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Contact to improve access to prompt-payment discounts

Monday 13th August 2018

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New products being developed by Contact Energy will improve benefits to customers and make it harder for them to miss out on prompt-payment discounts, chief executive Dennis Barnes says.

The company has restructured its retail operation to speed up its adoption of new technologies and automation that will help lower costs for mass-market, mostly residential consumers.

Barnes told analysts and journalists today that to be successful among the major energy retailers Contact must have the lowest cost to serve, the best customer experience, and be able to bring new services to market quickly and consistently.

Customers are benefitting, with tough retail competition lowering costs. But the firm plans new products that will help them pay accounts on time so that they don’t miss out on the prompt-payment discounts available, he said.

“Watch this space for products which will make that largely impossible. Customers should in the very near term, be fully able to access the prompt payment discount,” he said during a presentation in Wellington.

Contact is “absolutely focused” on making sure that customers can benefit fully from competition and discounts that are available to them, he said.

“The next products we announce over the next few weeks will be reasonably material in that regard.”

Contact, the country’s second-largest retailer of electricity and gas, is simplifying its retailing so that more of its processes can be automated.

The firm last month announced the sale of its LPG distribution arm as part of that strategy and today said its commercial and industrial customer base will now be folded into its generation arm to further improve the focus in the two distinct markets.

The government is reviewing the performance of the electricity sector. It has appointed a panel of experts to report back by April, particularly on whether pricing is fair around the country and for different industry and community segments.

A similar review undertaken by the Australian Competition and Consumer Commission made more than 50 recommendations, including the introduction of a default retail tariff and stricter controls on the types of discounts that can be offered and how they can be advertised.

The UK has also introduced a default tariff for pre-payment plans and will later this year introduce another for standard variable tariffs.  

Barnes said the company has been engaging with the panel and its advisers but doesn’t have any firm ideas on the issues it is likely to raise in its first paper expected next month.

He was wary of drawing comparisons with Australia or the UK, but said the panel had “sensibly” looked at prompt-payment discounts. Critics have argued the discounts can become – in effect – very high penalties for those consumers short of funds or not used to internet banking.

Barnes observed that the genesis of the inquiry had been around concerns that customers in provincial regions of New Zealand were paying higher prices than in the urban centres.

He said the panel’s work to date has thrown up some “quite useful” insights into the role that population density plays, the cost of getting power to the regions, and the final cost per megawatt-hour consumed.

The competitive parts of the industry appear to be performing well, he said.

“There’s actually quite a tight range relative to the cost of delivery range.”

Contact’s presentation cited government data showing average real residential spending on electricity had fallen to $2,031 in the March year – down more than 4 percent since 2013. Lines charges had increased about 4 percent the same time, while energy and other costs had fallen about 10 percent.

Ministry of Business, Innovation and Employment data shows that average household consumption has also fallen about 7 percent over the same period and now averages about 6,997 kilowatt-hours.


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