New research from Consumer NZ has found most prepay customers could be paying about 15% more for power.
Prepay customers tend to be New Zealand’s most vulnerable electricity consumers, often unable to sign up for monthly electricity plans because of poor credit ratings.
Prepay customers in Wellington and Auckland could be paying about 15 and 11% more, respectively, than their pay-monthly counterparts. Christchurch residents on prepay could be coughing up a whopping 17% more for their power.
On average, there were 15 cheaper power plan options ahead of the prepay option on the Powerswitch price comparison site.
“Households on prepay pay more because they are excluded from the cost savings offered by other plans in the market – including the time-conditional plans which offer significant savings,” said Jessica Walker, Consumer NZ campaigns manager.
For electricity retailers, prepay is a handy debt management tool where the customer carries all the risk.
“It seems remarkably unfair that people already struggling to keep their lights on are forced to pay more for their power.
“Prepay customers pose no credit risk to their retailer.”
New Zealanders on prepay are automatically disconnected from their power supply every time they run out of credit.
There are no official records of how many households on prepay are going without power – with electricity retailers not obliged to report this.
It’s unclear how many people are surviving the winter with no access to heat, light, hot water, or the ability to cook in their homes.
Based on statistics shared by a prepay power provider last year, Consumer estimates that around 50 prepay households are going without power every night.
With the cost-of-living crisis deepening, there is a risk of more households moving to prepay. Consumer’s 2023 power company satisfaction survey found 6% of households had switched to prepay because they had trouble paying their power bill. The same survey highlighted 2% of households reported their power supply was cut off in the last 12 months because they could not pay their bill.
“Our survey findings equate to around 40,000 households going without power at some point, because they could not afford it.
“We are concerned that an increasing number of households will be unable to keep the lights on. We believe more investigation is needed so that regulators and policy makers have a clearer understanding of what’s going on.
“Above all else we want to know how many New Zealanders are going without power in their household,” said Walker.
“No one should be shivering in the dark this winter, or ever, because they can’t afford to pay their power bill.”
Recent Consumer research found around one in 10 households had an electricity retailer refuse to take them on as a customer because of previously missed power payments.
Notes
The average percentage cost difference of prepay plans was determined by looking at the annual estimated cost of the most common prepay plan (Globug), as determined by our Powerswitch price comparison tool, for a range of household scenarios, in each of the four centres, as compared to the average annual estimated cost of the top five results for the same household scenarios.
The Consumer power satisfaction survey is an online nationally representative survey of 2000 New Zealanders, aged 18 and over, carried out in March 2023. The survey has a margin of error: +/-2.19%.
About Consumer
Consumer NZ is an independent, non-profit organisation dedicated to championing and empowering consumers in Aotearoa. Consumer NZ has a reputation for being fair, impartial and providing comprehensive consumer information and advice.
