Consumer NZ is advocating for the Consumer Care Guidelines for electricity providers to be mandatory.
What are the Consumer Care Guidelines?
The Electricity Authority published the Consumer Care Guidelines in 2021. The guidelines recommend how electricity providers should care for their customers. They are designed to ensure electricity is reliable, affordable and accessible for all New Zealanders.
However, the guidelines are voluntary, which Consumer believes could put commercial interests above the health and safety of people.
This year, the Electricity Authority asked New Zealanders to make submissions on how the guidelines could be improved.
Why we think the guidelines should be mandatory
Consumer NZ hopes to see the Consumer Care Guidelines made mandatory for all electricity providers across Aotearoa. While all aspects of the guidelines work to protect New Zealanders, we think the lack of regulation around electricity disconnections and reconnections stands out as the biggest health risk.
Consumer’s electricity survey, released in July 2023, estimated that around 40,000 households (2%), reported they’d experienced disconnection due to non-payment, within the past 12 months.
In the same survey, we found 6% of households reported they had to switch to a pre-pay plan due to financial difficulties affording their electricity bills. However, of those prepay consumers we surveyed, 50% had been auto-disconnected at some point – meaning they’d run out of credit and their power had been disconnected.
We do not think any households should be experiencing disconnection. There are many health risks associated with not having access to electricity. As an essential service, there needs to be more protection to avoid people’s supply being disconnected.
With this in mind, we believe one of the current central principles of the guidelines – that providers have a right to be paid for delivering electricity as an essential service – needs to be reviewed. While there should be an approach for recovering owed money, this principle may allow for disconnections as a penalty for non-payment, which is dangerous and disproportionate.
The pitfalls of prepay
To avoid the risks of debt and disconnection, prepay plans are often favoured by the most financially vulnerable New Zealanders – as a way to budget, and control financial input and electrical output.
However, these plans present their own risks for consumers, who may then be locked out of the market and unable to transition to post-pay plans in the future. There are no obligations for providers to take on new customers, and providers are likely to reject consumers they perceive to be risky – like someone with a history of auto-disconnections.
These prepay risks aren’t compensated for by lower costs, either. In our July 2023 survey, we found some prepay users are charged more for their power – 14% more on average – than those on the lowest cost post-pay plans.
Electricity is an essential service, but we believe it is not regulated like one. More needs to be done, like ensuring disconnections and their associated fees are monitored more closely. There needs to be mandatory recording and disclosure of auto-disconnections, comparative prepay and post-pay costs, and clarity around signing on new customers who present a potential financial risk.
Note: All submissions will be made public over the course of the consultation period. Consumer NZ’s submission is available on our website.
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Next steps
To help guide submissions, the Electricity Authority has released a consultation document setting out four options for how the Consumer Care Guidelines could be improved.
Option one
If this option went ahead, there would be no changes. It would mean the guidelines are left exactly as they are. We think this is the least ideal of the options presented.
Option two
This option means the guidelines remain voluntary. However, there would be more clarity around some of their misunderstood aspects. The Electricity Authority specifies this option would ensure all power providers have the same understanding and interpretation of the guidelines.
Option three
With this option, more changes would be implemented, with parts 2, and 6 to 8 of the guidelines becoming mandatory for all power providers. These parts collectively cover:
publishing a consumer care policy
handling customer payment difficulties appropriately
managing disconnections and reconnections
ensuring care of medically dependent customers.
These parts of the guidelines were prioritised, as they are regularly cited as the most important in terms of consumer health and wellbeing. To ensure they were implemented, the Electricity Authority would need to monitor and regulate provider compliance.
In its consultation document, the authority has stated that this option is likely to benefit consumers, especially those who are most vulnerable. However, it could also lead to additional costs for power providers and, hence, consumers.
Option four
This option would require more changes, as all parts of the guidelines would be made mandatory. This is the option that Consumer NZ agrees with and what our submission to the Electricity Authority focuses on.
In addition to the matters covered by option three, this option would also make mandatory the parts of the guideline that cover:
maintaining information and records
signing up customers or declining a contract
upholding general business conduct
managing fees and bonds.
Again, the Electricity Authority would need to monitor and regulate compliance. Also, similarly to option 3, the authority has identified that this option would benefit consumers yet is also likely to mean additional costs for providers, and subsequently probably for consumers as well. The increase in costs is likely to be larger than under option three.
Note: If you’d like to know more about the Consumer Care Guidelines, you can access them here (875 KB).
We are hopeful that the Electricity Authority will implement option four as it progresses through its review process.
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