The Reason Power Is So Expensive In New Zealand

By Gavin Male, CEO of NZ Compare

With electricity prices rising 20% faster than inflation, New Zealanders need to shop around. Why? Because consumers who switch often force electricity retailers to become more competitive, improve their power deals and reduce their pricing.

Improving the power switching market in New Zealand is essential to empower consumers, foster healthy competition, and ensure fair pricing in the energy market. Unfortunately, the current power switching system in New Zealand falls short of providing an effective platform for consumers to make informed choices.

Powerswitch, owned and operated by Consumer NZ and majority funded by the Electricity Authority (EA), has faced criticism for its limitations and lack of transparency, namely:

• Incomplete Information: Consumers often struggle to access complete and accurate information about bundle offers and time-of-use plans, making it difficult to compare pricing from different providers effectively.
• Limited Options: Powerswitch's platform features an incomplete set of power providers, restricting consumers' choices and potentially excluding better options.
• Lack of Transparency: Powerswitch's reliance on charging switching fees to retailers creates a biased system, as only providers willing to, or capable of, paying the fees are listed. This effectively freezes out smaller, cheaper power retailers without the margins to compete. It is an approach that undermines fair competition, restricts new entrants to the market and hinders consumers' ability to explore all available offers.
• Low Switching Rates: Despite years of significant government funding of Powerswitch and changes to legislation, the switching rate is still unforgivingly low. Only 10,874* people used the site to switch providers last year!

The need for improvement

So, what can be done to effectively improve competition and slow down energy price growth for all New Zealanders?

To foster a more consumer-centric power market, we need to shift the power (excuse the pun) from the big electricity retailers and into the hands of the people. I realise that there are several aspects to solving this issue as a whole – but the main takeaway is that current efforts to curb retail power profitability have not worked. At the very least, companies should be compelled to provide up-to-date information on pricing, deals and bundles, which can include natural gas and broadband, to a central advocacy authority like NZ Compare or Powerswitch.

I’ll let someone more experienced than me talk about reorganising government authorities tasked with keeping energy retailers in check, and focus on what I do best – equipping consumers with fully informed choices.

I see the following list as the bare essentials needed for an effective consumer choice platform:

Enhanced Consumer Tools

Develop a robust and user-friendly system that provides complete and accurate information about power bills, empowers consumers to compare prices, and helps them find the lowest available rates.

Comprehensive Coverage

Expand the range of plans and providers included in the comparison platform to ensure consumers have access to all available options and encourage healthy competition.

Transparent Pricing and Data Sharing

Enforce compliance among energy retailers, mandating the provision of comprehensive data about their offerings, pricing structures, and terms.

Elimination of Switching Fees

Move away from the current system of charging switching fees to power providers. Instead, ensure all providers have an equal opportunity to be listed on the comparison platform .

Simplified Switching

Support vulnerable consumers by providing telephone support through a dedicated call centre.

Currently Powerswitch is failing at several of these areas in spite of raking in over $2m a year in revenue, largely from taxpayer funding and switching fees. Operating a similar website myself, Power Compare, I know for a fact that they could be doing so much more for the Kiwi consumer.

Competition has been valued over monopoly for centuries – specifically because it results in better products and services for the consumer. And I’m sure I’m not the only one who wants my tax to go to the best comparison provider possible.

Compel energy companies to hand over their pricing information and fund an organisation with a track record of consumer engagement, advocacy, and effectiveness to show Kiwis how to save money. It’s that simple, it’s also the best way to protect Kiwis from energy hardship – and that’s what really matters most.

*Consumer NZ 2022 Annual Report

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