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NZ petrol, power companies least competitive, customers say

Thursday 13th October 2011 1 Comment

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Petrol stations and power companies are perceived as the least competitive providers of utility-type services, with both residential and business customers giving much higher ratings for competition between phone companies and banks.

Benchmark research for the newly formed Electricity Authority finds major electricity users and consumer advocates are more sceptical than residential customers, with only “28 percent of major users and consumer-group representatives stating competition in the retail market is more than ‘just adequate’, compared with 36 percent of residential users.”

Both groups were roughly equally sceptical about whether current levels of competition were ensuring “prices consumers pay only rise in line with costs to the electricity companies.” Well over half of residential and major users did not believe this.

The survey results have been published just as the numbers of people seeking to switch power companies thanks to the EA’s “What’s My Number?” campaign is falling after a three month advertising blitz.

The only major differences between residential and major users related to the day to day reliability of electricity supply, where only around 5 percent of big consumers were concerned, compared with around 20 percent of householders.

Neither group showed majority support for the proposition that the electricity market provides the right mix of power stations to meet growing demand.

While the wholesale spot market for electricity was seen by a slim majority to be producing prices consistent with a competitive market.

“The highest level of disagreement was with the statement concerning prices in the retail market, with almost half disagreeing that they ‘reflect the outcomes expected in a workably competitive market”,” the survey found.

“The view that the retail market is uncompetitive most likely arises from a long period of rising electricity prices. The rising pattern of prices has, at least in part, been driven by generation economics, where the cheapest fuel sources are exploited first.

“This trend is likely to continue unless disrupted by a large gas discovery or technological developments reducing the cost of supply,” the EA said in commentary on the survey.

Major users were also disappointed with the level of competitiveness in the market for electricity hedge contracts, particularly in the recently established futures market being run on the ASX platform, where more than 30 percent of respondents expressed dissatisfaction, compared to around 17 percent support.

With a string of natural and man-made disasters striking the country, the EA also heard strong feedback from electricity consumers to review crisis response capacity.

A consultation paper on further changes to electricity market arrangements, intended to improve its competitiveness, is due next month.

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Comments from our readers

On 14 October 2011 at 8:16 am Ralph Matthes said:
This is a good piece of research by the Electricity Authority on consumer and industry perceptions. This matters because consumer and supplier confidence is important in their decision making. But it's not the only factor that counts. The Electricity Authority is also putting in place metrics to assess efficiency and competition. It's the mix of those factual trends and changes in perception that policy makers will need to assess in the future as further improvemnts to the market are considered.
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