Consumer NZ says one power company’s loyalty scheme looks like a prompt payment discount in disguise.
Energy Minister Megan Woods asked power companies to get rid of prompt payment discounts in 2019 because they were effectively a penalty on customers who paid their bills late.
The Electricity Price Review found discounts for paying power bills on time were excessively high, caused additional hardship for those who could least afford it, and contributed to customer confusion when comparing prices.
Getting rid of them was expected to save consumers $45 million annually, the minister said.
Power generator and retailer Mercury offers its customers a “Rewards” programme which includes the ability to earn points for paying a power bill on time.
For every $1 paid on time, a Mercury customer can earn 1 point. Those points can then be used for bill credits, discounts or free power days.
Consumer NZ said Mercury’s Rewards programme appeared to be a prompt payment discount.
Consumer said as part of the Electricity Price Review the Government said it wanted to see major changes to prompt-payment discounts, and it agreed.
“Incentives to pay your bill on time are a marketing deception which mask the true price of power. We remain concerned that offers like this unfairly penalise those who can’t afford to pay their bill on time, and reward wealthier customers who can afford to pay on or before a bill’s due date.”
However, the gentailer doesn’t see it that way.
Mercury’s Commercial Operations General Manager Craig Neustroski said it disagreed with the consumer watchdog.
Neustroski said it appreciated some of the ways to earn points won’t suit everyone, which is why it offered a variety of ways to earn, such as paying bills on time (including part payments), referrals and challenges.
He said more than 200,000 customers had opted into Mercury Rewards, which included standard benefits for all customers like Anniversary Bonus Free Power Days.
Mercury launched Rewards in 2022. It holds about 26% of the market, after purchasing Trustpower.
The industry regulator, the Electricity Authority, said Mercury Rewards didn’t appear to be a prompt payment discount (PPD).
“Unlike a PPD it does not offer a discounted price on electricity of a set amount – e.g. 10% – and how the points earned are redeemed is decided by the customer.”'
Although Woods asked power companies to stop offering prompt payment discounts in 2019, she asked the Electricity Authority in May 2023 to monitor retailers' conduct regarding prompt payment discounts and late payment fees.
The Authority said it would shortly be requesting this data from retailers.
"In addition, the Authority intends to improve the collection of retail market data, to facilitate the monitoring of competitiveness and consumer protection in the retail sector. This includes monitoring the conduct of retailers towards vulnerable consumers and in relation to prompt payment discounts and late payment fees."
Minister Woods’ office didn’t want to comment about prompt payment discounts, referring questions instead to the Electricity Authority.
27 Comments
this is why this government must go loopy policy like this, why should a company not reward someone for an early payment and charge extra for late payments, next they will be hitting up companies that offer discounts to certain groups of people. ie tradepeople buying from bunnings or mitre 10
They should be chasing the real culprits. Rebates between suppliers and contractors for Local & Central Government infrastructure contracts.
Pressy Cards, rugby world cup tickets, cash rebates, all expenses paid trips to the Indy 500 etc all to bribe the contractor into dealing with that supplier. If a supplier can give a 5% kickback at the end of the job, then why isn't the council/government seeing this benefit?
Agree Nzdan. It's like the plumbers who use any one of the big supply companies for their job materials and fittings, all at a very healthy profit margin for the supplier, then at the end of the year those plumbers get an overseas trip, or such-like, courtesy of the supplier. The supplier makes a packet and restricts competition (take note Commerce Commission), the plumber will still add his/her markup on these materials but it is the consumer who actually pays for all this at a rate significantly higher than it really should be costing them.
I cannot see that paying a bill on time shouldn't be rewarded if the alternative means that the power company has a more uncertain cashflow.
They could easily just offer power at a lower price and be done with the rebate. In fact Trustpower (now Mercury of course) is so much more expensive than the competition in Tauranga most people who get the rebate will certainly be better off just switching to a cheaper rebate.
To be fair its almost impossible to do a comparison to other companies. I got a free Samsung washing machine on sign up thats $1000 and I needed one. The TECH rebate is significant. The power here is 30.37cents kwhr and I'm a low user on 703kwHr even now in winter. Saving a few cents per kwhr is not going to do it. I did a calculation of Mercury and Contact years ago, the difference was like $10 a month. The charges are completely different as to how they are made up, if anything they should be made to simplify it so its the kwhr charge that is the only variable.
The Labour Government was on an idealogical crusade, attacking prompt payment discounts and low user tariffs all contribute to the cost of living crisis affecting average families.
