Death knell for power companies' customer 'win-back' tactics

Tuesday 5th November 2019

Proposed new regulations will effectively kill off electricity companies' practice of wooing back departing customers with generous 'win-back' offers.

The Electricity Authority is consulting on a proposed 180-day ban on "retailer-initiated saves and win-backs" after a customer chooses to switch retailer.

The move is a direct response to the government's Electricity Pricing Review process, which broadly endorsed existing wholesale and retail electricity market arrangements but found areas where competition was being stifled. Its recommendation that customer saves and win-backs be banned was its strongest finding in the report on retail market performance and the only area where it made a recommendation for an immediate moratorium, which the government supported.

Retailers are also abandoning the use of so-called 'prompt payment discounts' - which can also be seen as a fine for late payment - as a result of the EPR's recommendations.

The authority said it expects the ban on trying to win a customer back "will increase retail competition and innovation and give consumers more information to help them choose a retailer that best suits them.

“This is about setting a foundation so all retailers – large and small, old and new – have equal opportunity to compete for customers," said EA chief executive James Stevenson-Wallace. "This proposal puts the pressure on retailers to fight for their customers and offer them something new and different."

It proposes a ban, with a review of the impacts after two years.

Smaller retailers complained that the deep-pocketed 'big five' power companies - Contact, Genesis, Mercury, Meridian and Trustpower - could make highly attractive offers to departing customers to get them to stay that were not available to the company's loyal customers or matchable by small-fry competitors.

Some of those smaller retailers are facing threats to their business models after thriving in a prolonged period of low wholesale electricity prices earlier this decade.

Petrol station owner Z Energy, for example, wrote down the value of its 70 percent investment last year in new-comer Flick Electric, from $46 million to $11 million in its half-year accounts last week.

(BusinessDesk)

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