TVNZ FAIR GO: ELECTRICITY RETAILERS QUESTIONNAIRE

What does your electricity retailer say about making your power bill clearer and easier to compare to others? The questions below were sent to the following electricity retailers in early April 2011: Bay of Plenty Energy / Nova Energy / Empower NZ Genesis Energy / Energy Online King Country Energy / Tiny Mighty Power Opunake Hydro Pulse Energy

1. In general, do you think your customers find electricity tariffs and invoices easy to understand? 2. With regard to the tariffs available to electricity consumers, are there: a) too many b) about the right amount c) not enough 3. With regard to consumer understanding of electricity tariffs, are tariffs: a) too complex b) about right c) too simple 4. Do you think a single per-unit price for electricity (displayed on invoices and in marketing, eg on Powerswitch.co.nz) would help consumers make informed choices about their electricity supplier? 5. Would you support a call for a single per-unit price to be displayed on customer invoices and in marketing? 6. Do you think customer invoices should include more information about the cost of their electricity? (For example, the invoice might include a list or pie chart showing the cost components of the price paid by the consumer.) 7. Are there any brief general comments you wish to make about the price your customers pay for their electricity? 8. Petrol prices are quoted in a single, readily understandable figure. Is it fair to compare petrol pricing to electricity pricing?

The responses are listed in full below (edited and summarized), but first there is a simplified grid with the key points raised in my story.

NB: Question 8 was sent separately, and some companies did not respond by the deadline.

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SUMMARY OF RESPONSES

Tariffs too Per unit charge? Display like petrol complex? price?

Bay of Plenty ABOUT RIGHT NO NO Energy / Nova Energy

Contact Energy / Did not answer Did not answer Did not answer Empower question question question

Energy Direct NZ TOO COMPLEX NO NO

Genesis Energy / ABOUT RIGHT NO Did not answer Energy Online question

King Country ABOUT RIGHT YES Did not answer Energy question

Mercury Energy Refused to take part Refused to take part Refused to take part Tiny Mighty Power Bosco Connect

Meridian Energy TOO COMPLEX NO NO

Opunake Hydro TOO COMPLEX YES NO

Powershop TOO COMPLEX YES NO

Pulse Energy Did not answer Did not answer Did not answer question question question TrustPower ABOUT RIGHT NO NO

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FULL RESPONSES

NB: All have been edited and/or summarized.

BAY OF PLENTY ENERGY & NOVA ENERGY (owned by Todd Energy)

Customer understanding of tariffs and invoices Most customers we approach seem to have an understanding of pricing and invoices.

Too many tariffs? We believe about the right amount of tariffs is available to consumers. The two key drivers of multiple tariff structures is the multitude of different line companies and their different charges, and regulatory requirements to offer low and high user tariff options.

Tariffs too complex? About right. While in theory one standard tariff sounds a good idea the reality is that a multi tiered structure allows customers choice. We refer you to the Ministerial Review into Electricity Market Performance in 2009 [which recommended] more standardised line tariff structures.

Per unit pricing No. By definition, a single tariff (effectively no choice) doesn’t provide any information to the consumer other than what it will cost per unit. Therefore, it will not allow consumers to make an informed choice to best suit their situation. Different tariff structures give different groups of customers benefits to best suit their situation and therefore can make an informed decision.

More information on bills? Our experience has been that most customers do not place high value on this information preferring to focus on total energy pricing and usage trends.

Compare petrol pricing to electricity pricing No. A closer analogy may be phone or mobile pricing that takes advantage of when you use the service and the market demand at that point in time.

CONTACT ENERGY / EMPOWER NB: This company sent just a single response, which it appears to feel answers all the questions.

Our focus is to work with our customers to help them to better understand what’s happening so they can make informed choices. This is why we have enhanced the information about energy use available online. We are also looking at other options to assist customers with home energy management. Including reviewing how our billing information is presented to our customers with the aim of increasing customer awareness of energy usage patterns and how this influences the amount they pay. We believe the more customers understand about what is driving their energy usage and costs the better able they are to manage these costs

ENERGY DIRECT NZ

Too many tariffs? About right. If the low user tariff wasn’t regulated there would be an opportunity to implement a ‘medium’ user tariff to benefit customers that use in the range of 6,000-10,000 kWh.

Tariffs are too complex

Per-unit pricing No … An idea may be to regulate the calculation of fixed charges so each retailer calculated these charges the same (at cost) and the variable cost was simply the electricity (energy)

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component. It would then be simply a case of comparing the variable charges between retailers to see who was offering the best price however the low user tariff regulations currently would not permit this. EDNZ carries out free price comparisons on request.

