two-tier retail market is developing. People who actively shop around enjoy the benefits of competition, and those who don’t are stuck with prices.”

Its called ‘The Loyalty Penalty’.

Some consumer group should run an advertising campaign on behalf of businesses with a “loyalty Penalty”, they need to be outed, but NOT to make us change providers…to make them lift their game.

https://www.theguardian.com/money/2018/dec/19/watchdog-plans-price-caps-to-stop-4bn-loyal-customer-rip-off
WeTheBleeple 3

22 March 2019 at 3:46 pm

I had a very similar experience. I wrote them complaining the bill was too high and they gave me a hefty discount. I inquired why this discount was not default, and how many others were they fleecing etc. They replied how they were.

‘taking it under consideration’

That was Mercury.

Same animal, different coat.
cleangreen 4

22 March 2019 at 4:04 pm

We know that the electricity price is a ripoff as the base price should be abut half of what it is here in line with the majority of the OECD.

https://www.oecd-nea.org/ndd/pubs/2015/7057-proj-costs-electricity-2015.pdf

Hydro: Hydroelectric plants are very site-specific, and so one would therefore expect to see a wide range of costs.

Overnight costs for small hydro plants (10 MW or less) range from USD 1 368/kWe in the United States to USD 9 400/kWe in Germany.

For large hydro plants in OECD countries,

overnight costs range from USD 1 195/kWe in Spain to USD 8 687/kWe in Japan. In non-OECD countries they range from USD 598/kWe in China to USD 3 971/kWe in Brazil.

Privatising the ‘essential service’s was a crime here, as we built them for ourb serurity and National flogged them off and we got shafted.
.
- Dukeofurl 4.1
  
  22 March 2019 at 4:31 pm
  
  The power price we pay isnt set at the ‘lowest cost’ , rather its the highest cost provider sets the cost for all- for each half hour period. So varies through out the day.
  
  Some people are unfortunately comparing price rises to inflation – doesnt work that way as shortages rachet up prices considerably and if you are on a fixed price contract for the year the increased price for short periods is considered in setting the next years fixed price.
  
  Power prices are more like the price of potatoes, wholly dependant on supply and subject to weather related swings .
  In theory they should swing down as well but they rig the available supply to reduce that chance.
- Ian 4.2
  
  25 March 2019 at 9:18 pm
  
  The green party destroyed a big hunk of the value of those shares.You need to look at the unintended consequences of your activism. You cost taxpayers a lot of dosh and you provided investors a cheap buy.Your immediate need at the moment is to silence your hate filled spokeswomen.
Skunk Weed 5

22 March 2019 at 4:33 pm

We were told in the 1980’s that power prices would drop after freeing up the market under neoliberalism.
cleangreen 6

22 March 2019 at 4:39 pm

While our use of power is dropping the cost is rising according to these sets of global power consumption, NZ is dropping. So should the cost per KW.

Use the common model of if it is scarce then the cost rises.

So we are being ripped off all the way to the bank folks.

Electric power consumption (kWh per capita)
IEA Statistics © OECD/IEA 2014 ( iea.org/stats/index.asp ),

https://data.worldbank.org/indicator/eg.use.elec.kh.pc
- Dukeofurl 6.1
  
  22 March 2019 at 5:45 pm
  
  data is out of date.
  GFC effects reduced growth in power consumption, may have even reduced it, economic boom since then has changed all that.
  
  We are very susceptible to weather related shortages of hydro lake storage. Lots of rain and winter snow increases flow through South Island power stations. Its a complicated system but projected say winter hydro flows leads to power companies buying future hedging contracts driving up the price.
  A recent instance over a shutdown of a natural gas pipeline for maintenance has led to suggestions one of the retailers knew in advance and was able to buy hedging contracts for a low price before the others knew who tried to do the same thing but at higher price, a really high price. ( I hope I have got all details right)
- RedLogix 6.2
  
  22 March 2019 at 8:58 pm
  
  It’s worth noting that when it comes to utilities like power and water, the dominant component of the pricing comes from fixed costs. In the case of your water supply I know it’s usually 90% of the total price.
  
