Consumers could save on average $20 a month by switching to the cheapest power company through websites such as whatsmynumber.org.nz (above). Photo / File
Consumers could save on average $20 a month by switching to the cheapest power company through websites such as whatsmynumber.org.nz (above). Photo / File
Low-income families that struggle to pay their power bills on time may save about $30 off their monthly bills through a new package of electricity reforms.
The centrepiece of the wide-ranging package, which follows a 13-month review of electricity prices, is a proposal to scrap the discounts that most power companies now offer to customers who pay promptly.
The discounts can be up to 20 per cent on an average household power bill of $173 a month, or about $34.
Most people already get the discounts because they set up direct debits to pay their bills on the due date, knowing that they will have enough money in the bank to cover the bill.
But about 100,000 households who were found to be in "energy hardship" often don't have enough cash to cover their bills on time, so they end up actually paying higher electricity prices than better-off families.
The Electricity Price Review Group has recommended that the Government should regulate to prohibit prompt payment discounts, although still allowing late payment fees as long as they reflect the actual costs of recovering debts.
Energy Minister Megan Woods has declined to regulate immediately, but said she would write to power companies stating "the expectation that they make discounts available to all consumers".
"Should the companies not follow suit, we will regulate," she said.
Megan Woods says she will regulate if power companies don't scrap their prompt payment discounts. Photo / Jason Oxenham
Overall, the power companies are expected to forego $45 million a year if they give all customers the same power prices now paid by those who get the prompt payment discounts, cutting a little over 1 per cent off the $3.9 billion that households pay for electricity each year.
There is no guarantee that the companies wouldn't try to recover that revenue by raising charges in other ways, but Consumer NZ head of research Jessica Wilson said she would be watching to make sure that didn't happen.
She said the review team, which included Consumer NZ chief executive Suzanne Chetwin, had come up with "long overdue consumer protections which we are very pleased to see".
Jessica Wilson says the review has come up with "long overdue consumer protections". Photo / Supplied
Apart from scrapping prompt payment discounts, the package includes several measures to make it easier to switch between power companies to get the best deal. On average, switching to the cheapest company saves $20 a month.
Woods will ask the Electricity Authority to develop a business case for a pilot scheme to identify consumers who haven't switched for many years and are paying above-average prices, and negotiate a cheaper bulk deal with the lowest bidder to supply those consumers.
She will also ask the authority to impose a short-term ban to stop companies that have lost customers going back to those customers to offer them sweet deals - a practice that has made it harder for new competitors to start up.
The short-term ban will be evaluated before any decision is made on a permanent ban.
The review group has also proposed phasing out a 2004 regulation that requires power companies to offer a low fixed charge of 30c a day to households that use much less power than the average.
The regulation, backed by the Green Party at the time, was aimed at encouraging energy conservation.
But in practice it has also penalised many large, low-income families in poorly insulated homes who use a lot of power and end up paying a fixed charge of $2 a day because of it.
Woods has asked officials to develop "specific proposals to phase out the regulations".
However Auckland Action Against Poverty co-ordinator Ricardo Menendez March said the package had "little teeth" either to force companies to scrap prompt payment discounts or to provide more support to struggling families.
Jonathan Young: Scrapping prompt payment discounts "will punish people who pay their bills on time". Photo / File
National Party energy spokesman Jonathan Young said removing the prompt payment discount seemed "perverse" and would punish people who paid their bills on time.
