A government-appointed panel has suggested a wide range of options to help reduce power bills, including doing away with prompt payment discounts

A government-appointed panel has suggested a wide range of options to help reduce power bills, including doing away with prompt payment discounts
Photo: Robert Lynch

Prompt payment discounts on power bills may become a thing of the past if the Government adopts the options in a report by the Government-appointed Electricity Price Review Panel.

The Panel has been investigating ways to make electricity prices "fair and affordable, not just efficient or competitive".

One of the options put forward in its just released report is to prohibit prompt payment discounts on power bills but allow suppliers to charge late payment fees.

"Consumer advocates and advisory groups say prompt payment discounts disproportionally hurt low income consumers and, in many cases, are unrelated to the true cost of recovering late payments," the report said.

It cited an Australian Competition and Consumer Commission (ACCC) report which found that the discounts "give the impression that an offer is significantly cheaper than other offers in the market when this is often not the case". 

The ACCC report said the practice was "confusing, at times misleading, and leads to poor consumer outcomes".

Although the banning of prompt payment discounts was presented as just one of many options for the Government to consider, the Panel said it was in favour of doing so.

The Panel also said it was in favour of merging the price comparison websites Powerswitch and Whatsmynumber and improving the merged entity's performance, to boost consumers' ability to hunt out the best deal.

Electricity suppliers could also be required to include "clear, prominent information about how consumers could switch suppliers or dispute their bill'.

Other options outlined in the report include:

  • Establishing an electricity consumer advisory council.
  • Establish a cross-sector energy hardship group, which could be funded by the Government and/or an electricity industry levy.
  • Offer extra financial support for households in energy hardship.
  • Make electricity distributors offer retailers standard terms for network access.
  • Prohibit retailers from using notifications that customers were switching suppliers to make the customers a better offer to stop them switching.
  • Make electricity generators release information about the profitability of their retailing activities.
  • Phase out low fixed charge tariff regulations.
  • Ensure access to smart metre data on reasonable terms.
  • Strengthen the Commerce Commission's powers to regulate distributors' performance.
  • Require small distributors to amalgamate.

The full report is available here.

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30 Comments

So what would happen to existing contracts? Have just renewed power bills on one property for 2 years with 20 & 24% discounts (10 ICPs)

See B7 in the doc:

We also note that some customers’ term contracts include prompt payment discounts, something that would need to be factored into the implementation process.

Submissions are open till 22 March.

One aspect the report omits entirely is the need to standardise the form of consumption data available to consumers. I'll submit on this: having vastly different data formats for consumption inhibits the widespread use of generic tools to manage it....

I couldn't care less about consumption data , I just want a lower energy cost .

The pricing formulas used by the different powerco's are so confusing its not funny, making actual comparatives all but impossible .

My inner cynic says we are being #()cK=!) over as consumers , but interfering with payment incentives is not going to help one bit.

Agree, I have written to the ECA about this matter. They also agree in principle - but this being NZ are hesitant to try and impose change.

Agreed. Exactly. This actually attacks a core principle of our society values, or at least those that still exist.That is, it is dismantling an incentive to those who organise themselves and pay their dues in good order, to advantage those that do the opposite. Cui bono.

This is a joke right ? Whats the problem with paying the bill on time and getting a discount ? Nek minnit they will drop the discount and we will all be paying more for power.

then I wont be paying on time anymore,
why should I not leave it until the last minute
and if we all do this it will effect their cashflows,
which can be huge for some companies and increase interest and fees expense with the banks
very short sighted

Yep, no point in not paying as late as possible, staying just short of them starting collections actions.

"fair and affordable, not just efficient or competitive". Why do I get the feeling that will be the phrasing used to justify charging some customers more to offset other customers.

"fair and affordable, not just efficient or competitive"

Sounds a little like:
"We're from the government and we're here to help you"

This is just another attack on the core middle class who always pay their bills on time! Well I never.

Next they will be doing away with no interest on credit cards if you pay them on time.

They make the prompt payment discount a permanent discount so you don't pay more. Meridian has already done this.

You mean they (temporarily) dropped their margin, and will fix this when they crank up the rates for everyone, regardless of if you pay on time.