More information on invoices? A pie chart would only be useful if the component parts were calculated identically by each retailer. For example EDNZ passes on the EA Levy cost which it is charged by the wholesaler however retailers can on-charge a higher amount than what is actually charged by the EA.

Compare petrol pricing to electricity pricing? No, given that prices would vary too much as retailers tried to recover their fixed costs such as transmission and metering etc.

GENESIS ENERGY / ENERGY ONLINE

Customer understanding of tariffs and invoices Electricity pricing is complex due to the varying distribution (network company) tariffs and meters around the country… We try to reduce the impact of this on our customers by absorbing some of this complexity and standardising as much as we can across the country. We would like to see more consistency but don’t believe full standardisation is the right answer.

Too many tariffs? Yes. We would support a call for a reduction in the number of tariffs.

Tariffs too complex? About right. Consumer NZ's Powerswitch website does a pretty good job of working through tariff complexity for people and allowing them to compare all up annual cost.

Per unit pricing No. We plan to do some smart things with tariffs that will save our customers money, we think that is more important to our customers than making all retailers supply a bland product because that might make comparisons easier.

More information on bills? Genesis Energy has just launched an Energy Usage Data service that enables customers with Advanced Meters to view their detailed electricity consumption data on-line.

Compare petrol pricing to electricity pricing? Not answered.

KING COUNTRY ENERGY

Customer understanding of tariffs and invoices Yes although some are confused about the difference between network and retail charges as some are bundled and others are not. In our area customers receive a bill from both retailer and the network company which many do not like. We believe one bill incorporating the network charge is better for customers.

Too many tariffs? About right, especially for domestics who just want a simple cheap option – or Day Night and maybe controlled. It is possible that as smart metering is rolled out there will be a call for more complex pricing options, however in our experience most people want a simple easy to understand structure.

Tariffs too complex? About right. KCE tariffs are simple and straightforward

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Per unit pricing Yes. It would make it easier for customers to compare like with like. If all were presented as GST inc/excl and net of discount there could be no confusion.

More information on bills? Customers generally like Consumption Graphs because in their mind they see at a glance when they use and when they don’t. Although this causes confusion if estimates are high and reads low or vice versa. A pie chart highlighting the components of a bill is a useful visual aid also.

Compare petrol pricing to electricity pricing? Your question on petrol prices is a good one. To compare electricity to petrol is made more difficult because there are 29 different network businesses which all have different charging structures. So commoditising the electricity charge may be useful (and could be achieved with some location effects) but commoditising the network charge much more difficult.

MERCURY ENERGY / BOSCO CONNECT / TINY MIGHT (All owned by MIGHTY RIVER POWER) This company refused to take part in the questionnaire.

MERIDIAN ENERGY

Customer understanding of tariffs and invoices Because invoices may be based on estimated reads, include different components (fixed daily rates, variable rates, Electricity Authority levy, GST etc) some customers may find tariffs and invoices difficult to understand.

Too many tariffs? There are too many tariff options. That reflects multiple factors including different meter categories, line company pricing methodologies, and historical retail offers not yet removed. The Electricity Authority is developing proposals that should increase tariff standardisation. Meridian supports this initiative.

Tariffs too complex? Current electricity tariffs are too complex. (See above comment re tariff standardisation) Meridian has been suggesting for a number of years that suppliers should be required to quote prices inclusive of GST and exclusive of ‘prompt payment discount’.

Per unit pricing This might simplify consumers’ decisions about their electricity supplier, but it would not assist consumers to make that decision in an informed manner. Many consumers choose pricing options with lower off peak rates and achieve a lower average per-unit price by, for example, using their clothes dryer at night.

More information on bills? We favour a summary on the front with further detail on the back for those who wish to see it.

Compare petrol pricing to electricity pricing? No. Many customers choosing pricing options with low off-peak rates higher peak-time rates.

OPUNAKE HYDRO

Customer understanding of tariffs and invoices? No they do not find it hard to understand Too many tariffs? Yes Tariffs too complex? Yes Per unit pricing Yes. Consumers would need to nominate a load profile. We have such an improved online tool in development More information on bills?

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Yes. It can vary too much from month to month. We suggest the single price occur at the time of signing up. We offer a price comparison tool to help customers work out whether they’re better off switching to us Compare petrol pricing to electricity pricing? No

POWERSHOP

Customer understanding of tariffs and invoices No. There are a multitude of fees and charges that customers do not understand on most retailers bills. The industry is complex, but this doesn't need to be reflected in customer pricing.

