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Powerswitch - the power price comparison site operated by Consumer NZ - will soon make concessions to its critics in two contentious areas.
Paul Fuge, the Consumer staffer who manages the site, says Powerswitch will add power plans that bundle power and broadband next year. It will also add more detail and prominence, and more data around savings, for planet and network load-friendly “time-of-use” plans that reward customers with keener prices if they use power at off-peak times.
Not all the players are happy with the developments, or the timing - which we’ll get to - but progress is being made.
But in a third contentious area - “success fees” and how the site is funded - they seem to have hit a brick wall.
The upshot of the controversies is that a swathe of power plans currently do not appear when you go hunting for the best deal on Powerswitch - and it’s not immediately apparent to the average punter that it’s not in fact showing the full picture.
Against the backdrop of the controversies, two surveys have been carried out. One carried out for power retailer Electric Kiwi, canvassing the opinions of a demographically weighted sample of 1011 Kiiwis in August, the other, a survey of power retailers by Consumer NZ, conducted the following month. Both showed a mood for change.
In the survey of 1011 customers, 95.7 per cent of respondents thought all energy retailers should be present on Powerswitch.
Just over half had used Powerswitch to compare plans over the past 12 months.
Two-thirds were under the false impression that all energy retailers were represented on the service (the site does list exclusions, if you know where to look).
Critics have complained that the Australian version of Powerswitch contains the whole shooting match. A householder or small business who’s wondering if they’re getting the best deal can compare their plan to all others, offered by every power company via a website called Energy Made Easy, which is run and fully funded by the Australian Government.
Here, Powerswitch is operated by the non-profit Consumer NZ under a three-year, $1.2 million per year contract awarded by the Electricity Authority (EA) - a Crown agency that’s involved in industry regulation, and also charged with encouraging competition. Power companies are charged a levy, which covers that $1.2m.
The EA says that $1.2m covers 70 per cent Powerswitch’s running costs. Fuge puts it at 75 per cent; he says the final washup depends on how many people use the service.
The balance comes from a $50 commission or “success fee” that a power retailer has to pay Powerswitch if a customer switches to one of its plans via the site.
Consumer’s survey of Powerswitch stakeholders - that is, power retailers - found 75 per cent wanted switch fees removed and the service fully funded by the EA.
Anonymised comments included, “The removing switch fees would allow Powerswitch to focus on providing useful information to the public without having to administer and monitor a switching fees arrangement with retailers.”
Another commentor said “100 per cent EA funding would be the simplest,” another that it would be “the most defensible” as independent” another that it was unfair that all retailers were required to promote Powerswitch to their customers, even if their refusal to pay the sales commission meant they had been delisted.
Similarly, some 67 per cent of respondents said had “concerns with the current funding model”.
Anonymised comments, which were overwhelmingly critical of the status quo, included
Suggestions for an alternative funding model included: “Retailers contributing more fairly. For example, a set amount each or a set amount based on market share.”
In the survey of 1011 consumers, only 20 per cent supported the status quo of success fees paid by retailers for each swiich. 27 per cent wanted a set fee, regardless of a retailer’s size. 37 per cent wanted a fee determined by market share, with bigger retailers paying more than smaller retailers.
Powerswitch has been around for two decades. The fee was first introduced in 2016.
At the time, challenger brand Electric Kiwi refused to pay it, arguing sales commission was unfair. New firms often offered the keenest deals, so ended up paying the most in success fees, and bankrolling most of the 25 per cent or so of Powerswitch costs not covered by the EA - a situation the Herald understands persists to this day.
Instead, it wanted retailers to chip in to Powerswitch costs proportionally, tied to their market share, so the big firms paid more.
In 2017, Electric Kiwi negotiated a flat fee of $50,000 per year to feature on Powerswitch, while larger retailers continued to pay the commission on individual switches. It had successfully pitched that as a fast-growing independent player, it was not appropriate - and would hurt market competitiveness - if it was hit by hundreds of thousands in fees.
Things were hunky-dory until March last year, when Powerswitch sent Electric Kiwi notice that it wanted all retailers on the same contract, and that it would no longer accept the fixed fee.