  For instance when I was in the water business, our wholesale price to the councils was 50c/m3, while as long as demand stayed within our production capacity, the marginal cost was 5c/m3. Roughly. I’m not sure how the numbers stack up in the electricity game, but I’d be fairly sure the fixed costs (capital, maintenance, labour, etc) would be the dominant portion.
  
  This means that as consumption drops, the price per unit rather perversely has to rise in order to be able to keep the system running. Eventually if demand drops enough, the system will shed fixed costs by closing plant, etc, but this tends to be rather sticky and comes in big lumps at long time intervals.
Skunk Weed 7

22 March 2019 at 7:10 pm

Thank Labour and Roger Douglas.
Naki man 8

22 March 2019 at 7:57 pm

I don’t know what all the fuss is about. My power bill is just over $100 a month this time of year. A little more than my internet bill and less than a tank of petrol.
If you own the house you live in and think you are paying too much it is very easy to reduce your bill, unfortunately not so easy if you are renting.
cleangreen 9

22 March 2019 at 8:20 pm

I have been finishing two other recent studies and the stats now show we are being ripped off no fear here.

Since the 2014 world bank study, we have decreased our own use of power every year since, we found the stats show.

Our use has fallen since 2014 again to less than average of 8939kWe per individual annually from 9026 in 2014.

So clearly we are really being ripped off alright by these fat cats running our formerly ‘public owned power companies using the excuse that power generation is lagging behind ouur demand as it has not incresed since 2014..

Shame on them!!!!
- Tuppence Shrewsbury 9.1
  
  23 March 2019 at 9:00 am
  
  consumption dropping does not equal a price drop. Please publish your study so we can assess your conclusions
KJT 10

22 March 2019 at 8:28 pm

One aspect that hasn’t been mentioned, is power companies overcharging retail customers, to finance their discounts to attract large businesses.

Power is a case study, on the inefficiencies of “privatisation” and ” competition” in large essential infrastructure.

And a total refutation of the raving that “private companies are always better than State control”.
- RedLogix 10.1
  
  22 March 2019 at 9:02 pm
  
  I agree with you on that totally. I recall from some years back a study done that compared the network costs between the electricity system and the water system in Wellington, and what happened in the decade after privatisation of the former, while the water supply remained public.
  
  I forget the exact numbers, but the water system real costs rose about 18% in that time, while the electricity sector rose something like 170%. Someone bite me if I have those numbers wrong, but the difference was stark. I recall linking to the document years back.
- Andre 10.2
  
  22 March 2019 at 9:50 pm
  
  One aspect that hasn’t been mentioned, is power companies overcharging retail customers, to finance their discounts to attract large businesses.
  
  Yup. The Electricity Retailers Association says so themselves, though they put marketing weasel spin on it.
  
  https://www.eranz.org.nz/fileadmin/user_upload/ERANZ-_electricity_prices_in_NZ_-_an_historical_and_current_context_-_June_2017.pdf
A 11

22 March 2019 at 8:34 pm

I remember that I moved out of Lower Hutt just before the cut off for being considered a resident and therefore owner of some power co. Missed out on over a grand in payout.

Made me think we needed more people owned power co’s
WeTheBleeple 12

23 March 2019 at 8:09 am

I’ve been thinking about this. Possibly cause a war…

Private companies gouge profit. We know this no matter how pretty their PR folks are.

I propose we claw the power companies back and force these private players in line with fair practice and public service provision. Power in NZ is a basic necessity not a luxury.

Buy them out, one chunk at a time taking their shares and turning them back to NZ’s asset as they are meant to be.

Force their pricing to stop them over-inflating their sense of worth.

Force their maintenance to stop them stalling business and activity.

Force them to act like responsible business till all the opportunists have abandoned ship.
- Stuart Munro. 12.1
  
  23 March 2019 at 8:30 am
  
  Agreed. One of my NZ power bills would pay for a year’s power in Korea, with change left over. NZ power companies are taking the piss.
  - CLEANGREEN 12.1.1
    
    23 March 2019 at 9:16 am
    
    Yes WeTheBleeple and Stuart,
    
    My Son is living back in Germany, and pays only a third of our cost of our power bill here for us two, – at his home there.
    
