NZ consumers want more than just price from electricity retailers

New Zealand’s electricity retail market is full of opportunities as consumers search for fair prices and innovative services.
Published: Tue 22 Nov 2016

New Zealand customers are starting to see the real value in services offered by their electricity retailers, says the Electricity Retailers Association of New Zealand (ERANZ). According to ERANZ Chief Executive Jenny Cameron, while customers do like a fair price, customers are also beginning to see the value in services offered by the various different retail brands.

It is these new services that are setting suppliers apart and customers are taking notice, she adds.

Retail competition drives innovation

In response to this customer interest, there has been a growth in new retail brands and in offerings from existing brands. Says Cameron: “Stating that electricity is only a commodity and focusing singularly on price is a narrow view of the potential of the electricity retail market.”

She explains that competition drives more than just a reduction in price-it enhances services, and this is exactly what is occurring in the New Zealand electricity retail market. “Customers are making choices based on more than just price all the time, and they may choose to stay with, or change, retailer based on those non-price factors – such as high-quality customer service, tailored personalised packages, high level of transparency and technology, ability to offset carbon emissions, packages that put more electric vehicles on our roads, or just the fact that the retailer has a great brand with a great advertisement that they like.”

A good example of this is Meridian’s advertisement that it has a smaller "carbon footprint". Neal Barclay, Meridian's general manager of retail, says customers want more than just the best price. "Savvy customers often value other aspects including service and our position as a renewable electricity generator – this is all part of a competitive retail market. All electricity retailers are not the same and focusing on price only is myopic."

He adds: “We also know that customers really value having the opportunity to take up things like fixed-price contracts that give certainty over household costs – advice that has been given to us by budgeting advisers – or loyalty innovations such as Airpoints and FlyBuys. They all add up to many compelling reasons why customers choose the companies they do.”

Electricity is all the same

But, the Electricity Authority has warned customers against “empty promises.”  Authority chief executive Carl Hansen says electricity remains a commodity and that customers should not be tempted by an electricity company’s claim to be more environmentally friendly or that it offers better power supply security.

He explains: “All electricity is exactly the same. There are 31 retail electricity brands in the market. Just because the brand has been around longer, doesn't mean electricity supply will be more reliable." Hansen said it was a myth that some retailers could provide their customers with more renewable electricity. "It's all purchased from a pool and how renewable it is at any time simply depends on what generators are operating at the time."

Electricity Authority research also showed 31% of consumers weren't willing to switch electricity retailers unless they could save $250 or more a year.

Hansen said that meant some were missing out. "It takes only two minutes to check if you are on the best electricity deal on and the estimated average saving available is $175. Switching electricity retailer is incredibly simple – it's not at all like the complex and time-consuming processes in some other utilities. In electricity, the newly chosen retailer takes care of all the arrangements."

New Zealand’s market-led approach a good example

New Zealanders may be surprised to find out that their country’s market-led approach to the electricity retail sector is being viewed as a success by the APEC Economic Policy Report 2016 ‘Structural Reform and Services’. ERANZ says the report is a vindication of the market-led and competition approach for the sector.

Cameron says : “The fact that the authors chose to analyse the reform of the New Zealand electricity retail services sector as one of just five case studies demonstrates how world-leading and innovative our sector has become.”

The report finds that the consistent approach by successive governments to the market-led and competition approach has delivered economic benefits for New Zealand. These include reducing electricity costs for business and enabling them to better control energy supply and price risks, stimulating new generation options, and boosting the strength of trading in electricity derivatives on the futures exchange.

“This a good endorsement for the need for an open, competitive, sustainable market, and the importance of consistency of government approach to promoting market-based responses.”

With such an innovative and transparent retail market, consumers are well placed to choose a retailer that will fit their specific needs-both price and service-wise. This is also an opportunity for retailers to engage better and regularly communicate their innovativeness and competitiveness in the market to their existing and potential customers. Our webinar, Energy retailing solution: How to use digital engagement to unlock customer satisfaction and growth discusses how utilities in Europe are already harnessing market opportunities through digital platforms. By leveraging customer intelligence, energy companies are delivering a digital engagement strategy that creates simple, targeted and impactful customer interactions at every touch point and through every communication channel. Register here.

This live event forms part of Engerati’s "Energy Retail Predictions 2017" In Focus track.


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