Any firm that refused would still have its plans listed on Powerswitch, but lose the live “Switch Now” link to its own website. Electric Kiwi reluctantly agreed to this measure.
In June this year, Powerswitch ratcheted up the pressure.
Electric Kiwi was advised it would be delisted from Powerswitch if it didn’t agree to switch to the $50 success fee.
It didn’t, and the following month its plans were pulled from the site.
The Herald understands Electric Kiwi recently made an offer of $8000 per month (or $96,000 per year) to be back on Powerswitch. The offer, understood to be more than what at least one of the top-tier players is paying in success fees, was rejected, but remains on the table. Fuge could not find any reference to the offer but said, regardless, “We don’t play favourites or do special deals”.
The simplest way to resolve the tension would be if the EA fully-funded Powerswitch, eliminating the need for the contentious success fee, or any other top-up funding mechanism. This is one area where most of our protagonists are on the same page.
Powerswitch’s Fuge says Consumer wants the EA to fully fund the service over the course of the next three-year contract.
But the regulator is not at home to that idea.
“The EA’s view is that the current funding model remains appropriate – retailers that receive commercial benefit from the site should pay a portion of the cost of operating it,” EA chief operating officer Richard Eglinton said.
The amount of the success fee, and how it was weighted between providers, was a matter for Consumer NZ.
The trend toward “bundling” deals has been building over the past few years.
On the power company side, Trustpower in 2015 introduced plans that covered both power and broadband. Trustpower was recently taken over by Mercury (which already owned 48 per cent of power retailer Now). The combined operation has around 112,000 customers on bundled plans. Others have followed suit. Contact now has around 70,000 households subscribed to power-broadband bundles. Other power retailers have joined in.
And from the other side of the fence, the following year Orcon Group bought a small power retailer, Switch Utilities, in 2016, and shortly after launched Orcon Power and Slingshot Power plans bundled with its broadband. The bundled plans had some 50,000 customers when Orcon Group merged with 2degrees mid-year - and the combined company recently announced that the power bundle offer would be extended to all of the combined company’s 345,000 fixed-broadband customers.
![“Nova, Mercury, Trustpower, Electric Kiwi and others also bundle [power and broadband]. It's now mainstream. While we can appreciate it might be difficult to compare bundled and unbundled plans, the reality is people visit Powerswitch to compare prices, so it’s time they came up with a solution” - 2degrees CEO Mark Callander. Photo / Michael Craig](https://www.nzherald.co.nz/resizer/v2/DKR3F7S4ANCMNMAKHZIHTN3Z5M.JPG?auth=ea0cee9c0e1cc436d3d639098bb46753aa2fab52f813c1fdc885e0f2737f5a4a&width=16&height=11&quality=70&smart=true)
Earlier, AUT economist Richard Meade told the Herald that the assumed expansion of the power bundling offer to all 2degrees customers was a key reason for the Commerce Commission to give the green light to the merger - because it would not just bolster competition in the broadband market (by creating a stronger number three challenger to Spark and 2degrees) but potentially make the power market more competitive too.
“Between Orcon and Slingshot we have almost 50,000 power customers, yet we aren’t featured on Powerswitch,” says 2degrees chief executive Mark Callander.
“Nova, Mercury, Trustpower, Electric Kiwi and others also bundle. Bundling is now mainstream, and a feature of the market,” he adds.
“While we can appreciate that it might be difficult to compare bundled and unbundled plans, the reality is people visit Powerswitch to compare prices, so it’s time they came up with a solution.”
Fuge says he has no argument. Bundled plans will be added - it’s just a matter of working out the nuts and bolts of how they should be presented.
Bundles were introduced seven years ago. Why has it taken so long?
Fuge said bundling has been tiny. It’s only recently been pushed into the mainstream by the 2degrees-Orcon deal and Mercury buying Trustpower.
“Bundling makes it really difficult to do apples-to-apples comparisons,” he said. “We need to build a new algorithm.” That will be done, but he won’t be pinned down to a timeline bar that it will be “definitely” before the end of next year.
And although conceding the time has come to add bundled plans, he’s also not shy of giving the bundlers a bit of needle.