Too many tariffs? Yes

Tariffs too complex? Yes

Per unit pricing Yes. However, more meaningful comparisons might come from retailers providing "normalised" electricity cost information, e.g. expected annual cost for a small, medium and large customers for each tariffs. However, we wouldn't support standardisation of tariffs into a simple price per-unit structure for all customers as this is likely to lead to pricing distortions that will ultimately push prices higher.

More information on bills? Yes, however transparency around underlying costs is important, but shouldn't come at the expense of clarity.

Customers really should shop around for the best deal for them. There are many people who are paying too much for their power.

Compare petrol pricing to electricity pricing? No, a single price that is applicable to all customers will create pricing distortions (due to the high fixed industry costs) that will ultimately increase prices.

PULSE ENERGY This company sent just a single response, which it appears to feel answers all the questions.

“Pulse Utilities is supportive of any moves which could simplify things for the consumer. Pulse supports competition in the industry and backs the Electricity Authority to continue providing strong regulation and information on the operation of the electricity market for consumers and other industry members.” - Dene Biddlecombe, Managing Director.

TRUSTPOWER

Customer understanding of tariffs and invoices If their retailer provides good customer service, then all it takes is a simple toll free call if they don’t understand things.

Too many tariffs? [This question not directly answered] The number of tariffs available from retailers is determined by the number offered by network companies. In most cases, those network options offer consumers opportunities to reduce costs, through the selection of controlled options that best match their household consumption profile.

Tariffs too complex? About right, if retailers provide appropriate customer service and advice.

Per unit pricing

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No. Retail tariffs have to reflect network company tariffs, A single per-unit price attempts to bundle network charges. This has the effect of benefitting those who use very little power (or those that use a lot of power infrequently, i.e. Queenstown holiday homes), at the expense of those who use more power more consistently – i.e. most consumers. … If off-peak options were removed, the national demand for electricity would increase at times of peak demand, driving wholesale electricity and network costs upward, and although consumers would have simpler bills, they would end up paying more for their power as a consequence of that.

More information on bills? All of our customer surveys, over 85 years of , have consistently shown that consumers prefer bills to be as simple as possible.

(NB: THIS ANSWER WINS THE AWARD FOR WITTIEST RESPONSE) Compare petrol pricing to electricity pricing? No. Petrol prices are quoted for 91, 95, and 97/98 and the price increases the further you get from a port. Unlike petrol you can’t store electricity therefore you pay after you have used it, and you can buy cheaper if you use it off peak. Try telling a petrol attendant you want a 30% discount because you are only going to drive you car when there is not much traffic on the road!

In addition, we received the following from Sue Chetwin, CEO of Consumer, which operates the Powerswitch.co.nz website, where you can compare price plans.

Are electricity tariffs easy to understand? From the feedback to PowerSwitch consumers don’t seem to have too much trouble with their invoices. This has not always been so but has got better. Are there too many tariffs? While a retailer might offer seven or eight different types of tariffs, only one will apply to each customer (customers can change types but this involves costs in changing their meter configuration) Smart meters are likely to change some of that. For a given tariff combination most retailers offer only two sets of prices (standard and low user as required by regulation) with TrustPower offering four in many areas. Customers can opt in and out of additional discounts giving more options but no more tariff complexity. With retailers putting different loadings on fixed and variable charges, it is not always obvious which is the cheapest. PowerSwitch makes it easy for people to make comparisons. Are tariffs too complex? The range of alternative tariff combinations can be confusing. Do you think a single per-unit price for electricity would help consumers? The answer is no unless retailers were prepared to offer a plan which had no fixed charges and a single price for all power (as PowerShop does). The reason we say no is that any price per unit derived this way would be misleading. A large proportion of consumers are on a two- meter plan (hot water and the rest). Consumers with identical total power use but with it spread differently over the two tariffs could have widely different per unit prices. Ie I shower twice a day and you shower once a week. Without access to the use details for consumers other retailers could not generate a directly comparable per unit price. Currently a comparison using consumers’ own power use information is done by PowerSwitch and the users gets a total cost comparison which is better than per unit price. Would you support a call for a single per unit price? Given the above reason we don’t really see the value in it for consumers Do you think customers’ invoices should include more information? They could do. For those who are interested this information is available on retailer and other industry-related sites and we are looking to include it on PowerSwitch. Brief general comments We are concerned at price increase above inflationary pressures that consumers continue to have to pay for.

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