    Considering he and his fiance’ is in a deep winter period there now, and we are in a far warmer period here.
    
    So for our winter; – it will be of cold comfort knowing that Germany’s power costs are far less than ours, is ‘criminal’ for us to be forced to face here.
    
    Especially since I spend my best years working on two large power schemes in NZ building public hydro power projects so our future would be sure with cheap power.
    
    What a ripoff!!!!!
    
    We have been robbed here in NZ by these overseas “leeches”.
    - Dukeofurl 12.1.1.1
      
      23 March 2019 at 10:08 am
      
      In Europe I think its only France that is similar to NZ in that electricity supplies the majority of home energy use.
      I know for UK most homes have natural gas for home heating and hot water , the ubiquitous ‘boiler’ tucked away somewhere, anmd maybe even the stove is gas. This way their electricity usage is a small part of their energy use.
      Germany may be the same as UK , so perhaps ask your Son about the natural gas – maybe its part of an apartment block that shares the heating via radiators , so electricity may only be lighting and home electronics ?
      
      The comments from Ballarat may also rely on natural gas , for heating, hotwater and stove. More recently electricity prices in Victoria have soared as the move to more renewable forms has replaced old brown coal ( the worst kind) of power stations
      - cleangreen 12.1.1.1.1
        
        23 March 2019 at 11:42 am
        
        Germany uses electric ranges mainly (my son a NZ master electrician said).
        
        They also use electric underfloor heating systems too.
        
        I lived in Canada for 3 decades on and off, owning three properties and all had “forced gas griddle heated air heating systems: which were bloody dangerous.
        Our system of good insulation with ‘wool’ is adequate for our mild climate also.
        
        Dukeofurl 12.1.1.1.1.1
        
        23 March 2019 at 2:50 pm
        
        “Gas central heating is the most widely used type of heating system in Germany. ”
        https://www.wolf.eu/en/advice/heating/gasheatingsystem/
        
        My household of two probably averages $100 pm over year and I have two heat pumps, the upstairs one is mostly used for cooling over summer nights – using dehumidify option as thats the problem , humidity rather than excessive hot.
        My annual consumption 3813 kWh ,year on last Aug, means Im at the low end of a ‘low user’, but have the usual washing machines and dishwashers etc. I take care to turn major appliances off at the wall after use, including computer gear
        
        Dukeofurl …
        
        23 March 2019 at 3:00 pm
        
        “A typical household buying from a local supplier that consumes 5,000 kilowatt hours a year is now paying 1,437 euros per annum”
        https://www.reuters.com/article/us-germany-energy-retail/german-consumers-paying-record-prices-for-power-portal-idUSKCN1P9233
        
        Thats maybe twice ($2350 ? )what I pay($1071) for a similar kWhr
        
        Thats ALL my household energy , while those in Germany are mostly paying extra for natural gas heating on top of 5000 kWhr – which is quite low
        
        cleangreen …
        
        23 March 2019 at 4:00 pm
        
        Many countries have electricity prices at least half or much less than ours.are now because the base price is high here by extra ‘taxes’ and ‘ripping us off’ by using extra line and transmission charges and metering equipment charges are ‘silently added by the power company’ like NZ companies has done so now.
        
        Note; some are out of date as NZ and Australia are but we can use them for comparisons from then to now as historic references.
        
        Try NZ in 2012 cost of average power per kW was around 19c and now we are now up to 35c in areas such as Gisborne rural areas are.
        
        Germany has high kW cost of (33 EU) – but my Son says their yearly cost now in Germany is lower by far than ours are even today in 2019.
        
        I commend Dukeofoul for keeping his/hers average monthly kWs down to “averages $100 pm over year ” That is amazingly low even for two.
        
        Here are some stats to prove this fact that many countries have far lower cost than we or Australia has so knowing that the same global folks operate the Australian electrical providers do so in NZ now, so we need to have these high cost companies investigated for corrupt practices now.
        
