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Power Companies banned from “win-back” offers

Tuesday, November 19, 2019
Power Companies banned from “win-back” offers

The Electricity Authority has recently proposed a 180 day ban on Electricity Companies trying to “win back” customers who switch to rival retailers.  This was a key recommendation in the government’s recent Electricity Price Review.

What does the proposed ban mean for NZ consumers, and how they shop for power?

What are win-back deals?

Under the “old system” before the proposed ban, it was fairly common for power companies to wait until a customer decided to switch to a rival, to offer them a special, cheaper deal to convince them to stay.

This meant that those of us who proactively compare power deals and switch power plan regularly were often getting a much better deal on power than the average New Zealander who was loyal to one power provider over many years.

In essence, this created a two tier power market.

  • Those who compare power plans and saved.
  • Kiwis who have never shopped around and are paying an estimated $400 million “loyalty tax” because power companies can afford to take them for granted and wait for customers to switch – or threaten to switch – before offering them a competitive price.

How will the ban on win-back deals affect me?

The Electricity Authority chief executive James Stevenson-Wallace said that banning attempts by retailers to win-back customers during the 180 period after they switched supplier would "put the pressure on retailers to fight for their customers and offer them something new and different".

In essence, Power Companies should be more motivated to ensure their customers are already getting a good deal, rather than waiting to swap.

A 180 day ban on power companies trying to win back a customer who has left, should in theory put the rival power providers on equal footing when it comes to offering competitive deals to their customers.

The policy is expected to benefit smaller independent retailers that compete against larger incumbent "gentailers" such as Meridian Energy, Mercury and Genesis.

How can I ensure I still get a good deal on power?

There is no doubt that we are likely to see a lot of changes in power plans, and the deals that power companies offer to try to entice new customers.

If you are the type of consumer who shopped around every year, and used cheaper deals as a bargaining chip to negotiate a cheaper deal with your current supplier – this could, understandably, seem like a threat to your ability to get a good deal on power.

In theory, the ban on win-back deal should lead to better deals on power for everyone, as power companies try ensure that their customers don’t change provider.

And, we are likely to see power companies offer more innovative deals and packages – for example power plans that give you perks like fuel discounts, or deals to bundle your power with other services like your internet plan.  So there are still lots of options to get a good deal.

This is a better time than ever to compare power plans and make an informed choice to take advantage of changes in the power market.

 

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