Customer Win-backs Prove Gentailers Act as a Cartel

Power-switching rules are being abused by the big five generator-retailers, who are acting to win back customers who have switched to another retailer.

The losers are the small independent retailers, and customers that are not targeted by a win-back team.

Data just released by the Electricity Authority show that up to 30% of customers switching to small retailers are persuaded to switch back again. Either they're offered a big discount to switch back, or they're threatened, sometimes incorrectly, with a big break fee.

The big retailers only make the effort to "save" their more profitable customers - bigger customers and those who always pay on time. The cost of their win-backs fall on - you guessed it - the poorer and more vulnerable customers. Their prices will rise again to fund those extra discounts.

Last year I challenged the Authority's chairman and CEO to prove they were not acting as a public cartel designed to raise prices. I said that Wikipedia defines a cartel as a formal agreement amongst competing firms to fix prices, marketing and production. 90% of all cartels succeed in raising prices.

The Authority's chiefs replied that they were not a cartel but a neutral regulator. They must now justify that in the face of continuing price rises and the struggles of small players in the market.

New Zealand's electricity market is failing, a victim of its own success. Price rises made it too easy to build new power stations. Now there's an electricity glut.

Market rules gave Transpower a property-right to big new price hikes. Now consumers are switching off - and electricity demand is falling for the first time ever. The next dry year will create a new electricity crisis, worse than the last because thermal power stations are being shut down now.

It's not enough to tweak rules to make the market a little easier for independent retailers, or vulnerable consumers. The whole basis for the electricity market has been proved wrong. It needs change from the bottom up.

Regulation must forbid the abuse of market power to raise prices, at both wholesale and retail levels. Every other country does that - only New Zealand persists with its failed experiment.

Power company share values will continue to fall until the cartel is replaced by a real regulator whose purpose is to promote the public interest. Only this can assuage today's rebellious consumers, and therefore offer companies a stable commercial environment.

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