Power switch efforts fail to rein in price

Photo / Richard Robinson

Schemes help many jump provider, report finds, but bills still rising.

New Zealanders are switching to cheaper power companies in droves with help from Government-sponsored campaigns, but a new report suggests that the schemes have failed to halt electricity price rises.

About 350,000 people a year were using Consumer New Zealand's Powerswitch website and the Electricity Authority's What's My Number site to move to a cheaper provider.

But a report commissioned by the Ministry of Business, Innovation and Employment found that the effect of consumer switching on competition had been "small". It also said consumer switching had "no significant effect" on retail prices.

Since the campaigns were introduced three years ago, power prices had increased by an average of $243, and by $327 in central Auckland and Manukau. The report's details were released under questioning by the Labour Party at a parliamentary select committee yesterday.

Labour's energy spokesman David Shearer said the report undermined the Government's mantra that a highly competitive market would halt prices.

"It is completely at odds with what Energy Minister Simon Bridges has been crowing about for the past few months," he said. Electricity Authority chairman Brent Layton defended the schemes, saying that "rising prices were not a good measure of whether a market was competitive or not".

Mr Layton said that the analysis did not include the increasing costs to retailers, which had been absorbed by the companies. Costs had risen by 21.5 per cent since the authority was formed three years ago, but power bills had only risen by 12.5 per cent.

It also did not reveal the discounts that were being offered by retailers. Some firms were offering discounts of $300, or 14 per cent of the average power bill.

Mr Layton said the consumer switching campaigns had created an environment "in which firms had to consider losing customers".

Electricity Authority chief executive Carl Hansen estimated that the direct savings for customers who had switched retailers totalled $4 million to $8 million a year, and the indirect savings created by increased competition and discounts was an estimated $16 million to $41 million.

For power price movements, go to: www.powerswitch.org.nz/power switch/price-trends/graphs