Complaints at electricity power games

By FIONA ROTHERHAM

A printing firm persuaded to switch electricity retailers after being offered serious savings on its power bill was shocked at the new contract.

The Auckland-based firm says that the fine print showed savings promised by the commission-based salesman were as illusory as snake oil medicine in the Wild West.

Hard-sell tactics are becoming common as competition heats up among power retailers in Auckland, New Zealand's largest electricity market.

The printing firm's complaint and others are being investigated by the Commerce Commission for alleged Fair Trading Act breaches.

The commission's manager of fair-trading issues, Rachel Leamy, said electricity retailing was one of its target areas this financial year.

There are nine retail brands vying for Auckland's 400,000-odd customers.

Two network companies cover Auckland. Vector in Auckland central and south has 260,000 customers while UnitedNetworks (former Power New Zealand) has nearly 177,000 electricity customers in the north and west.

The two incumbent power retailers, Mercury Energy and TransAlta, have haemorrhaged a considerable number of customers but they are far from bleeding to death.

Other players include the generator/retailers Contact, Genesis, Meridian, TrustPower, First Electric, and resellers Empower and Energy On Line.

Contact has just paid $23 million for Empower to gain a foothold in the Auckland market, where it previously had only 2000 customers. It wants to spread the start-up retailer's door-to-door-selling tactics nationwide.

MightyRiver Power, owner of the Mercury and First Electric brands, estimated it has lost 18,500 Auckland customers in little more than a year since customer profiling came in.

It still has 91.5 per cent market share in Vector's area.

TransAlta, which bought Power New Zealand's retail arm, has since lost 15,000 Auckland customers.

MightyRiver general manager retail John Foote said the two incumbents were "on top of the mountain. They can only go one way."

An Institute of Economic Research report to the Government electricity inquiry said prices had increased 9 per cent relative to industry costs since 1994.

Figures from the Ministry of Economic Development show that TransAlta's charges for an average domestic electricity consumer have risen 8 per cent, or $87, from April 1998 to May this year, while Mercury's prices remained unchanged.

UnitedNetworks' lines charges alone during that period rose $35, or 7 per cent, while Vector's dropped by $5, or 1 per cent.

Beneficiaries from retail competition so far have been the bigger power users - commercial and industrial customers, where the margins were traditionally higher.

While the competition is now shifting to cherrypicked residential customers, industry players say margins here are already thin.

David Caygill, the head of the Government inquiry, said consumers would not necessarily see lower power bills as a result of its recommendations.

Promised savings under the reforms have not happened across the board.

Empower followed the lead of Telecom and Clear to tap into schools to boost business. It claims to have signed up 10,000 of its 25,000 customers under this programme, under which 3 per cent of each family's power bill goes to the school.

TrustPower, which doubled its Auckland customers to 2000 in the past year, recently launched a rival schools programme. It is offering a 4.5 per cent payment to the school in year one and 3 per cent subsequently.

In January, listed telephone company Newcall bought a 75 per cent stake in reseller Energy Options, now renamed Energy On Line, so it could sign up clients to power as well as telephone products.

EOL is offering discounts of between 3 per cent and 10 per cent on four-year contracts. It claimed to have signed up more than 6000 customers nationally in just four months, but did not provide an Auckland figure.

Genesis said it had gained 8400 Auckland customers with a "low-key" approach that includes door-to-door selling. General manager retail Clare Fletcher said it saw more value in concentrating on retaining its existing customers.

The two incumbent Auckland retailers have a similar strategy, concentrating on loyalty initiatives to retain their remaining customers.