Top power company moves to stop disconnecting customers in hardship - Power to the People, part 3

One Porirua family had to use candles to light their home for months after being disconnected from their power. Photo / 123rf

Critics say power companies should stop disconnecting households who can’t pay their bills - or at least, stop charging fees when these customers are already struggling. In the third of our four-part series on energy hardship, Power to the People 2025, Raphael Franks looks at the effect on ordinary families and finds one major power company moving away from disconnections altogether

A mother with six children was disconnected from her power for six months. To make do, she cooked on a camp stove, lit her Porirua home with candles and often had all her children sleeping in one bed.

The woman’s 68-year-old mother told the Herald she often had to support her daughter and grandchildren when they were short of power.

Her daughter also lost a child around the same time - “so she was going through it”.

 

“It was horrible. That’s my family. Your blood runs through each other. It is hard to describe how it felt.

“I think most grandparents would die for their children or grandchildren, and it was painful to watch them go without.

“They were always sick. They had the flu all the time. It’s hard to keep them warm, and they all slept in the same bed sometimes.

“It was sad when one of them would text me and go, ‘Hi, Nan, we’ve got no power’. It embarrassed them.”

They were on a joint plan where they could share credit, and the grandmother shared what she could, but often had to go without to do so.

“Everybody complained to me because my house was always cold. But it was always cold because I was trying to save money on power.

“A lot of people do this.”

Disconnection fees ‘punitive’

Energy campaigners have condemned disconnections like these - and the fees power companies charge for them - as “punitive and inappropriate” for an essential service like electricity.

Their message seems to be having an effect. Last year, Contact Energy dropped disconnection fees after the Herald’s Power to the People campaign and a petition by energy advocates Common Grace.

Now Mercury Energy is moving towards dropping fees for non-payment from people in hardship. In response to questions on energy hardship from the Herald and Common Grace, it replied that it was only charging in cases of “clear fraud” and had not disconnected a customer in hardship for non-payment since June last year.

 

However the survey of power companies showed a majority still charged fees and said they would not stop disconnecting their customers for not paying their bills. The reasons behind keeping disconnections and fees included that it was a “necessary approach” for some customers and there was a cost to providers to disconnect a customer.

Campaigners and experts disagreed. University of Otago professor Kimberley O’Sullivan told the Herald disconnection fees were “really problematic” and further hurt people in hardship.

 

“Non-payment often happens if a household experiences some stressor - say maybe someone in the house is unwell or gets hospitalised, the car needs fixing, someone loses work hours or a job, any of those things ...

“Even a household that was once fine can suddenly have a cascade where the bills start piling up and then they might be late with paying their electricity bill - which no one wants to pay late, because everyone needs electricity.

“Hopefully they can catch up, but if they can’t, then they might get a disconnection notice, and if they still can’t, they might be disconnected (now, thanks to the Consumer Care Obligations, at least there is a minimum process for the retailers to follow when this happens).

Kimberley O'Sullivan, University of Otago, detailed the way people can fall into difficulties paying their bills and says the consequence of being disconnected hurts them further. Photo / University of Otago

“Once a household is disconnected, not only are they still trying to deal with whatever it was that put them into that situation in the first place, but the kicker is that there can be significant fees for disconnection and reconnection that need to be paid before they can switch the lights back on.”

Consumer NZ’s Powerswitch manager, Paul Fuge, agreed, saying disconnecting a vulnerable household that could not pay was disproportionate and harmful.

“Life can be tough. At different points, many of us may experience circumstances that make it difficult to maintain access to essential services,” Fuge said.

“These include job loss, illness, mental health struggles, financial stress, caregiving responsibilities, exposure to domestic violence, or challenges in securing stable housing and employment.

“Some households face even deeper, long-term hardship such as persistent poverty or severely limited incomes, which further compounds their vulnerability.”

Fuge said having access to safe, reliable and affordable electricity was fundamental to people’s health, wellbeing and ability to function in a modern society.

“Electricity is universally accepted as an essential service.

“Losing access has serious impacts, particularly for people with disabilities or health conditions who rely on electricity to sustain daily life,” he said.

“Providers of essential services must not place commercial interests above consumer safety and wellbeing. Electricity retailers, by choosing to operate in this space, accept a duty of care. If they are unwilling or unable to meet that responsibility, they should not be permitted to serve the market.”

