Power of reasons for SMEs to consider switch

SMEs are now being seen as a new, lucrative market for electricity retailers. Photo / Supplied

Electricity Authority is launching a tool that helps businesses see if they're getting the best power deal, writes Carl Hansen.

Q: Why have SMEs been less aggressive about changing power supplier than households, 370,000 of which have switched?

Research done in 2011 into SMEs' awareness and behaviour about switching revealed that only 4 per cent are actively looking for a cheaper retailer compared with 5 per cent of residential customers. Meanwhile, only 22 per cent of SMEs have switched electricity provider in the past two years and 80 per cent of those who have switched say they found it easy.

The main reasons for small and medium sized businesses not switching included perceptions that there weren't any real gains to be made and that it seemed too much of a hassle. Other main barriers to switching were a lack of trust towards electricity retailers.

A lack of information was also cited as a key reason for not shopping around for electricity. The online business tool allows businesses to find out this information in five easy steps.

Q: Explain the Electricity Authority's SME campaign.

Following the What's My Number residential campaign, the Electricity Authority has extended the opportunity to make significant savings to the SME segment of the retail electricity market. The goal is to increase SMEs' propensity to switch, therefore creating more vigorous competition within the electricity market. The new SME campaign provides an online tool for SMEs to easily compare and switch electricity retailers, developed in partnership with www.switchme.co.nz, the energy comparison website.

The tool works by allowing SMEs to enter their business and consumption details online. Retailers are then provided with this information and asked to tender. This is all facilitated online. Electricity retailers then submit a tender - about 10 working days are allowed for this - and once the responses to the tenders are received, SMEs are invited back to the site to view them and select the best deal. The businesses can then initiate the switch from there if they want to.

The online business tool can be found at www.whatsmynumber.org/mybusiness.

Q: A number of electricity retailers are now turning their attention to SMEs, seeing them as a potential new and lucrative market. What should small businesses be looking for from their electricity provider?

The SME market is more diverse than the residential market, with a much wider variety of tariffs. SMEs should look for retailers that are able to provide the most cost-effective plans and tariffs based on their consumption and individual business needs. This may change from year to year and from retailer to retailer, so it is worth reviewing your electricity provider on a regular basis. SMEs should search out the best deals for their business type via the online business tool www.whatsmynumber.org.nz/mybusiness.

Q: What kinds of savings can they be making?

As electricity retailers don't publish standing tariff rates for SMEs it isn't possible for us to calculate the potential savings SMEs could make by switching from their current provider to the cheapest.

However, the pricing responses from the online business tool have an average spread of 17 per cent, indicating there is significant value for SMEs to shop around for their electricity. So far, 35 per cent of SMEs receiving tariff offers via our online business tool have chosen to switch electricity retailer.

Carl Hansen is chief executive of the Electricity Authority.