Electricity companies accused of using 'confusion as a marketing tool'

Friday, 20 November 2020

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.

Unadvertised discounts offered by some electricity companies are making it harder for consumers to quickly shop around and make sure they are getting the best price for power, Consumer NZ says.

Flick Electric chief executive Steve O’Connor said the big players were using “confusion as a marketing tactic” and creating a two-tier market by offering discounts to some customers behind closed doors.

“The number one tool for the large incumbents is price confusion,” he said.

”You may have two houses next door to each other, with the same power company, the same number of residents and same power usage, but with different bills and this is simply wrong and unfair.”

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Majority state-owned generator Genesis Energy has been offering a “special” 10 per cent discount to some customers through its call centre and through at least one price comparison website.

That offer does not appear to be clearly advertised on its own website, however.

Discounts, including some not obviously advertised on Genesis’s website, can reduce power bills by 19 per cent or more.

A spot check on one Meridian bill by Stuff showed it was charging an existing customer 11 per cent more than the prices it was quoting customers through comparison site SwitchMe.

Meridian confirmed the SwitchMe quote did not take into account a promotional $200 sign-up credit it is offering to new customers, which might otherwise have largely explained the price discrepancy.

Rather, the lower price reflected a cheaper per-kilowatt-hour energy charge than the “standard pricing” on its website which closely matched the prices charged on the customer bill.

“The SwitchMe rates offered are slightly cheaper but you can switch to those rates at any point as we don’t have break fees on our contracts,” Meridian spokeswoman Polly Atkins said.

Genesis has not said who it is offering its 10 per cent special discount to or in what circumstances.

One Genesis bill confirmed various discounts could reduce a combined electricity and gas bill by 19 per cent.

Genesis Energy declined to say who it was offering its special 10 per cent discount to, or under what circumstances.

Spokesman Allan Swann said it set out rewards and discounts on its website.

However, its website only showed available discounts of up to 6 per cent for paying by direct debit with paper bills on a one-year term, and a further 5 per cent discount for bundling gas and electricity.

Meridian Energy has been undercutting its standard pricing in an offer on comparison site SwitchMe.

“Same as any other company working in any other industry, other rewards and discounts may apply throughout the year, such as during marketing promotions,” Swann said.

“It is also worth noting that there is a distinct difference between discounts on our plans for our existing customers, versus any discretionary ‘sign-up’ discounts offered by our sales teams to non-Genesis customers during the acquisition process,” he said.

Despite voicing concerns about pricing practices, Flick was last week also offering a $100 sign-up credit through SwitchMe that did not appear to be advertised on its own website.

Spokeswoman Georgina Ball said it was “calling ourselves out as well to help consumers understand what is happening in the market”.

“We are playing the game we would prefer not to be playing. We have found the only way we can effectively compete is to play that game as well to some extent.”

She said that, in Flick’s defence, its promotional offers had no catches.

“There is also no big discounting in every bill, which can obscure everyday pricing further.”

Flick Electric chief executive Steve O'Connor says big power companies are using confusion as a marketing tactic but the company says it is “calling itself out” too, as it has been forced to play a game it does not want to play.

Consumer NZ operates Powerswitch, another website that is designed to help consumers compare plans but acknowledged its information might not be comprehensive.

Research director Jessica Wilson said a survey it conducted showed only 19 per cent of people thought it was “very easy” to compare prices and contract terms.

“That is only getting more complicated because of ‘bundling’ offers, with electricity companies selling broadband and vice versa.”

Comparisons were further complicated if power companies were offering unadvertised discounts to sign up or retain customers, she said.

“We think companies should be offering the best prices in the market and not offering these sweetheart deals.”

O’Connor indicated it might not be in the interests of all power companies to encourage transparency.

“The incumbents are thinking: if we want to ultimately hold high prices for the vast majority of our customers who are disengaged and don’t switch but also want to compete for new customers, how do we do that without alerting all the existing customers they could be better off?

“Theresa Gattung famously talked about telcos using confusion as their chief marketing tool. It is exactly what is happening in the electricity market.”

Cameron Burrows, chief executive of the Electricity Retailers Association, suggested there was a limit to how clear pricing could be under the current market structure.

Despite its name, the association is mostly funded by power companies that also generate electricity rather than independent retailers.

The Electricity Price Review ordered by the Government did have “a decent look” at whether retailers should publish headline prices for different types of customer on their websites “and they did not progress that because there is a huge amount of complexity”, Burrows said.

“We have got about 30 electricity retailers each dealing with about 30 lines companies, each of which have multiple tariffs.”

He was not immediately aware if any of the association’s members had policies on providing price transparency.

“We have got a lot of different New Zealanders who have got different needs with what they want and it is difficult to have a particular plan that meets that.

“We recommend everyone gives their power company a call sporadically and has a chat about their situation,” he said.