Electricity firms given six months to change payment rules before Government steps in

Thursday, 7 November 2019

The Government said the Electricity Price Review would benefit consumers but, a year on, doubts remain that all power companies have adopted the spirit of its recommendations.

Electricity companies have been given six months to reduce the penalties on customers who pay their bills late, before the Government decides whether it needs to step in.

Energy Minister Megan Woods said last month that 'prompt payment discounts' offered by power companies amounted to 'hidden late payment penalties' for those who didn't get them.

Woods has now written an 'open letter' to power companies encouraging them to make changes, before she 'proceeds down the track' of regulation.

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The Electricity Price Review released by Woods last month estimated that consumers would be $45 million a year better off if power companies normalised pricing at the discounted level and only charged late-payers 'reasonable fees' for the costs of chasing late payments.

The Government is understood not to be convinced by the concern that electricity companies might be more likely to average out their pricing at somewhere between the discounted and non-discounted level over time.

The Government believes consumers will come out significantly on top if electricity companies stop charging markedly different prices to those who pay their bills on time, and those who don't.

'In six months' time I will reconsider the review's recommendation in light of any developments in prompt payment discounts I observe in the market,' Woods' open letter said.

Consumer NZ has backed the call for change, saying prompt payment discounts could penalise late-payers by as much as 20 per cent.

Meridian stopped offering special discounts in October, saying that it was instead extending the 'discounted' price to all customers.

Its chief executive, Neal Barclay, agreed the special pricing was 'unfair to the poor'.

Electricity Retailers' Association chief executive Cameron Burrows said the Government had set 'a clear direction of travel' on prompt payment discounts and it would be working with retailers to help implement that.

'Some retailers have already discontinued prompt payment discounts, and many offer plans that don't include a prompt payment discount,' he said.

The Electricity Authority began moving to implement another recommendation of the Government's electricity review on Tuesday, proposing a 180-day ban on power companies attempting to 'win back' customers who had switched to a rival supplier.

The Government has endorsed a further potentially more controversial recommendation of the Electricity Price Review that would remove the requirement for electricity companies to offer tariffs with low-fixed daily charges and higher kilowatt-hour rates.

Those plans are structured to advantage consumers who use less than 800KWh of power a year.