Consumer NZ concerned about energy gentailers’ profits

Consumer NZ is expressing concern after the big four generation and retail power companies (gentailers) announced their largest single-year rise in earnings.

This comes at a time when some New Zealand households can’t afford to heat their homes, Consumer adds.

Combined, the top four gentailers (Meridian, Contact, Genesis and Mercury) made $2.7 billion in operating profits. That’s around $7.4 million profit every day over the past year, says Consumer.

“The optics of huge profits at the height of a cost-of-living crisis aren’t great. Three out of five New Zealanders are concerned about the cost of energy,” says Consumer chief executive Jon Duffy.

A Consumer survey showed 19% of Kiwi households had trouble paying their monthly power bill in the past year; while 12% of households reported being cold because they had to cut back on heating due to its costs.

“We estimate 40,000 households have gone without power at some point in the past year because they couldn’t afford to pay.”

Electricity Retailers Association of New Zealand (ERANZ) chief executive Bridget Abernethy explains that ERANZ members are playing a key role in New Zealand’s transition to a zero-carbon economy and investing billions of dollars in new development projects to make that happen, with more planned in coming years.

“We’re ploughing earnings back into developments. Market analysts estimate we’ll invest around $4 billion in renewable generation in the next five or six years.”

Abernethy says ERANZ members are very conscious of the cost pressures Kiwis are facing and have programmes in place to help those most in need.

“It’s also worth noting that increases in household power bills have been well below the rate of inflation over the past five years.”

While prepay services give customers the flexibility and capability to manage their income, some customers like the real-time visibility of their usage and payments, says ERANZ.

“Anyone struggling with their power bill is likely juggling other debts as well, so it’s a way of helping customers manage debt overall, not just their electricity,” Abernethy adds.

Both government agencies and budgeting services recommend prepay connections to vulnerable customers where appropriate. Prepay is seen as a valuable tool to help some households manage overall cash flow and expenses, she says.

“Disconnection is always an absolute last resort for our members after exhausting other options.” says Abernethy.

ERANZ encourages people struggling to pay for their power to talk to their provider.

“Our members are committed to working with customers to find solutions to help them stay connected.

“These may include referrals to budgeting support services, setting up affordable payment plans, working with customers to ensure their credit rating is not impacted by debt, more information about initiatives such as the Winter Energy Payment, or referrals to programmes like EnergyMate.”

Retailers recognise they have a responsibility to support vulnerable customers and ensure a customer’s debt level doesn’t spiral out of control, which is why there’s a robust system in place for working with customers who have difficulty paying their bills, ERANZ explains.

“Allowing their debts to accumulate will leave them in a worse financial position.”

More work needs to be done to ensure consumers can have confidence the New Zealand electricity sector is working to their benefit, says Consumer NZ.

“We acknowledge that profits are a healthy and normal part of business, but there’s a question around what is excessive,” says Duffy.

“The big four gentailers and their subsidiaries have significant market share, providing power to about 85% of the market.”

Consumer NZ says Mercury, Genesis, Meridian and Contact reported earnings (EBITDAF) of $841 milllion (up 45%), $523.5m (19%), $783m (10%) and $573m (5%) respectively, totalling $2720.5m.

Recent research by the watchdog found customers who have to use specific prepay power plans are paying about 15% more for their power than people on post-pay plans, Consumer adds.