Subsidies leave firms out in cold

Complete Heat director David Ryan (front) and installation manager Darren Munden (rear) have had to lower their prices to compete with firms approved for the state subsidy. Photo / Steven McNicholl

Heating and insulation businesses lay off staff in face of undercutting by Govt-approved operators Heating and insulation companies that missed out on the government's subsidy scheme say they are losing staff and money.

Some say the government subsidies are allowing competitors to hike their prices and still undercut them using taxpayers' money.

They say customers are avoiding them because they see government approval to offer subsidies of up to $1300 for insulation and $500 for energy-efficient heating as a "badge of quality".

Of 249 companies wanting to join the $347 million scheme for the next four years, 60 were chosen based on factors including geographical coverage, financial stability and their ability to carry out self-audits.

An Energy Efficiency and Conservation Authority (EECA) spokeswoman said just because a company missed out did not mean it was offering poor-quality work.

Only companies that could offer both floor and ceiling insulation and at least one type of clean heating were chosen, she said.

But David Ryan of Mt Albert heating company Complete Heat said there was a perception by the general public "that unless you could offer the government subsidy your product would be substandard".

He said he was having to knock $500 off the price of his heating systems to compete with companies offering the $500 rebate.

Alistair Boyu said his company Polyman had let all of its 11 installers go in September because he could no longer afford to pay them.

He believed his competitors were charging more per square metre yet were able to undercut him because of the subsidy.

Meanwhile, Garry Ferguson of Man About the House in Wellington said his business had gone from 16 installers - some of whom were hired in expectation of the scheme - to six after he failed to get approval.

And Ben Van Arts of air-conditioning firm Hot Chilly said it had cut sales staff for its residential business from six to one, also after an expected approval did not come through.

The company also does commercial installations. "Our phone has pretty much stopped ringing for the residential side."

Mr Ryan said he had laid off two of his nine workers because of the recession and the new scheme.

Labour Party energy spokesman Chris Hipkins said all companies that could meet quality standards should have access to the subsidy. People saw EECA approval as a "badge of quality", he said.

"Putting arbitrary limits on it means some providers have been able to milk the system," said Mr Hipkins.

He said approved companies could undercut non-subsidised competitors without passing on the full saving to the customer.

About 900,000 houses in New Zealand need insulation.

About 188,000 will be fitted under the scheme and the EECA spokeswoman said there should be business left over for other companies.

She said if the authority had approved every company, each would have received just a "handful" of subsidies - not enough to make it worth participating.

Energy Minister Gerry Brownlee said restricting the numbers meant EECA could keep a tight control on the quality of work and avoid safety problems like those plaguing Australia, where shoddy work practices have been blamed for several fires and the deaths of four installers.