Amid an ever-growing array of electricity plan options, decked out with discount offers and replete with accompanying online services, consumers should not lose sight of the tariff pricing structure that underpins their plan.
In recent years, a host of smaller and medium-sized companies have joined the larger retailers in the New Zealand market in competing for the consumer dollar, which in turn has seen the development of a greater choice of plans for consumers.
As noted by the Electricity Authority in its Electricity Market Performance 2015 review, the retail “market was again characterised by innovative pricing plans, fast growth in the prepay electricity space, and more bundled product offerings”.
Market innovation has become an increasingly important distinguishing factor for electricity retailers, which are aware that they need to keep up to speed with the latest trends to retain and attract customers.
Now more than ever, consumers can seek out the plan that is best suited to their individual needs, which, in addition to the tariff, may range from online account management and monitoring requirements to short-term contract flexibility or long-term solidity.
This is, of course, doubtless a good thing for consumers. However, for consumers searching for a new plan or considering changing their current provider, it will pay to be aware of the underlying tariff structure of retailers’ respective plans.
What is an electricity tariff?
A tariff is the pricing structure agreed to by a consumer with their retailer, with there being “many different tariff names and types across the industry”.
It is worthwhile looking at the structure of a typical power bill in understanding the role of the tariff in determining the total cost a customer will need to pay over the period they are being invoiced for.
The Electricity Authority explains that most bills include costs for fixed (also referred to as daily) and variable charges:
- Fixed charges are shown as cents or dollars per day, with consumers charged a fixed rate each day regardless of how much power is used.
- Variable charges are the charges for the actual power used, based on the kilowatt hours (kWh) used, the unit of measurement for electricity use, and charged at the rate agreed to with the retailer.
In assessing potential plans, consumers should pay particular attention to the rates for variable charges, which will determine the differing costs incurred over each invoice period.
What types of tariffs are on offer?
Some of the tariffs that have traditionally been on offer from retailers include:
Anytime, single rate tariffs
As explained by retailer Genesis Energy, its Anytime rate is for electricity supply at the same price 24 hours a day.
These sorts of tariffs, sometimes referred to as single rate tariffs, may be a good option for consumers who use a consistent amount of electricity throughout the course of the day, and not so much in off-peak hours.
Genesis’ Day/Night rates, meanwhile, “are for customers who use an above-average amount of electricity at night”, with different rates applying for the day (typically 7am-11pm) and the night (typically 11pm-7am).
These sorts of tariffs, divided into peak and off-peak times, allow consumers to schedule the majority of their power usage for off-peak times.
Genesis describes its controlled rate as being “for the controlled supply of electricity to selected appliances that are permanently wired to a separate meter”.
These sorts of tariffs are used in conjunction with appliances such as hot water systems, with Genesis advising that the electricity supply “can be turned off during peak times for an allocated period determined by the network company”.
While these sorts of tariffs have been a standard offering from retailers, the introduction of new meter technology, known as smart meters, has also changed respective retailer approaches.
Smart meter technology brings changes to the marketplace
Figures released last year by the Electricity Authority revealed that seven out of 10 New Zealand households now have a smart meter installed.
The Electricity Authority notes that smart meters will “help consumers to benefit from cost reflective pricing such as ‘time-of-use’ tariffs”.
“When used together, smart meters and new technologies that enable consumers to decide how they use and generate power will deliver significant benefits for consumers,” the Electricity Authority states.
“Using a smart meter with solar PV and battery storage could help a consumer decide when, and how much, power to buy from or sell into the grid. Smart meters enable ‘time-of-use’ tariffs by recording exactly when consumers use or generate their power throughout the day.”
The Electricity Authority noted last year that 21 new retail brands had entered the market in the last five years, most having “built their business models to use smart meter data to reduce costs, increase efficiency, improve customer service and offer new services and tariffs”.
So, what are some of these new tariffs on offer from retailers? The Electricity Authority makes mention of three retailers:
Electric describes itself as “an independent digital electricity company”, stating that it “saw a gap for a company that could maximise smart technology to offer electricity that was cheaper, smarter and easy to manage”.
Part of Electric’s product offerings is its Hour of Power, allowing customers to choose 60 minutes of off-peak power, with all electricity used during that hour free each day.
Flick describes itself as “the first NZ electricity company to use smart meter technology and proprietary software to give customers access to the real-time, wholesale costs of electricity”.
Flick states that it passes through all of the wholesale costs of getting electricity to a customer’s residence without any mark-up, charging a separate fee to look after its customers as their retailer.
Via Flick’s CHOICE app, customers can check what the price of power is in real-time, choosing whether to consume electricity or not.
GLOBUG provides a prepay electricity plan, which it states “puts you in control of your electricity costs, by allowing you to pay for electricity as you go”.
GLOBUG customers can check their account balance and top-up their account via the GLOBUG app for Android and iOS, along with seeing an estimate of how many days of power are remaining.
What are solar feed-in tariffs?
For consumers with solar panels, or for consumers considering having solar panels installed, there is not only the opportunity to generate their own electricity, but feed-in tariffs are also available from a number of retailers, incorporating purchase of excess electricity generated and fed into the grid.
Retailer Trustpower, for instance, states of its domestic generation purchase:
“If you generate your own power, there may be the opportunity to sell your excess generation to Trustpower. Around New Zealand, we buy electricity from many small-scale domestic generators, including micro-hydro schemes, solar panels and wind turbines under 10 kW capacity.
“This domestic generation, also called distributed generation, could be an excellent way to help minimise your power costs.”
Consumers interested in introducing solar into their electricity mix should research their options online, and talk to experts within the field, in calculating what sort of benefit it will potentially be to their individual household.
Which tariff to choose?
In selecting a tariff consumers should, if possible, determine the patterns of their historical usage, or their anticipated future usage, providing a guide as to what sort of costs they can expect to incur and the best way to go about minimising those costs.
Consumers should consider when the majority of their usage occurs, and then determine whether a time-of-use tariff, the sort of tariff commonly offered in conjunction with smart meters, is their best option. For consumers anticipating low electricity usage, a single rate tariff may, alternatively, be a better option.
It is, of course, worthwhile shopping around and comparing the various plans and prices on offer from retailers, along with reviews of their respective services.
Consumers should keep in mind the length of the contract on offer from the retailer (be it short or long-term), and other services on offer, including online and mobile app support, providing for account monitoring and management.