MEDIA RELEASE
Thursday 5 March 2015
Retail separation better for electricity customers
Flick Electric Co. chief executive Steve O’Connor is calling on the ‘Big Five’ gentailers to consider separating their
generation and retail businesses in the interests of customer experience and a more dynamic retail market at a major
industry conference in Auckland today.
“The generation and transmission parts of the industry do a brilliant engineering job of providing New Zealanders with a
highly-reliable, moderate-cost, low-carbon electricity supply. But electricity continues to be a low-engagement,
high-cynicism category for customers. Why?”
O’Connor believes the answer is that the electricity reforms of the 1990s allowed generators to be retailers as well.
“The unfortunate consequence is that the gentailers – which at their heart are generation focused – treat their customer
bases as a financial hedge for their production. The result is opaque pricing and a low-level of retail innovation.”
He highlights the failure of the gentailers to use the full capability of smart meters that are now installed in more
than 60% of homes. “Basically they’re just being used as automated meter readers. That’s like using your smart phone to
only make phone calls. It completely misses the point.”
O’Connor says that structural separation of the telecommunications industry shows that competition increases when
infrastructure and retailing are distinct, and the playing field is levelled in retail. “It’s not just about price, it’s
also about innovation and differentiation of products and services. Customers have more control because they’re being
given real choices.”
Currently 96% of ICPs are serviced by the gentailers despite there being 19 retailers in the market. “Given the
gentailers all fundamentally offer exactly the same thing, you just can’t say that we have a competitive,
customer-centric market.”
He says that allowing generators to own retailers was a line call in the 1990s that has not served consumers well.
“Being free of the shackles of generation allows retailers to focus purely on things that are in their customers’ very
best interests, to innovate and to create really dynamic retail businesses. Times have changed and technology has
changed, it will be interesting to see if the industry giants are willing to change and step up to the plate for
customers too.”
ENDS