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Contact posts biggest customer loss in seven years

Thursday 13th September 2018

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Contact Energy posted its biggest customer loss in seven years last month after its contract with a major commercial client came to an end.

The firm, which has been letting commercial and industrial customers go rather than compete to keep them at low margins, said it lost about 4,000 accounts in August. That left it supplying about 410,500 power customers, down from 414,500 at the end of July and 423,500 in August last year, according to the firm’s latest monthly operating report.

Contact says about 2,500 of the accounts lost in August related to the single commercial customer. It opted not to re-tender for the supply last year due to the low margins and high cost to serve the business.

The other losses reflect the high level of competition in the market, particularly from new entrant players, Contact said in an email.

“We expect customer numbers to reverse positively over time as our refreshed brand and new products continue to gather momentum with customers.”

Contact wouldn’t name its former customer.

Contact, the country’s second-largest power and gas retailer, has been working hard to lower its retail costs and better target those customers most valuable to it.

The Wellington-based company partnered with AA Smartfuels last year to provide fuel discounts and is offering broadband to widen its pool of products and reduce the willingness of customers to switch away. It is more actively promoting weekly and fortnightly payment options and this month is offering a free Amazon Echo for customers signing up on two-year fixed-rate deals.

While the number of Contact’s power accounts is down about 3 percent the past year, mass-market sales during the past two months were down only 1.3 percent at 765 GWh. Total power and gas sales for the same period were down about 2 percent at 1,505 GWh, with increased gas volumes almost offsetting reduced power sales to industrial and commercial customers.

Contact shares were recently up 3 cents at $5.75. The stock jumped 20 cents on Tuesday when the first report of a government review of the power sector found no evidence of excess profits among retailers and distributors.

All the major power retailers are suffering as a growing number of low-cost, niche retailers enter the market. Some of those also have major backers or relationships giving them access to existing customer-bases.

Contact’s reports show it has shed about 7,000 power accounts since June. It shed about 2,060 accounts in July – the biggest loss of any retailer that month, according to Electricity Authority data.

The biggest gainer that month was Electric Kiwi, which added almost 2,000 accounts and overtook Flick Electric as the market’s leading newcomer. Electric Kiwi has amassed almost 27,000 customers in just over three years.

Other notable gainers in July were Meridian Energy – the only major retailer to add customers – energyclubnz, part-owned by media company Stuff, and Vocus, which offers combined power and broadband deals through its Slingshot arm.

Energyclub has gained about 2,500 customers in a little over a year. Vocus added almost 16,000 in about two years.


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