        Argentina 9 2016
        Australia 11-26 2016
        Belgium 27 2015
        Bulgaria 11 2015
        Brazil 12-25 2016
        Canada 8-16 2016
        China 5-14 2016
        Chile 23.11 2011
        Croatia 15 2015
        Czech Republic 14.75 2015
        Denmark 33 2015
        Finland 17.51 2015
        France 19.23 2015
        Germany 33.76 2015
        Guyana 26.8 2012
        Hungary 23.44 2011
        Hong Kong 12.02-24 2013
        India 7 2014
        Indonesia 8.75 2013
        Iceland 14.5 2015
        Iran 2-19 2011
        Ireland 28.36 2011
        Israel 15.35 2017
        Italy 28 2015
        Jamaica 7.35-16.8 2011
        Japan 18 2015
        Jordan 5-33 2012
        Latvia 18.25 2012
        Malaysia 7.09-14.76 2013
        Mexico 19.28 2012
        Moldova 11.11 2011
        Netherlands 28.89 2011
        New Zealand 19.15 2012
        Pakistan 2-18 2015
        Papua New Guinea 29 2013
        Paraguay 8 2011
        Peru 10.44 2007
        Philippines 30.46 2010
        Portugal 25.25 2011
        Russia 9 2014
        Serbia 3.93-13.48 2013
        Singapore 21.53 2013
        Spain 19.72 2017
        Solomon Islands 84.8 2013
        South Africa 15 2015
        South Korea 8.1-62 2016
        Sweden 21.5 2015
        Taiwan 7-17 2012
        Thailand 4.46-9.79 2011
        Tonga 57.95 2011
        Turkey 11.2 2016
        United Kingdom 25 2015
        Ukraine 2.6-10.8 2014
        Uruguay 17.07-26.48 2014
        United Arab Emirates 0-12 2017
        United States 12.7 2017
        USA Virgin Islands 51-55 2013
        USA Hawaii 30.33 2017
        Uzbekistan 4.95 2011
        Vanuatu 58 2013
        Vietnam 6.20-10.01 2011
        
        Dukeofurl …
        
        23 March 2019 at 4:27 pm
        
        Based on my numbers German electricity prices are ‘twice’ that of a low user in Auckland ( How is their GST?)
        Yes some rural areas here have very high lines charges
        
        My only ‘trick’ is to have the hot water turned off except for 51 min per day -yes I use a timer- before the morning showers. In winter it goes up to around 80 min. In theory it shouldnt make much difference but I found it did. ( water comes from the hot part of the cylinder – the top- while cold water comes in the bottom where the thermostat is and immediately turns the element on to mix the water. I just have enough water used so that the cold water stays at the bottom till the next day)
        
        I can remember years ago being surprised by people who left electric heaters on in rooms all night!
        To me the main thing was a warm dry bed , by using an electric blanket before going to sleep. And about once a fortnight or so leaving it on very low setting for say 4-5 hours to drive the moisture out of the bed. damp beds require more heating.
        
        cleangreen …
        
        23 March 2019 at 4:56 pm
        
        They stupidly got rid of the ‘ripple relay system’ of the ‘controlled’ side of all home electricity systems sadly.
        
        We had always included them in distribution boxes attached to all homes then to restrict overnight water heating when high line demand was present so we had a lower water electricity charge in all homes where some would connect their heaters to the “controlled side of the electricity supply.
        
        As an electrician i was amazed when a Contact energy guy suggested we do this.
        
        All power providers should offer any service that would lower customers costs also like this.
        
        cleangreen …
        
        23 March 2019 at 9:19 pm
        
        Dukeofurl; My son just emailed his thoughts on the German prices here,;-
        
        “30 cents euro per kWh, that’s gone up from 25 cents since 2010. We generally only use electricity for cooking, I’ve never actually come across any house that hasn’t!
        They use a central heating system which the water heating is tied in with and the main source of heating are natural gas boilers, heat pumps, district heating system which means they have heating plants supplying heat (biomass and coal plants), and also wood and wooden pallet based heating systems
        
        We also pay our power annually. So 750-1450 euros a year
        I’ve generally only paid 750-1000euros a year.”
        
        We here average $250NZ a month (a lot more than you do) as you are wisely using less power than most.
        
