Electricity Authority seeks protection for small retailers   22 Jul 2014

Article - BusinessDesk

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)

Add a comment

News

Hilary Timmins' Award-Winning UK Documentary Series To Inspire NZ Students

29 Jun 2020 Education
Dream Catchers, produced and directed by Hilary Timmins, celebrates the success stories of more than thirty inspirational New... more

New Zealand reaffirms support for Flight MH17 judicial process

7 Mar 2020 News By Rt HON WINSTON PETERS
Ahead of the start of the criminal trial in the Netherlands on 9 March, Foreign Minister Winston Peters has reaffirmed the need to... more

Business

NZ Government's Economic package to fight COVID-19

17 Mar 2020 Business News By RT HON JACINDA ARDERN
The Coalition Government has launched the most significant peace-time economic plan in modern New Zealand history to cushion the... more

NZ Government announces aviation relief package

19 Mar 2020 Business News By Hon Phil Twyford
Transport Minister Phil Twyford today outlined the first tranche of the $600 million aviation sector relief package announced earlier... more

Living

Diversity was Key at New Zealand Trade Tasting in London

6 Jun 2022 Food & Wine
New Zealand Winegrowers Annual Trade Tasting was recently held in London, on Wednesday 4 May, in Lindley Hall. It was the first... more

Kiwi author stuns Behind the Butterfly Gate

12 Jan 2022 Arts By Charlotte Everett
Hidden behind the Butterfly Gate is where the secret has been kept for 76 years...  New Zealand writer Merryn Corcoran’s... more

Property

Fairer rules for tenants and landlords

17 Nov 2019 Property By Minister Kris Faafoi
17 NOVEMBER 2019 The Government has delivered on its promise to the over one million New Zealanders who now rent to make it fairer... more

New Zealand Government will not implement a Capital Gains Tax

17 Apr 2019 Property By RT HON JACINDA ARDERN
The Coalition Government will not proceed with the Tax Working Group’s recommendation for a capital gains tax, Jacinda Ardern... more

Migration

Boosting border security with electronic travel authority – now over 500,000 issued

19 Nov 2019 Migration By Hon Iain Lees-Galloway
19 NOVEMBER 2019 We’ve improved border security with the NZeTA, New Zealand Electronic Travel Authority, which helps us to... more

Christchurch reinstated as refugee settlement location

18 Aug 2018 Migration
18 AUGUST 2018 HON IAIN LEES-GALLOWAY The announcement that Christchurch can once again be a settlement location for refugees... more

Travel

Gallipoli Anzac Day services cancelled

19 Mar 2020 Travel & Tourism By RT HON JACINDA ARDERN
The New Zealand and Australian Governments have announced this year’s joint Anzac Day services at Gallipoli will be cancelled... more

New Zealanders advised not to travel overseas

19 Mar 2020 Travel & Tourism
New Zealanders advised not to travel overseas more

Sport

The Skipper's Diary: Sir Richard Hadlee honouring his father and NZ's Forty-Niners

27 Oct 2019 Cricket By Charlotte Everett
NZNewsUK London Editor Charlotte Everett spoke to Sir Richard Hadlee about why he’s chosen to publish his father’s... more

PREVIEW: All Blacks v England semi-final

26 Oct 2019 Rugby
The two most convincing quarterfinals winners are set to square off in a semifinal showdown for the ages when the All Blacks meet old... more

Columns

Gordon Campbell on the Gareth Morgan crusade

11 Nov 2016 Opinion
Gordon Campbell on the Gareth Morgan crusade First published on Werewolf The ghastly likes of Marine Le Pen in France and Geert ... more

Gordon Campbell on the US election outcome

10 Nov 2016 Opinion
Column - Gordon Campbell   Gordon Campbell on the US election outcome Well um.. on the bright side, there (probably)... more

Kiwi Success

Congratulations to Loder Cup winner

26 Sep 2018 People By Hon Eugenie Sage
25 SEPTEMBER 2018 The Loder Cup, one of New Zealand’s oldest conservation awards, has been awarded to Robert McGowan for 2018... more

Appointments to New Zealand National Commission for UNESCO

16 Aug 2018 Appointments
16 AUGUST 2018Appointments to New Zealand National Commission for UNESCO HON JENNY SALESA Associate Education Minister Jenny Salesa is... more

Recruitment

Historic pay equity settlement for education support workers

14 Aug 2018 Recruitment By RT HON JACINDA ARDERN
14 AUGUST 2018Historic pay equity settlement for education support workers RT HON JACINDA ARDERN HON CHRIS HIPKINS Prime Minister The... more

Historic pay equity settlement for education support workers

22 Aug 2018 Recruitment By RT HON JACINDA ARDERN
14 AUGUST 2018Historic pay equity settlement for education support workers RT HON JACINDA ARDERN HON CHRIS HIPKINS Prime Minister The... more