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10/10/2018 — General
Meridian reduces penalty payments

The head of one of the major listed energy companies has claimed there are unfair penalty payments and says the industry has “dirty secrets” that needed calling out.

Resource sector writer Grant Bradley said Meridian Energy Ltd (NZX: MEL; ASX: MEZ) chief executive Neal Barclay claims the power industry hasn’t been fair to New Zealanders and said his company was ditching prompt payment discounts.

Reporting in the Otago Daily Times, Barclay said: “Let me be absolutely clear that these are not discounts in the genuine retail sense. They are penalties charged for late payment of bills, and they hurt those who genuinely struggled to pay for their energy the most. That’s unfair by any definition.”

Meridian, ranked as NZ’s biggest power generator and 51% owned by the Government, said the penalties generated revenue of $5 million.

While it was tough to admit the lack of fairness in the penalty system, it was, he said, long overdue.

“I’m not saying we’ve been ripping people off. Power companies don’t make excessive profits in NZ, but the industry still has a few dirty secrets and it’s time they were called out.”

Bradley reported that Meridian scrapped the prompt payment system in the wake of the Government’s review of the electricity sector which found low-income consumers miss out more often on prompt payment discounts - which can be as high as 26% of the bill, and which budgeting and advocacy groups say are really late-payment penalties.

“Profiting from people’s inability to pay a bill on time is something that never sat well with me,” Barclay claimed.

“We know that roughly one in four people miss their payment date from time to time. This can be due to a simple admin error that has seen customers pay more, just because they were a few days late.”

Barclay said the mechanism was outdated and only councils also charged for late payments (on rates).

“They’re a hangover from the days when power companies were regional power boards run by local government, and they have no place in a competitive market like retail electricity.”

Barclay said not everyone was happy with the decision and there was a perception among some of our customers that they will now be paying more for power, and subsidising vulnerable customers through this change.

Grant Bradley reported the change came into force on October 1, which means everyone would pay the same price for their power, regardless if they paid this week or next.

Meridian’s earnings in fiscal 2018 were $666 M, up 1.4% on the previous year and it profit was up marginally to $201 M.

A preliminary review on the electricity sector found that after adjusting for inflation, residential prices were 79% higher than in 1990. Since 2000, New Zealand’s residential prices have risen faster than most other OECD countries.

About 103,000 households spent more than 10% of their income on domestic energy in 2015–16.

“People in this predicament are in what we call energy hardship. The picture is even worse if housing costs are excluded: the figure jumps to 175,000 households. Worryingly, children are over-represented in households experiencing energy hardship,” the review panel said.

The panel claimed the average gap between the cheapest retailer’s price and the incumbent retailer’s price has increased by about 50% since 2002, after accounting for inflation.

A final report, including recommendations on how to reform the industry, was due in May next year.

*sources: odt.co.nz; nzherald.co.nz

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Neal Barclay.