Power-switch campaign in the pipeline

The Government is looking to spend $5m on making Kiwis aware of possible savings on their power bills. Photo / Brett Phibbs

The Government is moving towards spending millions of dollars on a campaign to encourage consumers to switch power companies - moves that could save them at least $100 a year.

A ministerial review has recommended setting up a $5 million fund to promote the benefits of power company switching.

Although consumers would have to pay for the campaign from electricity levy funds, it would continue only if it could show it generates at least double its value in customer benefits.

The recommendation, with others that could shake up the electricity sector, confirms the view that electricity users, particularly householders, have been paying too much for power over the past 10 years.

The Government will make its decision on which recommendations to adopt after a five-week feedback period.

Energy Minister Gerry Brownlee says he is also concerned that many users do not know how easy it is to change power companies.

The Consumers Institute runs an online comparison website, Powerswitch, which has a spike in interest when electricity companies are under fire, such as when Contact Energy increased power prices and its directors' fees before last year's election.

About 35,000 customers shifted from Contact after the move, although the company's fightback has triggered bouts of sharp discounting in some regions.

Institute chief executive Sue Chetwin has welcomed the move to promote switching and said her organisation was working on plans to enable consumers to swap companies through the Powerswitch site.

Such systems work in Australia and Britain, although it would require the co-operation of all power companies.

The review also recommends the timeframe for retailers to switch customers be reduced from the existing 23 days to three days for customers with smart meters.

The six-member expert panel said price rises had been excessive.

While industrial customers pay similar average prices to Australia, the average New Zealand household pays 30 per cent more.

Heavily regulated lines charges have been largely held to the rate of inflation but gross retail margins increased sharply between 2002 and last year.

The report says price rises are mainly the result of the increased cost of gas for generating electricity after the depletion of the Maui field, a lack of competition among retailers and dry years.

Generator-retailers passed on the cost and inconvenience of last year's winter power shortage to consumers by calling for voluntary savings, avoiding the cost of paying more in spot prices.

The report recommends that power companies pay customers at least $10 a week when public conservation campaigns are started.

Although New Zealand remained vulnerable during dry years there were enough generation plants being built to ensure security of supply for the next six years.

The frequency of public conservation campaigns had created the wrong impression, the report said.

"Such perceptions create an undesirable and unnecessary level of public anxiety and increased risks and costs of business."