        I need electricity here due to severe allergies to gas or wood fire emissions.
        
        We do use much more cost then my son and his partner do in Germany.
        
        Canada was much cheaper than NZ or Germany at only 12 cents a kWh. US at 11 cents so we are very high here.
        
        Dukeofurl …
        
        24 March 2019 at 10:02 am
        
        Thanks for that
        
        Andre …
        
        24 March 2019 at 10:10 am
        
        Do you occasionally make sure the whole cylinder gets up to at least 60 degrees? If not, then the risk goes way up of cultivating a delightful little colony of Legionnaire’s disease in your hot water cylinder.
  - RedLogix 12.1.2
    
    23 March 2019 at 9:40 am
    
    Similar experience even in Australia. I remember my shock at our first power bill in Ballarat, it was was similar to the ones we got in NZ, except it covered a whole quarter, not one month!
- Jess NZ 12.2
  
  23 March 2019 at 10:18 am
  
  Yes, socialist of me I know, but I think that utilities required for civilised living should be nationalised, not privatised. The profit motive increases the already immoral divide between rich and poor in NZ.
  
  So power, water, transport, health and ‘communications’ should all be free of the profit requirement.
  
  Rich people will always be able to buy a better deal, but the rest of us shouldn’t be propping up already rich investors.
WeTheBleeple 13

23 March 2019 at 9:25 am

Yeah we’re certainly getting gouged aye. Maybe part of it is due to having a smaller consumer base, but not all of it.

To ensure good (renewable hydro) power supply in our future we will also need to address the retention of water in our landscapes. Not only to ensure power supply, but for stream health and life, and primary production – our biggest earner.

The way all of this fits together where conservation enhances power and economy is the type of opportunity we should keep our eyes open for.

Building resilience in our systems.

NZ Forever.
Herodotus 14

23 March 2019 at 9:58 am

Simon your story is very similar to mine, had a 24 month price freeze. Recently the 24 mth period lapsed. We received a letter stating that all rates: Fixed and variable were to be “lifted” by 22-34%. From visiting http://www.switchme.co.nz i was able to find a supplier that was able to match our rates from 2 years ago. 4 days after completing the process I was rung from the current power coy with a counter offer, like you offering a dramatic lower rate and as a goodwill gesture $300 credit on the account. I used this opportunity to voice my frustration and from principle did not accept their offer.
I wonder how many “passive” customers these coys have that just accept such increases.
Wasn’t the power shake up to benefit the consumer ??? 🥴
Should have purchased all those shares that our govt sold a few years ago 🤑
Slijmbal 15

23 March 2019 at 10:14 am

Must agree with the point made earlier that while there is competition it is not provided to the consumer as a natural consequence, rather it has to be quite actively sought out. We have the cosmetic appearance of a competitive market but not an actual one.

Electricity costs have 3 main components; generation, transport (Transpower) and ‘retail’. Haven’t been able to dig out what proportion of our costs are in each but from memory all 3 components are major contributors to the cost.

The government owns ~ 2/3rd of power generation and owns Transpower and the 5 main generators who generate almost all power in NZ are also the 5 main retailers (with less domination than in generation but still a large amount of market share – I don’t have numbers to hand). This certainly looks like a cartel. A Government owned one.

We also have a pricing model for wholesale prices that is poorly constructed that can easily be gamed by the generators to increase profit. Furthermore, we have a poor model of setting how much profit the electricity companies are allowed. In crude terms it is priced by valuing their assets, setting an acceptable level of return on these assets and then being able to set prices accordingly. Getting assets artificially increased in value allows a corresponding increase in price and thus profit.

Ironically, with majority government ownership and government set rules for profit and pricing this is actually a government caused problem and not a private industry one IMO. Even more ironically, the largest proportion of price hikes (%age wise) have been applied under Labour governments. National are also guilty of this behaviour, just not as much. It’s been treated as a stealth tax by governments for ~ 20 years.

Electricity supply has so many built in impediments to competition e.g. very high capital costs and easy to repel new entries to the market, it’s not sensible to have 2 Transpowers etc. etc. that competition can only be enforced by market intervention. I worked in the electricity industry prior to de-regulation and wasn’t impressed by what I saw then so I’m not in favour of nationalisation and would rather fix what we have than overturn it. I don’t see any government intervening soon as it will mean increased taxes elsewhere.

