Like a fixed mortgage, Mercury Energy’s fixed electricity price plan for Auckland consumers may seem like a good deal – but is it really?

Late last year, Mercury Energy launched a fixed price plan to selected Auckland customers, a deal that is still being offered today. It locks customers into a fixed electricity price for 3 years – customers are guaranteed that the price per unit of electricity will not go up during this period.

On the surface this sounds like a good deal, considering power prices seem to be climbing relentlessly. But is it really as good as it seems?

Firstly, you’ll have to pay more initially. Consumer NZ estimates that the fixed rate Mercury Energy offers is 9 percent more than existing tariffs. This means any customer signing up to the deal is agreeing to a 9 percent increase in their electricity prices over the next 3 years – but that 9 percent must be paid from today, not next year or whenever ordinary tariffs might be increased. So you’re paying your price increases in advance.

Mercury Energy also increased its prices by 4 percent in April this year, after the deal was initially launched, so anyone signing up to the deal now will be agreeing to pay 9 percent on top of that 4 percent increase. And if you want to pull out of the 3-year deal, you’ll have to pay a $150 early termination fee per connection.

Mercury Energy also has a poor record for price hikes; its prices in Auckland have gone up 29 percent over the last 3 years – when the national average price increase over the same period is just 15.8 percent. This fixed offer is only available to existing Mercury Energy customers so, given its 29 percent price hike over the last 3 years, it’s little wonder some Mercury Energy customers might view a 9 percent increase over the next 3 years as some respite.

Considering that the national average increase in power prices for the last 3 years is 15.8 percent, does a guaranteed increase of 9 percent over the next 3 years seem reasonable? Perhaps. With competition being generated among electricity retailers by comparison sites such as Powerswitch and by other agencies, will all the other retailers increase their prices by more than 9 percent over the next 3 years?

Unfortunately this is crystal ball stuff. But we can make a comparison.

Powerswitch shows that an average Auckland household using 8000 kWh of electricity would currently pay $370 less per year with retailer Energy Online than they would with Mercury Energy’s fixed deal. Energy Online has said that it has no price increases pending in the short term. But assuming Energy Online increased its price by 13.8 percent over the next 3 years (the national average for lower tariff suppliers over the past 3 years), it would still work out at least $108 cheaper per year than the Mercury Energy fixed deal.

The savings could be more than this, depending on the timing of any increases. We’ve deliberately kept our calculations conservative.

Before you sign up to the Mercury Energy fixed price deal, we suggest you do some number crunching via Powerswitch to see how competitive other retailers may be.

In summary

• The Mercury Energy offer provides certainty that your electricity costs will not increase over the next 3 years (over and above the 9 percent tariff increase on signing).
• You are locked in to one supplier for 3 years and will have to pay a $150 fee should you wish to change supplier or move to an area not covered by Mercury Energy.
• For many households, other suppliers are cheaper than Mercury Energy. But there is a risk that other suppliers will increase their prices, perhaps by more than 9 percent, over the next 3 years.

Got a question or comment on this topic? Share your views and experiences with other Consumer members...