In theory, we have a free market in which electricity customers can switch suppliers as they like. In practice however, very few do as working out the best deals between suppliers is hard, due to confusing pricing methods and loyalty schemes.
That's what new electricity retailer Powershop in Wellington is aiming to change. The brainchild of Ari Sargent, an electricity industry veteran, Powershop lets customers pick and choose which electricity supplier they wish to be with, and shop around for the best deal.
Launching formally this week, Powershop is a Meridian Energy project, run by Sargent and a small team. Presently, only Meridian is represented on the site, and the FlowerPower and GreenPower providers that are its wholesale customers. However, Sargent claims discussions with other providers are going well and he's hopeful they'll join Powershop soon.
Sargent says Powershop aims to "engage with customers and give them control of their energy purchases." Shopping for power is done on a website, where customers can buy electricity either per unit or in bigger packs of units, as they need them.
Payment is via credit card, internet banking, or direct debit, and can be paid in advance, or post-paid as with traditional electricity suppliers.
This reporter was asked last year to test drive Powershop in November, and has found the service pretty good overall. Shifting from Mercury was a little bit bureaucratic on their part, but once Powershop was in charge, it was easy enough to buy electricity through the website.
What does complicate things are the byzantine charging schemes that traditional electricity retailers use, with daily fixed charges and low/medium/high usage pricing. Add to this loyalty discounts, and it becomes really quite tricky for customers to work out who actually offers the best deal.
In comparison, Powershop electricity is bought on a simple per-unit basis, with no fixed charges or loyalty discounts. One unit equals one kilowatt hour of usage, and you are encouraged to enter your meter readings often on the Powershop site to ensure the billing is correct.
Sargent says he is aware of the confusion electricity customers face when shopping around for the best deal. He says Powershop is putting up tools online that'll cut through the complex pricing schemes used by the power suppliers.
Another issue is locality: depending on where you are in the country, your electricity pricing will differ and the number of providers will vary.
Is Powershop a better deal for customers? Maybe; I saved between $12 to $15 a month with Powershop compared to Mercury Energy, but wished there were more competing providers to choose from.
Sargent says Powershop intends to save most people money over longer periods of time with low-cost providers, rather than one that might be cheapest just for a short while.
Lance Wiggs, who runs FlowerPower and GreenPower, on the other hand says introducing competition and shaking up the staid electricity industry is the key reason why he got involved with Powershop.
According to Wiggs, "once the other providers start losing customers to Powershop and critical mass is reached, they will have come to the party." The goal for Powershop according to Wiggs is 250,000 customers, after which he hopes to be able to buy wholesale electricity from a range of providers.