“Win Backs” and “Saves”

We’re lucky in New Zealand. Whereas other parts of the world have monopolized electricity markets, we have the choice of almost 50 different electricity retailers. And because of the fierce competition in New Zealand’s electricity market, retailers work hard to keep us happy.

But with many retailers offering incentives to prevent customers from leaving or tantalizing deals to draw them back, the way New Zealand’s electricity retailers remain competitive is starting to be questioned.

Electricity Market Regulator Investigating Fairness of Current Market Practice

In many cases, customers who do not shop around end up paying more than customers who do – a problem identified by New Zealand’s electricity market regulator, The Electricity Authority.

“Saves” are identified as customers who are prevented from leaving before the switching process has completed. “Win-backs” are customers who return to their old retailer after the switch has gone through.

Statistics show that by offering a discount or credit on their power bills, some retailers can win back up to 40 per cent of its customers.

Although The Electricity Authority implemented a “save protection scheme” in January 2015 that provided winning retailers with the option of being protected from saves, it did not regulate win-backs. Doing so has resulted in many retailers waiting until after the switch is completed before trying to win the customer back.

The current review, led by the Market Development Advisory Group, will review the entire customer acquisition process (both saves and win-backs) and scrutinize the resulting competition effects.

How the Switching Process Works

When a customer decides they would like to shop around for a new electricity retailer, the first step is to complete some research. Switchme, New Zealand’s largest, non-government funded switching site, provides helpful information and assistance with all aspects of the switching process, and comparing the power providers.

Once a customer has switched to a new retailer, the switch is recorded in a registry. This ensures the customer receives a smooth, uninterrupted power supply and pays the correct amount to both the old and the new retailer.

The Effect on the Non-Switching Customers

Concern has been raised that loyal customers are not being offered anything for their loyalty. In fact, while on the companies default rates, they may be spending extra, which the retailer uses to offset the cost of winning back customers, or acquiring new ones. New offers with lower rates may only be available to new customers to the retailer, while existing customer are not eligable.

In many cases, customers who switch only enjoy the new, lower rates for a short period of time, too.

The Bottom Line

With its main focus on fairness, the forthcoming power review will determine if we are being well-served by the current market practice.

If it determines we’re not, the review will uncover the changes that need to be implemented.