Empowering decisions – 2014 in review Residential electricity market performance 2014
Introduction
The Electricity Authority’s work involves matters that impact the long-term benefits that the electricity market provides to consumers:
- Will the lights stay on? Do the market arrangements ensure continued electricity supply even in dry years or during foreseeable emergencies?
- Do consumers have choice? Can consumers switch easily to get the best deal for them?
- Are prices reasonable? Do the prices consumers pay reflect the efficient costs of supplying them?
- Is innovation occurring? Are suppliers developing new services and pricing plans to deliver greater value to consumers?
This market performance review focuses on the residential electricity market. It provides a snapshot of what happened in this market during 2014. It looks at what the retail market is delivering to consumers and how consumers themselves are changing the face of the market.
There are links throughout this publication to our EMI website (www.emi.ea.govt.nz) where you can access updated information, read notes relating to the reports, and download the data or figures.
2014 Highlights
At the end of 2014, residential consumers were being supplied by one of 27 retail brands, a new high. A major trend for the year was the expansion of brands into new regions across New Zealand. All16 regions enjoyed increases in the number of retail brands on offer in 2014.
In 2014 385,596 consumers switched retailers. North Island consumers continued to switch more than South Islanders, and Gisborne was the standout region, with switching rates increasing by 42% compared to 2013.
Average savings available to consumers if they switched increased to $162 in 2014. There were significant differences in the savings available across the country, with some regions having estimated average savings exceeding $200.
We tracked regional residential electricity consumption for the first time in 2014. South Island residential consumers used an average of 8,248 kWh, compared to the North Island average of 6,879 kWh. There were significant regional differences within the islands.
Another trend for 2014 was an increase in solar installations. There were a total of almost 4,500 connections by the end of the year, mostly in Auckland.
Electricity retailers continued innovating. We observed retailers finding new ways of engaging with consumers, more bundled offers and more time-of-use pricing packages.
The competitive part of the electricity industry delivered a cost reduction for residential consumers in 2014.
Note: Figures are provided by the EMI website and links are provided to allow the reader to get updated data or investigate further. In addition, the website provides more comprehensive notes detailing any assumptions or data sources. EMI is a live system and is subject to change as backdated events or corrections are processed.
All statistics and figures relate to residential consumers and are for the 2014 calendar year unless stated otherwise.
We use the term consumers to mean consumer connections or installation control points (ICPs).
When we refer to residential, this means the residential segment of the retail electricity market.
Our work
We broadly group our work to develop the electricity market under the following areas:
- Reducing barriers: so there are no harmful barriers for business to enter or exit the electricity markets.
- Facilitating consumer participation: finding opportunities for consumers to have more control over their electricity use and enable innovation in how they interact with their electricity supply.
- Providing efficient price signals: to help inform electricity industry investment and consumption decisions.
- Promoting flexibility and resilience: so the electricity sector is able to respond efficiently to changing circumstances.
In 2014 we continued to run the highly successful What’s My Number campaign. The purpose of What's My Number is to add competitive pressure to the electricity market. The more consumers actively shopping around for the best deal, the more competitive retailers need to be.
We also worked to facilitate consumer participation through a project to improve the transparency of consumers' electricity charges. We have now published guidelines for retailers’ and distributors’ communications about price changes with media and consumers. The aim of the guidelines is to help make sure consumers have timely access to sufficient information so they can understand their bills, see what is driving price changes and make choices about their retailer.
New prudential and settlement rules were put in place in 2014, which have reduced the financial barriers faced by new retailers when they enter the market. We also finalised work on an opt-in ‘save protection’ scheme. Retailers who elect to be part of this scheme can be assured when they acquire a new customer that the customer’s old retailer can’t try and persuade them to stay while the switch process is underway.
Looking ahead, our work in the residential electricity market includes the retail data project which is considering options to promote retail competition by improving access to retail electricity data.
We are also increasingly focusing our attention on the area of efficient price signals. For consumers this is important as there are a range of new technologies available – including electric vehicles, battery technology and small-scale solar generation. It’s important there are efficient price signals so consumers can be clear about the investment decisions they are making. Our programme of work in the distribution pricing area looks at this issue.
More detail on all of these projects is available in our work programme.
All consumers have choice
This review is of the residential segment of the retail electricity market. The residential segment is by far the largest market segment, when measured by the number of connections [1], with more individual consumers in this segment purchasing electricity than all other segments combined.
Retailers in this segment seek to differentiate themselves through distinctive products and service offerings with some choosing to target specific consumer groups.
At the end of 2014 all residential electricity consumers were supplied by one of 27 retail brands backed by one of 17 independent retailers.
Two of these independent retailers (EMH trade and Electric Kiwi) and one additional brand (Hampton Electric, part of Opunake Hydro) had less than three customer connections as at 31 December 2014. To avoid any discrepancies in this report, we’ve excluded these three entities from our analysis. This means we have tracked 24 brands retailing to residential consumers, an increase from 23 in 2013
[1] - A connection refers to an electricity connection to a local or embedded network. These connections are called installation control points (ICPs).
Record regional expansion
A big trend in 2014 was that the hot competition in the main centres has expanded to the regions. There was record regional expansion of retail brands giving consumers more choice than ever before. While some brands expanded into regions where their parent companies were already operating, we also observed some independent retailers entering regions for the first time.