Fuge said retailers needed ways to recover unpaid bills. “Of course, but cutting off an essential service to force payment from people who simply cannot afford it is both punitive and inappropriate”.

Vulnerable households, who are already overrepresented among those having difficulty paying their bills, bear the brunt of disconnections.

“The consequences are real,” he said.

“Cold homes are a serious health risk, particularly for children and older people. Respiratory illness is a major public health burden in New Zealand, costing more than $7 billion annually and accounting for one in 10 hospital stays.

“People in the most deprived households are hospitalised for respiratory issues at three times the rate of those in better-off areas,” Fuge said.

“Consumer NZ strongly believes that using disconnection as a method of debt recovery is unsafe and must be phased out. The energy sector must move toward fairer, less harmful ways to prevent and manage debt.”

Jake Lilley, from financial mentor charity Fincap, echoed O’Sullivan and Fuge, saying disconnecting a customer was a safety issue and should be avoided.

Fincap's senior policy adviser, Jake Lilley, says disconnecting someone from their electricity is a safety issue. Photo / Fincap

“No one should be disconnected because they’re unable to pay - and that’s not currently what the regulations say.

“And disconnection fees, particularly where someone hasn’t been able to pay, make the problem worse," Lilley said.

He said the fees were often unlikely to be paid, and, if they were, it was usually through a loan.

“So they’re just kicking the can down the road on the affordability issues.

“I do understand there would be some sort of cost to energy providers from others in the system.

“And that would vary depending on the type of meter. But regardless, what’s the point? And really, when we look at it, it’s an essential service. Would we expect people to be disconnected in the first place because they’re unable to pay? And then they are facing further punishment that compounds the issue. Our concern is that it just lumps more debt.”

Fuge, from Consumer, said any disconnection fees should reflect actual, reasonable costs to power companies.

“Our analysis of publicly listed fees shows significant variation across retailers,” Fuge said.

“Today, most disconnections are carried out remotely by meter providers, and the technical process is the same regardless of which retailer serves the property. We see no clear justification for the wide differences in what consumers are charged.

Consumer NZ's Powerswitch manager, Paul Fuge, says if some retailers are waiving disconnection fees, others should be able to as well. Photo / Supplied

“With the widespread use of smart meters, disconnections and reconnections are now almost entirely done remotely and are largely automated. In most cases, there is no need to physically send someone to the property, as was required in the past.

“This means the actual cost to retailers for carrying out a disconnection or reconnection should be very low.

“Given this, it’s difficult to see how high fees can be justified.”

Fuge said retailers should not profit from disconnection fees and should not include general administration or debt recovery costs in fees.

“Disconnection and reconnection fees must relate only to the actual cost of the service provided,” he said.

“If some retailers are choosing to waive or significantly reduce these charges, it shows that the costs involved are not prohibitive, and that absorbing them is commercially feasible. This raises legitimate questions about whether the fees charged by others truly reflect the cost of service.”

‘Fees reflect costs’ - industry

The Electricity Retailers’ and Generators’ Association, which represents Contact Energy, Genesis Energy, Manawa Energy, Mercury, Meridian Energy, and Nova Energy, said retailers did everything they could to avoid disconnecting customers and charging them fees.

Chief executive Bridget Abernethy said disconnection was a last resort, and a household was typically only cut off if a retailer found the bill payer was not engaging.

 

Abernethy pointed to Electricity Authority data showing the highest percentage of customers disconnected for more than 24 hours in any month was 0.038 (3.8 people for every 10,000 customers).

“Electricity Authority data demonstrates the industry’s disconnection rates are very low.

“Disconnection for non-payment is a last resort, and Erganz members work with their customers to find solutions, including affordable payment options. Disconnections for non-payment typically occur only when a retailer is repeatedly unable to reach a customer despite their best efforts.

“It’s a process that takes time and involves cost but, in line with the Consumer Care Obligations, disconnection fees do reflect actual costs.”

Abernethy said customers facing difficulty paying for power should contact their retailer as soon as possible. “Retailers have a range of ways they can help.”

Bridget Abernethy, chief executive of the Electricity Retailers and Generators Association of New Zealand, says disconnections are a last resort and typically only done when a customer is not engaging. Photo / File

Retailers acknowledged they were essential service providers and recognised this gave them a responsibility to support vulnerable customers, she said.

She pointed to several options Erganz member companies had for people who had been disconnected and charged fees.