On a final note, this will only get worse with moves around removal of fossil fuels in the mix as it’s become much more difficult to create economically reasonable, renewable generation in NZ. For instance, Hydro requires new damns, which are invariably strongly opposed. Other renewables such as wind and solar are not even close to economically competitive and a long way from being so, if ever, in the New Zealand environment.
cleangreen 16

23 March 2019 at 12:17 pm

Slijmbal

Excellent review you made.

I have a company that works within the Electricity industry in a “partnership” with the Electricity Authority (EA) as an (MEP) ‘Meter Equipment Provider’ and also as a (MEO) ‘Meter Equipment Owner’ where my activities are all controlled by the EA and often our similar companies that are small like ours are discriminated against by the Power providers and we are unable to supply services to customers that they want as the power providers will not allow us to represent the consumer to carry out installations of our equipment which can save the consumer money in lower bills.

So yes there are anomalies in the electricity industry now and the potential for some electricity providers to ‘play’ the system to reach higher profits with to much power given to the electricity providers over consumers rights to choose there services offered inside the electricity equipment industry.

We have on several times provided our company input submissions to the EA but seldom has anything changed.

We hope that the tenacious excellent prowess of our new Energy Minister Megan Woods will correct those issues and give consumers better right to use their preferred Meter equipment Provider to supply better metering to give the consumer lower bills, as some electronic digital metering is known to be very unstable whereas the older mechanical ‘ferraris’ spinning wheel’ metering that has been used for 60+ years has proven to be is more accurate in most climatic conditions.

Most Electricity Providers will also benefit from a more reliable stable reading of use at every location without having to deal with customers disputes also.

Main benefits also are for property owners with solar backup power systems as these mechanical spinning wheel meters reverse the reading when power from the home is generated and returned to the grid is shown accurately as a credit of 100% back to the homeowner by debiting the power returned to the grid.

Simply this give will give more control of use and lowed bills back to the customer.
- cleangreen 16.1
  
  23 March 2019 at 4:11 pm
  
  Site for the above. …
  http://energyusecalculator.com/global_electricity_prices.htm
  
  https://www.iea.org/publications/freepublications/publication/WorldEnergyPrices2018Overview.pdf
  - cleangreen 16.1.1
    
    23 March 2019 at 4:41 pm
    
    https://www.iea.org/publications/freepublications/publication/WorldEnergyPrices2018Overview.pdf
    Looking at this latest annual electricity study 2018 it is clear that charges are systematically added as needed by the Electricity suppler virtually like an ‘open check book policy’ in this 2018 study.
    See page 142 – WORLD ENERGY PRICES (2018 edition)
    INTERNATIONAL ENERGY AGENCY
    
    New Zealand
    “Electricity
    For industry and households, prices are calculated by adding sales revenues, obtained in quarterly surveys of electricity retailers, and dividing the total by sectoral consumption data obtained in the same survey.
    
    Electricity distribution companies supply additional detailed information regarding directly invoiced customers on an annual basis. As these companies reconcile their financial accounts in March each year, there is a mismatch between the sources.
    In order to ensure consistency with historical series, MBIE can only produce annual
    electricity data.”
    
    It is clear that they add charges to balance their books after quarterly surveys and no-one else audits them for their integrity and honesty?.
hoom 17

23 March 2019 at 10:31 pm

I will never forget Max Bradford on the day he announced the splitting of ECNZ:
“NZ electricity prices will never be as low as today”

It was a Bushism but has been proven absolutely literally true, prices nearly immediately rose significantly and continued inexorably upward since.

What annoys me is we had 9 years of Labour with no real improvement to what was already very clearly a broken-to-the-core system in that time.

I see no sign that this Labour govt will do anything other than a minimal & ineffectual adjustment round the edges.

A ‘market’ setup to always choose the most expensive price is not a market, its a Cartel.
And it makes no sense for separate companies owned by the Govt to be run as a Cartel. (nor as an actual market)