Supplier fines lack real voltage

By FIONA ROTHERHAM

Pay the fine and sit back and wait for a payout at the end of the year.

That's the situation facing electricity retailers under the new regime governing their effectiveness in allowing consumers to switch between electricity suppliers.

The fines - which can be unlimited in size - will be pooled each year and paid back to retailers, including any offenders, based on their market share.

The new rules come after lengthy delays and bungles have resulted in some customers who change suppliers having their electricity cut off.

From last month retailers can be fined for failing to switch customers to a new supplier within two working days. They are also required to provide meter readings within 23 working days.

The rules were established by the Maria governance board which covers electricity switching. They will be overseen by M-co, the company charged with administering the electricity market.

The Consumers Institute says the new compliance regime cannot be taken seriously.

"Having a system where the fines go back to the offending companies beggars belief. It indicates a lack of independence," said institute economist Grant Hannis.

But no offending company would be getting a cheque in the mail, said Maria governance board chairman Richard Rowley.

Each year any fines paid would go towards the industry-funded board's $1 million annual budget. This would reduce the levy required in the next year from market players.

M-co chief executive Philip Bradley said the same system applied to fines paid under the regime governing wholesale electricity market trading. Nearly every market participant had been fined under this regime, he said.

"The NZEM market surveillance committee tends to take into account the likely rebate each person receives at the end of the year.

"So if they had 15 per cent market share the committee adds 15 per cent on to ensure the penalty is appropriate.'

The Consumers Institute said a fairer option would be to use the fines to compensate consumers affected by switching delays.

In a recent case, First Electric paid $2000 compensation to a consumer who had waited a year to be switched.

This reflected the savings the consumer would have made during that year if they had switched to an alternate supplier.

The ministerial inquiry recommended the industry has a single governance board but consumer groups are concerned there is no requirement for this to include a consumer representative.