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

 

Scoop Business: Wheeler Downplays Scope For ‘Large’ Rates Fall

Reserve Bank governor Graeme Wheeler says some market commentators are predicting further declines in interest rates that would only make sense for an economy in recession, although some easing is likely to be needed to maintain New Zealand’s economic growth. More>>

ALSO:

Ruataniwha Dam: Consent Conditions Could Mean Reduced Intensity

Legal advice sought by the Hawke’s Bay Regional Council on the Ruataniwha Dam consent conditions has confirmed that farmers who sign up to take water from the dam could be required to reduce the intensity of their farming operation to meet the catchment’s strict nitrogen limit. More>>

Health And Safety: Bill Now Sees Rules Relaxed For Small Businesses

Health and safety law reform sparked by the Pike River coalmine disaster has been reported back from the industrial relations select committee with weakened requirements on small businesses to appoint health and safety representatives and committees. More>>

ALSO:

Bearing Fruit: Annual Fruit Exports Hit $2 Billion For First Time

The value of fruit exported rose 20 percent (up $330 million) for the June 2015 year when compared with the year ended June 2014. Both higher prices and a greater quantity of exports (up 9.0 percent) contributed to the overall rise. More>>

ALSO:

Interest Rates: NZ Dollar Jumps After RBNZ Trims OCR

The New Zealand dollar jumped more than half a US cent after Reserve Bank governor Graeme Wheeler cut the official cash rate by a quarter-point and said the currency needs to be lower, while dropping a reference to criteria that justified intervention. More>>

ALSO:

Drones: New 'World-Class' Framework For UAVs

The rules, which come into effect on 1 August, recognise the changing environment and create a world-class framework that accommodates ongoing development while still ensuring the safety of the public, property and other airspace users. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news