Damien Grant: Don't be fooled by elec-trickery

Power companies use advertising campaigns featuring the likes of Jeremy Wells and pukekos to attract customers.

Opinion

In a past life, I ran a natural gas retailer. We had 5,000 domestic and commercial customers and it was a profitable little business. Along the way, I picked up a thing or two about consumer behaviour; specifically, they just don't care that much about their power bill.

We made money by enticing new customers with a low offer price or a one-off credit. We'd typically lose money in the first year but reap the rewards if the customer remained with us for several years, which the customer invariably did.

Customers, we understood, believed that all utilities charge about the same, take forever to answer the phone and that switching between one retailer and another wasn't worth the aggravation.

However, the most effective trick up our sleeve was the complexity involved in comparing one utility bill with a competitive one.

A consumer would need 12 months' data, a spreadsheet and a spare couple of hours to make a genuine comparison between the competing offers; taking into account prompt payment discounts and loyalty schemes that abound in a crowded market.

Today, those in the industry have a nice phrase to describe the obfuscation involved in the pricing complexity: Elec-Trickery.

Electricity firms don't bother trying to compete on price and differentiate themselves with puffery like Newsboy and energy conscious pukekos; thank heavens the Government is here to help.

Next time you get a power bill take a closer look and you will notice a small tax, maybe a couple of dollars, for the Electricity Authority. More than $80 million a year is collected.

This obscure little body has 57 staff and 41 of them earn more than $100,000 a year.

So what, you might be wondering, are you getting for your money?

Well, $13m was spent on the EECA, the outfit that ran a television campaign fronted by former Norse god Ty Johnson telling us if we used less electricity our power bill would be lower. Thanks, Ty.

Another $5m is invested every year in the What's My Number campaign, including $1.5m on their website. Sadly, their own report confirms only 24,000 consumers were prompted to switch retailers, saving just over $4m.

Curious, I decided to check out Whatsmynumber.org.nz. My number is $75 if I switch to Powershop, which went further and guaranteed my initial annual saving would be at least $150 — and there is the real answer.

Retailers work on the basis consumers can be enticed with a credit, such as the $150 Powershop offer. Hopefully, inertia will then kick in allowing the retailer to farm the account profitably or even better lock me into a fixed-term contract; perhaps for a two-year price guarantee Mercury has on offer.

If you have the patience to deal with the process, take advantage of the enticement offers that come along on a regular basis.