“Several options [include] setting up affordable payment plans, referrals to government, community and social services, including budgeting support, working with customers to ensure their credit rating is not impacted by debt, and providing information about initiatives such as Power Credits, the Winter Energy Payment or the EnergyMate programme,” Abernethy said.

Responding to calls for disconnections to be legislated or regulated away, Abernethy said it already existed in the form of the Consumer Care Obligations.

“Erganz members were key contributors to the development of the Consumer Care Guidelines in 2008, which eventually became the Consumer Care Obligations, and have made significant contributions to improvements over the past decade,” Abernethy said.

“Erganz members are committed to delivering best-practice customer service, and in many cases will go beyond these minimum standards.”

Kate Day, co-director of advocacy group Common Grace, put the question to each power company to ask whether they would stop disconnecting customers for non-payment this winter. Here are their answers:

Contact said it did not charge disconnection or reconnection fees in cases of non-payment.

Toast also does not charge disconnection or connection fees for non-payment. Neither do Globug nor Wise.

Mercury said it charged fees in cases of “clear fraud” only and said it had not disconnected any customers in hardship for non-payment since last June.

Genesis Energy and Frank Energy said disconnections were a last resort and pointed to their “proactive process to contact disconnected households and offer support”.

“Last year, we attempted 1948 calls. Genesis does not charge a bond for onboarding or commission on debt collection,” Genesis and its subsidiary said.

Ecotricity, also owned by Genesis, said its fees “reflect the genuine operational costs associated with managing disconnections and reconnections”.

Meridian did not address its fees, only saying it had among the lowest disconnection rates in the industry, but also it was a last resort for customers who are not engaging.

“Disconnection affects only a very small proportion of customers - 0.017% of our total customer base in 2024 - but there remain customers for whom this is a necessary approach.

“We only use credit disconnection as a last resort for customers who refuse to engage with us around unpaid bills and/or mounting debt. When customers do engage, we support them to get back on track. In the event a customer finds themselves disconnected and then advises us that they are in hardship, we won’t charge the fees.”

Pulse Energy Alliance said its fees were a way to recover the cost of disconnections: “Our focus is to engage early with customers who are experiencing issues paying their bills to work with the customer to avoid disconnection.”

Nova Energy said it had not changed its position on fees; they were still charged. The company pointed to its “long track record of benchmark low disconnections for non-payment”.

Electric Kiwi said it would remove disconnection fees from one of its plans, but disconnections themselves were still a necessary last resort.

“We are preparing to remove disconnection fees from our most accessible, no-strings plan. However, disconnection remains a necessary last resort in very rare cases where we are unable to reach any resolution with a customer and they will not communicate with us.”

Switch Utilities, owned by 2degrees, was still charging, but said it would waive fees or refund them “if a customer indicates financial difficulty”.

“People default on payments for a range of reasons, not just hardship. If their non-payment is because of hardship, then we want to talk to them, so that we can work together to ensure they can stay connected,” Switch said.

The Electricity Authority’s public figures on companies’ disconnection rates in the year to May showed social retailer Nau Mai Rā had the highest rate per 10,000 customers, followed by Pulse Energy Alliance and Switch Utilities.

Ezra Hirawani, chief executive and co-founder of Nau Mai Rā, said the high rate reflected the fact that the company focused on providing power to the more vulnerable households.

“What we’re dealing with is the higher-risk customers that the other retailers don’t,” Hirawani told the Herald. He also said Nau Mai Rā only disconnected a customer (without charge) when the customer was not engaging, which he said was a way to prompt them to re-engage.

‘Loudest debt collector gets paid’

Lilley, from Fincap, said some power companies insisted they only disconnected customers who repeatedly ignored requests for payment.

However, this was a problem financial mentors saw with many struggling clients and was almost an expected response from people in hardship.

“There’s this sort of push that people are refusing to engage, but, I imagine in many contexts, people have financial problems with not just their power provider. And they’re probably juggling a lot, just to try to get their financial affairs in order.

“It’s quite normal for someone who’s in a very stressed situation to put their head in the sand as a coping mechanism.

“Your loudest debt collector is the one that gets paid, that might be the argument, but it’s not helping the underlying issues here.”

Monday: As Kiwis battle rising electricity bills, campaigners call for change

Tuesday: Could you get a cheaper plan for electricity? Most companies won’t tell

Wednesday: Major company moves to stop disconnecting customers in hardship

Thursday: Why our biggest power companies should be broken up (and why they shouldn’t)