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Consumers must check power switch fine print

Sep 5th, 2011 | By | Category: Front Page Layout, Latest News, News

PEOPLE POWER: A consumer survey on the Powerswitch website.

CONSUMER power-switching has risen sharply this winter, prompting warnings that people should double check figures before they change suppliers.

Industry expert Geoff Bertram takes a harsh view of electricity companies which promise savings by switching.

“You should regard anybody coming to your door trying to sell you an electricity deal as a fraudster – that should be your first assumption and they should have to prove otherwise,” says Mr Bertram, a senior associate at Victoria University’s Institute of Policy Studies .

“The deals they are offering will save you $100 here and $100 there, but these are peripheral gains – look at the long term and scrutinise the small print.”

In June and July this year more than 86,000 consumers switched power companies.

The ‘What’s my number?’ campaign, launched by the Electricity Authority in May, encourages consumers to shop around for power, claiming households could expect to save an average of $150 per year.

“Whether the campaign has persuaded these consumers to switch is yet to be determined, but the number of visitors to the Powerswitch site to date (495,609 at 28 August 2011) is encouraging,” says campaign manager Todd Collings.

Wellingtonian Nick Kalafatelis, pictured left, was one of the many visitors to the Powerswitch website between May 31 and July 31, and he calculated potential savings using his latest account statement.

The website provided Mr Kalafatelis with a figure of $444 potential annual savings if he switched from his current provider to Meridian Energy.

“My current provider would have to match or beat Meridian’s offer to keep me – if not, I’ll definitely switch,” he says.

Mr Kalafatelis was careful to check the fine print when calculating possible savings. However, when re-routed to Meridian’s website he found details on the recommended plan were few and far between.

“I can’t tell how I’m going to save the $444 – you probably need to get the specifics of the plan over the phone.”

This, according to Michelle Hyde of Carterton, is where consumers are vulnerable.

“My advice to others is don’t switch over the phone, because they can present figures that dazzle you, but don’t add up in reality.”

Ms Hyde switched from Genesis to Meridian around two years ago, but after a month she was back with Genesis when she realised the deal was not as beneficial as she thought.

“I’d signed up for a price fixing deal, to pay a slightly higher rate in exchange for a guaranteed price for two years,” she says.

“It wasn’t until I compared my new statement with an old one that I realised I would be paying a third more for my power – even if prices went up that wasn’t going to be worthwhile.”

But, Ms Hyde says she doesn’t feel Meridian deliberately deceived her.

“I wasn’t mislead, but I wasn’t told a whole lot either,” she says.

According to Contact Energy spokesperson Jeremy Seed, Contact is increasing its online payment discount by 10 percent in an attempt to hold on to customers

“Many customers who considered switching decided against it in light of the increased discount because they would make no discernable savings on their electricity price,” he says.

This price-wrangling is exactly what the Electricity Authority hoped to see happen as the result of its campaign, however Geoff Bertram says this does not mean the Government’s initiatives have been a success.

“It’s a playground squabble that everyone will get wildly excited about but will have zero impact on prices in the long run,” he says.

Despite criticisms such as these, it appears that consumers like Nick Kalafatelis, who have seen power prices continue to increase, will continue to take any savings they can get.

“It works out to about $37 a month. When your bills are $240 a month for a 3 person apartment, with no dryer… you have to save where you can.”


Kiwis told to use power of their vote for cheaper electricity

It is time for voters to demand parliamentary candidates present serious and sustainable options to reduce the cost of electricity, says energy economics expert Geoff Bertram.

New Zealanders should not accept inflated electricity prices and demand political parties take more serious action to introduce competition, says Mr Bertram, pictured left.

The senior associate at Victoria University’s Institute of Policy Studies has a simple message for voters.

“If candidates don’t come up with something that will seriously and sustainably bring electricity bills down then don’t vote for them.”

Consumer New Zealand says in June-July this year more than 86,000 consumers switched electricity providers as a result of the “What’s my number” campaign which has encouraged consumers to shop around for better power prices.

However, Mr Bertram and other electricity consumer groups such as the Domestic Electricity User’s Network (DEUN) have criticised this campaign as being nothing more than window dressing.

“In order to reduce electricity prices to the levels that they should be (approximately half of what NZ consumers pay now), competitors need to be free to enter and exit the market, private investors must be able to buy shares in energy generation projects, and users who generate their own electricity should be able to feed it back into the grid at a profit,” says Mr Bertram.

“Unfortunately we are nowhere near that in New Zealand.”

Mr Bertram is also critical of the Government’s plans to sell up to 49% of SOEs Meridian, Solid Energy, Mighty River Power and Genesis.

“Why would they want to reduce profits when they plan on selling them? The Ministry of Economic Development will be advising the Government to fatten up the assets held by these companies before they flick them off to overseas investors at huge profit.”

In 2009 an Electricity Market Review was conducted by an independent, ministerially appointed panel. The review resulted in the Government introducing the Electricity Industry Act, which was passed in 2010.


However, long term lobbyist and DEUN spokesperson Molly Melhuish, pictured right, believes the Act will only encourage an increase in electricity prices.

“The new Act’s foundation documents set out principles which exclude any consideration of the interests of domestic consumers,” Ms Melhuish says on her blog.

Mr Bertram says people like Ms Melhuish have been lobbying for years, but do not have enough clout to really change the electricity industry structure in this country.

“What we have in this country is a slow moving, lazy, fat oligopoly, where the five big guys are just squatting on their patch making huge profits and ratcheting up their asset values,” he says.

“They have written the rules themselves to protect their assets and keep competitors out.”

Electricity Authority spokesperson Amanda Forsey, says this comment probably relates to the period prior to 2003 when electricity generators and retailers established the rules for the wholesale and retail electricity markets.

“The Authority does have a stack of initiatives underway to modernise the rules in ways that further enhance competition, reliability of supply and efficient operation of electricity markets,” Ms Forsey says.

But, Mr Bertram says the Government does not really care about consumers, even if it has encouraged them to shop around for better prices.

“The major power companies in this country are SOEs, so you have to be totally cynical whenever the government starts talking about competitive industry.


But the Government is focussed on constraining electricity prices, sat Acting Minister of Energy and Resources, Hekia Parata, pictured left.

“No government can promise to reduce electricity prices, but what we can do is make sure that the market works much better for consumers,” says Ms Parata.

As for selling off state owned enterprise assets, Ms Parata says the government will extend the mixed-ownership model only if the Government maintains a majority shareholding stake (51%) can be confident of widespread and substantial New Zealand share ownership.

“The Government expects that the changes made in 2010 will put downward pressure on both electricity prices at the retail and wholesale levels of the electricity market,” she says.

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is I am a Whitireia Polytechnic journalism student. I have an academic background in politics and international relations, and worked as a policy analyst across government before deciding to pursue a career in journalism.
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