More broadly, he notes that Powerswitch funding was $325,000 in 2016, but had been cut to $150,000 by 2019 on the logic that privately-funded services.
It was only following the 2019 Electricity Price Review that it was ramped up to $1.2m and Fuge was brought on by Consumer in late 2020 as the first employee to be dedicated full-time to Powerswitch. The funding also covers web and data development, and marketing.
Powerswitch can argue (and displays on its dashboards) that more people are now hopping between providers. In 2013, 13 per cent of customers switched power providers. This, year the switching rate is 19 per cent. That’s an improvement over a decade ago, but the figure has also been flat for the past three years, and is down on the 21 per cent high hit in 2017 and 2018.
Fuge recently warned Diana Clement’s readers that bundled deals with power, gas, internet and possibly mobile phone together. They may not be the good deal they appear because one aspect of the bill is inflated to cover the discounts elsewhere, he said.
Trustpower was fined $390,000 in 2016 after the Commerce Commission took action over a broadband-power 24-month power deal that increased the pricing of the broadband component from $49 to $79 in its second year. The regulator said the terms were “hidden in the small print”.
And earlier this month, the ComCom publicly criticised Contact for failing to join the Telecommunications Dispute Resolution Scheme - a free mediation service for mobile and broadband customers with gripes.
“The reason retailers are keen to bundle is that it’s very ‘sticky’,” Fuge added.
“It’s exponentially harder to change providers once you’ve bundled up.” That’s unfortunate, he said, “Because there are some very good individual deals around that would save consumers money.”
Some 76 per cent of respondents to the survey of 1011 consumers agreed with the statement “I’m interested in changing my energy usage habits to help support the green energy transition.”
Just under 78 per cent said they were aware that power retailers offered plans that incentivised off-peak power usage.
Eighty-three per cent agreed that “Powerswitch should do more to highlight the potential benefits of energy plans that support the green transition.”
And 69 per cent thought an average of real savings achieved by customers on time-of-plan should be displayed to indicate the likely savings customers would see,
And while Fuge also concedes the need to give more play to off-peak plans, and to make “UX” (user experience) changes to make their features more obvious, he says the system is working as it is in that time-of-use plans feature the most frequently in Powerswitch results - indicating the service’s algorithm was already in tune with consumers. Over June and July, around 60 per cent of Powerswitch users were picking time-of-use plans.
He added he was getting it from both sides. Some retailers said the algorithm was giving too much weight to off-peak plans.
Fuge said more than other plans, time-of-use depended on individual customers. Some were more capable than others of taking advantage of off-peak plans by programming their dishwasher and other appliances. Some were more motivated because they owned EVs. Others maybe had wanted to take advantage of lower rates or free hours off-peak but, say, had a baby and ended up doing their washing during the day regardless.
“People are initially gung-ho, but we often see a dying-off period,” Fuge said.
“Human behaviour is very tricky territory.”
The Herald understands Electric Kiwi offered to upload customer usage profile, so Powerswitch’s algorithm could be based on actual usage data, and actual savings (which it maintains are currenlty underplayed on Powerswitch) and not have to second-guess human behaviour.
Fuge said he recently discussed the first stage of an independent review commissioned by Powerswitch and carried out by consultancy Link Energy, with the EA, which recommended more in-depth analysis, involving a sample of around 20,000 customers. The plan is to scope out the trial before Christmas, then run it during January.
While stressing that it was up to Consumer to set Powerswitch’s parameters, EA COO Eglinton was clear about the direction he expected to move in.
“The Electricity Authority recognises that there are a variety of factors that matter to different types of consumers, and a range of sophisticated plans in the electricity market,” the COO said.
“Electricity plans offered by retailers can change regularly, and are of increasing complexity – for example combining electricity with bundles of other services - such as broadband - and reflecting changing technology, such as consumers able to sell solar-generated electricity to their retailers.
“This makes it challenging for Consumer NZ to always rank existing plans accurately and equitably, but the Authority provides funding to Consumer NZ to help facilitate the ongoing development of the site in light of these trends and to best reflect the range of pricing plans in the market.”
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