Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Electricity Authority seeks protection for small retailers

Electricity Authority seeks protection for small retailers

By Pattrick Smellie

July 22 (BusinessDesk) - Power companies face new restrictions on the widespread practice of "saving" and "winning back" customers who've decided to switch to another retailer for a more competitive offer, under new rules the Electricity Authority has released for public consultation.

The issue is particularly acute for small retailers trying to build a new customer base. As many as 10 percent of the 385,000 successful attempts in 2013 to get a customer to switch from one power company to another was reversed as losing retailers target special offers to encourage valued customers not to leave.

That is harming electricity retail market competition by making customer acquisition campaigns more expensive and, where only the most valuable customers are "cherry-picked" for saves, such campaigns could be unprofitable, a discussion document from the industry regulator says.

Industry figures show smaller retailers suffer most from "saves" and "early win-backs" and that one in particular, Pulse Utilities, has been losing 20 percent of its new customers to these practices, which often see customers offered inducements of between $150 and $300 not to switch retailer.

"For small and new entrant retailers, saves and early win-backs present a barrier to entry and expansion," the EA says. "The effect on profitability is greater for such retailers as the costs of an acquisition campaign have to be spread across a smaller (or non-existent) customer base."

To counter the problem, the EA is proposing to allow "retailers that are traders" to choose to be protected from both practices within the 10 day switching period or for up to 10 days after a switch has occurred.

"Saves are not possible in most markets, and are disallowed in some of the markets where they are possible," the EA notes.

Win-back offers would be allowed from 10 days after the switch had occurred. Retailers that chose to be protected would be bound by the same prohibitions if their own customers switched to competitors.

"The authority considers that the proposal is for the long term benefit of customers," the discussion paper says, arguing that the loss of save offers "would be outweighed by broader competitive effects" including increased marketing activity by acquiring retailers since they would make better returns than at present on the cost of customer acquisition campaigns.

It was also likely that retailers would increase activity to keep customers before switches were initiated, "making it more likely that a customer would receive an improved offer from their current retailer."

The paper notes that save and winback activity is not applied to all departing customers, but generally only to those who are known to be profitable, credit-worthy and loyal. Low-value customers or those with a poor credit record were less likely to be discouraged from switching.

Submissions on the proposed changes are sought by August 5.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

BusinessDesk: SkyCity Lifts Minimum Convention Centre Investment To $430M

SkyCity Entertainment Group, the casino operator, has lifted the minimum it will invest in the Auckland International Convention Centre to $430 million and said total costs including land may be $450 million to $470 million. More>>

Statistics: Drop In Dairy Prices Leads Fall In Exports

Total goods exports fell $240 million (5.5 percent) to $4.2 billion in April 2015 compared with April 2014, Statistics New Zealand said today. More>>

BusinessDesk: APN's NZME Sees Future In Paywalls, Growth In Digital Sales

APN News & Media has touted a single newsroom concept for its NZME unit in New Zealand, similar to what Germany's Die Welt uses, saying an 'integrated sales proposition' is helping it win market share, including ... More>>

Labour Party: Global Milk Prices Now Lowest In 6 Years

The latest fall in the global dairy price has brought it to the lowest level in six years and shows there must be meaningful action in tomorrow’s Budget to diversify the economy, says Labour’s Finance spokesperson Grant Robertson. “Dairy prices ... More>>

BusinessDesk: NZ Inflation Expectations Creep Higher In June Survey

May 19 (BusinessDesk) - New Zealand businesses lifted their expectations for inflation over the next two years, sapping any immediate pressure on the Reserve Bank to cut interest rates, and prompting the kiwi dollar to jump higher. More>>

BusinessDesk: Lower Fuel Costs Drive Down NZ Producer Input, Output Prices

May 19 - Producer input and output prices fell in the first quarter, mainly reflecting lower fuel costs and weakness in prices of meat and dairy products. More>>


Media: Fairfax Media NZ Announces Senior Editorial Team

Fairfax Media New Zealand has today confirmed its new editorial leadership team, as part of a transformation of its newsrooms aimed at enhancing local and national journalism across digital and print. More>>

Science: Flavonoids Reduce Cold And Cough Risk

Flavonoids reduce cold and cough risk Research from the University of Auckland shows eating flavonoids – found in green tea, apples, blueberries, cocoa, red wine and onions – can significantly reduce the risk of catching colds and coughs. The research, ... More>>

BusinessDesk: RBNZ House Alert Speech The Catalyst For Government Action

Prime Minister John Key all but conceded that pressure from the Reserve Bank of New Zealand for concerted action on rampant Auckland house prices was one of the main catalysts for the government's weekend announcements about tightly ... More>>

BusinessDesk: How To Fall Foul Of The New Housing Tax Rules: Tips From IRD

Just because you rented out your investment property doesn't absolve you from paying tax, says the Inland Revenue Department in a summary of commonly made mistakes by non-professional property investors when it comes to their tax liability.More>>

Legal: Superdiversity Law, Policy And Business Stocktake Announced

Mai Chen, Managing Partner at Chen Palmer New Zealand Public and Employment Law Specialists and Adjunct Professor of Law at the University of Auckland, today announced the establishment ... More>>

Housing: More House Price Gains Expected

House price expectations remain high, with a net 56% of respondents expecting house prices will increase. Fears of higher interest rates are fading, consistent with the RBNZ’s signals this year. Affordability and a lack of houses for ... More>>

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news