Pricey pre-paid power

This week in Parliament I questioned Energy Minister Simon Bridges about the high prices facing some of our most vulnerable families who use pre-paid electricity.

The Government is fond of telling people to shop around to get a better power deal – in fact, that’s pretty much their only policy to help households lower their power bills.

But many pre-paid customers can’t shop around, because in seven regions of New Zealand there is only one pre-paid electricity retailer. If you live in rural Northland, the Hawke’s Bay, the central North Island, Nelson, Tasman, rural Canterbury, or the West Coast, the pre-paid market is a monopoly. There’s no competition. In many other regions there are just two pre-paid retailers.

Many pre-paid electricity customers are getting ripped off.

This lack of competition means many pre-paid electricity customers are getting ripped off. Nationwide, it’s 14% more expensive on average to buy power through a pre-paid plan. Compared to the cheapest standard post-paid plan, it is 25% more expensive for an average family household to be on a pre-paid plan in Auckland, 24% more expensive in Dunedin, 20% more expensive in Northland, and 18% more expensive in Christchurch.

Absurdly, when I challenged Simon Bridges about this, he said he thought there was “an exceptionally competitive market” and that when it comes to pricing, “pre-paid is competitive with post-paid.” He’s just plain wrong.

Many pre-paid electricity customers choose a pre-paid plan because they have low incomes and it helps them budget. Others are forced onto a pre-paid plan by their electricity supplier because they’ve had trouble paying bills in the past.

58% of pre-paid electricity households with children have run out of credit and gone without power in the space of a single year.

58% of pre-paid electricity households with children have run out of credit and gone without power in the space of a single year, according to a study in the New Zealand Medical Journal.

With the winter chills approaching, these families face the very real risk of going cold this winter and that’s not good for their kids’ health.

I challenged the Minister to develop an industry code of conduct for the pre-paid market, to make sure families are getting a fair deal. This code of conduct could ensure fair pricing, do a full inquiry into whether there’s sufficient competition in the market, regulate when and how power can be switched off, and make sure it’s easy for households to monitor their power usage and top up their account when needed.

There are some pre-paid power retailers in some regions that are doing a great job, providing price-competitive power, and doing right by their customers. But unfortunately this doesn’t apply to all retailers in all parts of the country.

If the National Government won’t step in to help families with pre-paid power who are getting treated poorly and charged too much, then over the coming months I’ll be putting pressure directly on the industry to raise its game.

@GarethMP

07.05.2015: Gareth Hughes pre-paid power question to Simon Bridges.

 

 

5 thoughts on “Pricey pre-paid power

  1. DBuckley, this is a blog of a political party (though some of us are a bit dismayed by the condition of its presentation these days it is still a “blog” – sorta)

    We do not run retail or wholesale power companies.

    It is not our job and suggesting that that is what Gareth, who could be the next co-leader of the party, should be doing instead of what he IS doing, is just a bit false and misleading.

    The problem he highlights is absolutely real and warrants intervention, because this IS a small independent nation with very little profit to be had in supplying such alternatives for the poor. Why else do YOU think that this is happening?

    shame on you.

  2. Apologies for brief threadjack…

    http://www.smh.com.au/environment/weather/world-headed-for-an-el-nino-and-it-could-be-a-big-one-scientists-say-20150508-ggw8bo.html

    Niwa tells us:
    In El Niño years, New Zealand tends to experience stronger or more frequent winds from the west in summer, leading to drought in east coast areas and more rain in the west. In winter, the winds tend to be more from the south, bringing colder conditions to both the land and the surrounding ocean. In spring and autumn southwesterlies tend to be stronger or more frequent, providing a mix of the summer and winter effects.

    Something to be considered in our efforts this year.

    Along with, “why are we trying to kill this blog off by limiting inputs?”

  3. Rather then whining about the state of prepay retail, Gareth, get a few people together, find some investment, take a sabbatical from the Green Party, and set up a retailer. Flick did it, so it isn’t impossible. Make a difference.

    And Hello – prepay mobile phone is more expensive than contract post-pay. Pre-pay for most things is more expensive. A builder with an account at Mitre 10 will pay less for a chunk of 4×2 then a cash buyer will pay.

  4. Of course, when selling these assets to the vultures there was no way the profit motive was going to add to unfair pricing, lets get rid of the vultures presently in Government.

  5. Thanks for asking about this. It’s odd the you pay more when you pay in advanced, it must be the only business model that charges more for paying in advanced for goods.

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