The government has announced a ban on electricity retailers using promotions to lure back customers who’ve changed companies. Flick Electric’s Nikki Cockburn explains why this is a victory for consumers and competition.
Progress on the Electricity Price Review (EPR) might be slow – especially when it comes to putting recommendations into action – but yesterday things kicked up a notch. The Electricity Authority (EA) announced it’s imposing a rule that will mean power companies have to wait 180 days before they can contact customers who’ve jumped ship to a new retailer and dangle cheeky offers in front of them in the hopes they’ll tempt them back.
Known in the industry as winbacks, these special offers include things like fridges, cash, lower power prices, and even dirty old prompt payment discounts that are never offered to loyal, bill-paying customers – only those who decide to walk (and walk they should!)
These tactics might look good on the surface, especially for those who are proactive and engaged when it comes to switching retailers and finding the best deal. But in reality, winbacks have only helped to add to the problem of a two-tier market that advantages those who frequently switch retailers at the expense of those who don’t.
That’s because the research shows that while consumers who change retailers are rewarded by winbacks, benefitting from things like lower power prices and sparkly new electronic goods. But loyal customers who stay with the same retailer pay the price with higher charges that prop up the winbacks model. As outlined in the Government’s EPR response: “the average gap between the cheapest retailer’s price and the incumbent retailer’s price has risen about 50% since 2002.” While one tier benefits, the other tier suffers – and that’s plain unfair.
The EA’s ban means that retailers can’t offer customers winbacks for a period of 180 days after a customer has switched to another retailer. Hopefully, they’ll instead be more encouraged to offer their customers the best deals right off the bat and maybe even reward loyalty.
And, for smaller, independent companies (like us!), the new ban will mean they have the time and opportunity to prove themselves to new customers on their own merits, without the bigger retailers cutting in. It’s good for competition and good for customers.
The new ban comes into play on 31 March and we’re hopeful that it signals the start of some bigger, crucial industry and market changes that will have positive, ongoing effects for Kiwis. In three years the EA will review the changes to see if they’ve worked.
It’s a win for consumers that will hopefully result in all power customers being treated fairly, rather than just those who shop around. And at Flick we’ve long campaigned for an end to winbacks and applaud the EA for taking strong action to make the market fairer for consumers.
This content was created in paid partnership with Flick Electric. Learn more about our partnerships here.