Prompt Payment Discounts No Longer Offered by Meridian
By recently ending their prompt payment discounts, electricity retailer Meridian Energy is bringing more fairness to the electricity retail market.
Wondering why the sudden change and what that means for you? Here’s what you should know about why Meridian has stopped offering a prompt payment discount.
Recently Implemented Change Will Result in More Fairness
The recently released first report of the Electricity Price Review prompted the energy giant to quickly implement the change. The discount ended as of October 1.
Meridian Energy Chief Executive Neal Barclay admitted that the change was long overdue and that the discounts were not as they appeared. Barclay also admitted that the prompt payment discounts were actually penalties charged for late payment of bills.
The discount, which was normally 10 to 20 per cent of a consumer’s bill, could be as high as 26 per cent – which was much higher than the power retailers’ cost of capital.
The prompt payment created an unfair environment since they hurt those who already struggle to pay for their energy bill.
Penalties Created Large Profits for Meridian
Meridian will lose $5 million annually in revenue with the cancellation of the prompt payment discount. Although power companies don’t make excessive profits in New Zealand, prompt payment discounts were a big money generator. Even so, Barclay is happy to see that they will no longer be punishing the customers that need support the most.
Although the system was being reviewed by Meridian for 18 months, the Electricity Price Review is what prompted Meridian to take action.
The preliminary review found that after inflation, residential prices were 79 per cent higher than in 1990. Over the last 18 years, New Zealand’s residential prices have increased quicker than most other OECD countries.
Guaranteed Discounts will be Implemented Instead
Prompt payments were initially introduced with good intentions. However, they eventually disproportionately affected those who could least afford their energy costs. Customers who were already struggling to pay their energy bills, such as seniors or single parents, were missing out on prompt payment discounts because they paid their bills late.
The loss of this discount could add large penalties for consumers who weren’t able to pay on time.
Instead of a prompt payment discount, Meridian will be offering everyone “guaranteed discounts”.
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