Mercury invites customers to lock in prices

Photo / Greg Bowker

Mercury Energy is offering customers the chance to take a punt and lock in power prices for the next three years as competition intensifies in the residential electricity market.

The company is offering fixed rates to selected Auckland consumers who must pay higher tariffs now to qualify for the deal but face no increases until 2013.

Among deals from other companies are a day's free power every week over summer and $75 credits for switching to them.

Consumer NZ estimates said Mercury's higher initial rates are on average about 9 per cent above existing tariffs.

Consumer's research and testing manager, Hamish Wilson, said that spread over the next three years, this compared favourably to the energy price rises and other lines company and government charges that have added up to 29 per cent over the past three years for Mercury customers.

They needed to assess whether they thought power prices would continue to climb steeply, as they have for over a decade, or whether the Government would succeed in holding prices by reforming the electricity sector and encouraging competition.

"It's a bit of a punt that you are taking but you do have the certainty there," Mr Wilson said.

The Mercury offer includes any lines company increases and any rises in Electricity Authority and emissions trading levies.

"No matter what other price increases come along, the customer can be certain that their electricity daily (line) and unit charges will stay the same for three years," Mercury has told customers.

They can break from the deal for a $95 charge which Mr Wilson said was modest compared to average annual power bills, which for a medium size user in Auckland Central range from $1900 to $2115 a year.

Mercury is owned by Mighty River Power, whose general manager of consumer markets, James Munro, said the deal was similar to choosing between a floating or a fixed mortgage. "Just like banking with fixed, you pay the premium at the outset to get certainty."

It was distinct to "no price review" offers which did not absorb line charges or levies.

"I don't think it's the be-all and end-all. It's a pricing variation to sit alongside everything else we do. In general terms it would suit anyone who wants that certainty - it's an emotional and economic decision."

Competition for customers is increasingly cut-throat as record numbers switch suppliers to chase better deals and state-owned enterprises prepare to swap assets as part of government reforms. The three-year deal will help Mercury - which has about 400,000 residential customers - to fend off competitors.

"It's a calculated business risk but this is not priced at a discount," Mr Munro said. "The flip side is that competition is intense at the moment ... and this is one more way to offer into the competition."

Energy Online is offering a $75 credit and promising to beat Contact Energy's Auckland rates by $110 a year, and online retailer Powershop is offering 12 days of free power over summer.

Contact Energy is offering discounts on energy bills for new customers to June 2012 but unlike Mercury, existing customers are not eligible.

Punt or pass

The good news: No increase for three years.

The bad news: You pay about 9 per cent more.