Electric company Octopus enters the market with a one-year offer of “no fixed daily costs”
- According to CanStar, “less user” households can save $120 or $240 with Octopus’ no-fixed-fee offer
- He describes his initial standard fee as “very competitive”
- Octopus expects electricity market to be reformed, says it is unsustainable and government is not ‘blind’
UK power company Octopus has started retailing electricity to Kiwi consumers at apparently very competitive rates that include no fixed daily charges for a year for those on “low user” tariffs.
Octopus sells electricity at peak, off-peak and mid-range tariffs which, in a suburb of downtown Auckland, would be between 17 cents and 35c per kilowatt hour for low-power users, depending on the hour of the day.
It also pays a generous first year rate of 17c/kWh to ‘buy back’ electricity from households that generate their own solar power.
Margaret Cooney, chief customer officer of Octopus NZ, said she saw an opportunity to give “some breathing room” to the 60% of the market that fell into the low user category.
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She acknowledged that guests were unaware of the prices that would apply if they chose to stay longer than a year, while claiming that Octopus – internationally – was committed to maintaining “fairly competitive”.
Market researcher CanStar said Octopus’ upfront prices compare well to other “no-frills” providers, and those with low fares would save $120 or $240 due to no fixed fees in their first year, based on their current fixed rate, too. calling its standard rates “very competitive”.
Power companies began doubling fixed charges for low users from 33 cents a day to 66c/day in April after being given the green light to do so by the government, who assumed the change would lead to an equivalent reduction of the price that would otherwise be paid by households that consume more electricity.
“Independent” electricity retailers – those not owned by Meridian, Genesis, Mercury and Contact producers – have struggled in recent years due to soaring wholesale electricity prices.
But Cooney said Octopus had an additional reason to enter the local power market.
The company employs 100 people in Wellington at a development center for its Kraken software which it hopes to showcase through its retail business and market to other power companies.
Retail examines our electricity market; why some say the current structure must go; and why there are big profits to be made in power.
Kraken is designed to allow electric vehicles to be automatically charged and for water heaters and appliances to be automatically turned on when energy consumption and rates are low, potentially saving consumers money and power companies.
Octopus also has operations in the UK, US, Japan, Germany and Australia and a total of 3.5 million electric customers, but Cooney said around 20 million customers use its technology a including its partners.
“In the UK, we have built a strong reputation as ‘the supplier of choice’ for people with electric vehicles.
Associate Commissioner of the Commerce Commission Vhari McWha told a gathering of around 200 industry bigwigs at Transpower’s headquarters in Wellington on Wednesday that the key regulatory parameters underpinning the industry were sound.
But Cooney assumed the electricity market was open to reform, saying the government was not blind to problems in the sector.
The amount of electricity used in New Zealand has remained roughly constant at just over 40 terawatt hours per year for the past 10 years, while the price paid for that electricity has more than doubled to just under $8 billion over that period, according to Electricity. Authority data, she noted.
Most of this cost increase has occurred in the past two years.
At the same time, there has been virtually no progress in increasing the proportion of electricity generated by renewables over the past six years, she observed.
“We’re not here to make noise about the regulations…but we expect there to be some sort of movement.
“It would be hard for anyone to suggest that the current market – how it works – is sustainable.”
Luke Blincoe, managing director of independent electricity retailer Electric Kiwi and a vocal critic of the current electricity market, said it was great to see another respected ‘independent’ enter the market, but agreed that it wasn’t. was not a sign that the market was repaired.
“They will definitely have the same issues that we talked about – they haven’t gone away and they haven’t gotten better,” he said.
Cooney said the “golden number” for Octopus to break into the retail market was likely 40,000 to 50,000 customers, but given that it also had tech licensing opportunities, there was likely to be quite a bit. leeway.
The high penetration of smart meters in New Zealand meant it was a good market to test the technology, she said.