It was good PR move, as evidenced by the bunch of imbeciles that believe it is a good thing

The only margin impact is not making money on late payers. The 98% who pay on time pay the same as they do now.

I'm not commenting on whether this is good or not, just the mechanics of it. It makes so little difference to me as I pay $200/year for electricity.

No, the impact will be that those that pay on time will be paying more to subsidise those that pay late once the next round of price adjustments come through.

Debt has a carrying cost, and now instead of those that create that carrying cost paying it in late fees/ lack of prompt payment discount(same thing, different name), those that do pay on time will be paying it for those that don't pay on time.

If you don't think there is a carrying cost for debt, tell your boss/bank/tenants to delay your income payments by 3 months and see how that works out.

What is this "cross-sector energy hardship group, which could be funded by the Government and/or an electricity industry levy." business?

More wealth redistribution from middle class to the poor?

By the way, the spot electricity market is surging fast, we are probably overdue for a 10%+ increase in electricity bills. The last few years increases have been too mild.

Spot market isn't the bulk of the cost though, that's only the marginal cost. The bulk of the cost is priced much lower and purchased well ahead of time (or self generated for the gentailers).

Correct, except for this "or self generated for the gentailers".
'gentailers' buy on the spot market / forwards like anyone else.

yes but if you have bought forward enough then a price rise on the spot market doesnt matter, unless its sustained and exceeds your forward time scale.

That was Prag's point, steven.

The spot market surge is quite sustained, and the price has been consistently above $100 / MWh since about November. This is a summer period where a few years ago, would be averaging < $50 with spikes low at $0.01.

We, as a nation have been under-investing in the power generation for years, due to a lack of sustained electricity demand growth. The lack of growth was primarily a result of the energy efficiency drive, but now all the low hanging fruits are pretty much picked (switch to LED, the introduction of VSDs, efficiency drive at HVAC etc) while we still continue to pour in massive number of immigrants. We are at the very early stage of where the additional demand from population growth is now making an impact, outweighing the efficiency efforts of the last few years.

We are one season of drought away from grid stress. Unless we get some torrential rain over the next few months, I expect the spot market to average above $200-$300 this winter (30%+ above last years'), with frequent spikes going well above $1000/MWh

Once the current hedged futures contracts need to be rolled over, the retailers won't absorb all that cost increase and will have to pass on the massive price hike to the consumers.

If a massive import of immigrants require new roads, hospitals, schools etc, why would new power generation be any different?

I'm doing my part - I added enough generation to my house to run 3 houses

The buy forwards off other generators to meet demand imbalances, sure; but why would they sell their own generation to themselves on the futures market? Some sort of daft accounting requirement?

It's just the structure of the market - everyone sells to a Grid Injection Point.

You are right in that gentailers are a natural hedge to themselves. But they technically, don't sell power internally.

They don't forward their own generation to themselves (as you say, daft), but they do forward their own generation to others and vice-versa.

So what about the incentive to pay your rates installment by 28 Feb ?

Does it fall under the same set of rules ?

I've got no problems paying a cheaper price for paying on time. My contention is that these discounts by power companies make price comparison more difficult. It's very difficult to find the plain unit price and night/day hours when signing up to Genesis, Contact etc. They should advertise it as a late payment penalty.

The cartels running the supermarkets, fuel stations etc deliberately muddy the pricing information with invasive club cards (your data sold to Equifax), fuel discounts, bundles, fake 50% sales and many other strategies.

The big supermarkets should be forced to put their prices online for each store. The big supermarkets use information asymmetry to screw the consumer.

Get rid of these free power days they give some people. If they can do that, they can afford to drop the overall pricing for everyone everyday.

Sorry, but convince me the panel aren't interested parties. Just those few government panelists have made a decision for you and I and we have no choice if it is adopted.
If all companies are forced to stop offering the discount, then where is the free market?

Right, got it! They're socializing the cost of late payers.
Give me a penny for every time I have read the word "socialism" on various sites in the last month and I might be able to pay my monthly $100 electricity bill (before 15% discount)!
They say by 2050 we probably won't own anything anymore - everything will be shared!
Personal data, accommodation, scooters........