I disagree with the justification. From the companies' perspective, some kind of incentive saves them in debt recovery costs. I didn't know about Mercury's reward scheme and as I have two connections, I'll have to look into it.
An extraordinary example of a convoluted and self defeating argument to justify interference in basic commercial practices. An attempt to punish those that are responsible and timely because those that are the opposite, are more important. This is the most lopsided, dysfunctional government that the nation has ever seen.
These days with digital meters and electronic payments I wonder if a weekly bill would be a better option for poor people. A lot of them live week by week and have no idea how to budget, a monthly bill must come as a shock.
Rates is the worst, 3 monthly is so old fashioned.
What’s wrong with NZ?
“Energy Minister Megan Woods asked power companies to get rid of prompt payment discounts in 2019 because they were effectively a penalty on customers who paid their bills late.”
FFS. Always playing to the lowest common denominator. Bit like ex Minister of Police, Poto Williams who objected to armed response vehicles as it would target ‘our people.’
To avoid a ban, I’d say figuratively but not literally that 5% of NZs need drowning.
Yep, if you can't afford to pay your power bill, you deserve to be charged extra.
Then the people who can afford it effectively get a small discount, as the charge is above the real cost of a late payment.
Taking their money off them is the only way they will learn to stop being poor.
Slightly ironic policy from the government - regulating late payment fees for power retailers, so if you pay late, you aren't penalised.
Try paying late to IRD, you'll be looking at the inside of Mount Eden Prison for atleast 2 years. You'd quickly realise you'd have faced less penalties ramraiding a bottle shop and using the proceeds to pay IRD on time.
Labour & MBIE had the same stupidity earlier this year with abolishing the low users rate. The result being power line charges move towards a fixed higher (5x) cost.
Labour has zero comprehension of how business & commerce works, their political policy is to simply grab more of other peoples money & waste it.
I remember initially having a similar response when I heard the decision since I am a very low user. But thinking instead from a non selfish perspective, why should my neighbour who has a hot water cylinder be paying for my share of the lines charges? It costs basically the same to supply lines to our houses, yet I get to free load off the lines company cause I have gas hot water?
The decision absolutely contradicts your last point - from a business perspective, cross subsidies don't make sense - you should pay for what you cost the lines company. From an emotional perspective you might disagree, but you can't say that shows bad business sense.
Between abolishing the Low User Plan and Prompt Payment Discounts, Labour has effectively raised the cost of electricity for over 70% of users. This is to subsidise the other 30% who choose to have large families and not bother to pay their power bills on time. Here's a hot tip - if you cant afford a large family, don't have one. Its pretty clear exactly which group of the population Labour are "In It For" and it isnt the vast majority.
Households on low-use plans pay higher charges relating to electricity used than other households on standard-use plans.
Labour wanted low users to subsidise higher users which is why with the increased line charge there is a concurrent - but much smaller - offset in the kW/hr rate.
https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resourc…
I think you're misunderstanding - low user regulations capped what lines (and retailers too) could charge as a daily charge. This means they upped the variable rate to try and claw back what they could, but by law it had to be cheaper on the low user plan than the standard plan up to 8000 kWh (or 9000 kWh in southern regions). So for particularly low users, lines companies could not come even close to recouping the costs of supply to those customers - meaning the cost to supply those low users was imposed on the rest of the customer base.
The removal of low user rates mean every customer has the same contribution to the fixed costs of running the network, with everyone in a particular customer category having the same rate per unit. Higher users will still pay more towards lines charges (as there will still be a per unit charge, so higher usage = paying more), but lower users will now pay their fair share.
Those lines companies are rolling in money. That's why they pay back a ton of it in dividends to users every year. Marlborough Lines payment is usually enough to cover 2 months of power bills. Auckland's Entrust is paying out $120m this year. Orion pays about $32M a year to Christchurch City Council. This was never about lines companies recouping their costs. They already do that and more.
The amount of profit the lines companies turns is beside the point I'm making though - the lines companies lost money on very low users, so in order to return the profit they have been allowed to make, they will overcharge standard users in their place (i.e. standard users subsidising low users, as I originally said). Given the amount of revenue they can take is fixed, by removing limits on how much they can charge low users, it naturally reduces the need to overcharge standard users to reach their allocated revenue.
You can argue they should just forgo their revenue or dividend so low users can remain on low charges, but then that once again just means they take a loss on low users paid for by the standard users. I.e. standard users subsidising low users.
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