Greater choice and more competition is a good thing for consumers. More choice also means it’s even more worthwhile checking if there are better deals available.
In 2014:
- Payless Energy entered Queenstown and Central Otago (Aurora Energy network).
- Newcomer Flick Electric started retailing on 6 networks, all in the North Island.
- The Pulse Energy brand (separate from their group brands Just Energy and Grey Power Electricity) entered 23 networks and had a nationwide presence by the end 2014.
- Glo-Bug entered 22 new network regions, expanding from operating on only 6 in 2013 to 28 by the end of 2014.
- Energy Online entered the South Island for the first time. They also expanded into the Northland networks.
- Simply Energy expanded into 6 new networks across New Zealand, giving it a presence across 13 networks by the end of the year.
- Trustpower started operating on the Southern Hawke’s Bay (Scanpower) network for the first time, making it available nationwide.
- A new retailer, Ecotricity, started operating in Auckland.
All 16 regions had an increase in retail brands consumers can choose from.
More information on the choices available to consumers in different regions is available in the regional summary section.
Consumers switched to get better deals
A switch occurs when a consumer changes from their existing retailer to a new provider. We track how many consumers change supplier as one measure of consumer activity in the retail market.
National switching rates
In 2014, 385,596 consumers switched retailers, a slight decrease from the record levels of switching in 2013, when 396,376 consumers moved retailers. Of these, 350,376 were residential consumers reflecting a 20.2 per cent national average switch rate.
Switching rates [2] differ between regions and there is a big difference between North Island consumers at 21.1 per cent and South Island consumers at 17.3 per cent.
South Island switching hit 22 per cent in 2011, the first year of the What’s My Number campaign, but has fallen away since then. In comparison, North Island consumers seem more active as their switching rates have remained at or above 20 per cent for the last 4 years.
Figure 1 shows regional switch rates. Gisborne was the standout region in 2014, with the highest switching rates in the country—a massive 42 per cent increase from its 2013 switching level.
[2] - Switching rate is the number of switches between traders over 2014 expressed as a percentage of the average number of consumers across the period in the market segment and region.
Figure 1: Regional residential switching rates, 2014
Who are consumers switching to?
The medium-sized retailers (Trustpower, Pulse Energy and Nova Energy) all had strong performances in the residential market in 2014, gaining almost 35,000 consumers between them. Mighty River Power had mixed results with their smaller brands compensating for losses on their Mercury brand.
Figure 2: Who did consumers switch to? Independent retailers, 2014
Consumer willingness to switch helps discipline the market and ensure retailers are competitive. While switching in itself does not measure this willingness, it does provide an indicator of the willingness, which can be used to complement other measures.
They’re small…but growing!
New retailers entering the market is a sign of healthy competition, which is great for consumers. New retailers can help raise consumer awareness about options and act as an incentive for existing retailers to offer competitive prices and improve their service quality levels, or else risk losing customers. Growth of small competing retailers has an important effect on competition as they create a competitive fringe, which restrains and disciplines the behaviour of the traditional, bigger players.
Outside of the six largest retail parent companies, small independent retailers were serving 70,512 consumers by 31 December 2014, an increase of 13,171 consumers or 23 per cent during the year.
Many of the smaller retail brands not only expanded geographically but grew dramatically in scale during 2014.
- Flick Electric Ltd grew to almost 400 customer connections by December 2014
- Payless Energy more than doubled its customer base from 150 to 360 customer connections
- Mighty River Power retired its Jimmi brand, while its other small brand Budgie grew strongly.
- New retailer Ecotricity entered the Auckland market offering zero emissions electricity.
Figure 3 shows the growth (or decline) in the number of consumers served by residential brands during 2014. Although small retailers currently make up a small share of the market, they are important as competitive pressure often comes from those operating at the margins.
Figure 3: Residential brand growth, 2014
Competition is reducing market concentration
Engaged consumers and responsive retailers combine to create an environment where the retailers that respond best to consumer needs gain market share. Over time, as new retailers enter and grow market share, market concentration reduces. This improves the competitive environment for all consumers.
Figure 4 shows the Herfindahl-Hirschman Index (HHI)—a measure of how concentrated the customer base is which takes into account each retailer’s market share. The HHI has been decreasing for the past 10 years. This provides some further evidence that the retail electricity market is becoming more competitive over time. There was a noticeable decrease in the HHI during 2011, when the first What’s My Number campaign launched.
Relative market shares and levels of concentration are important measures of the drivers of the competitive pressure in the market. No one measure is perfect, so we look at a range of indicators, with the HHI being one of these. For the HHI presented here we only consider the market share of retail parent companies including all their sub brands.
It is worth noting that it becomes progressively harder to further reduce the HHI, as the HHI reduces.
Figure 4: National average HHI – all connections, 2004 – 2014
Retailers have a different presence in each regional market depending on many factors including: who was there first; wholesale price risk; competitiveness; how attractive the consumers might be or strategic the region is. These factors are in addition to how active the consumers are, or put another way how easy or hard it is for retailers to attract new consumers.
Figure 5 represents the change in HHI for different regions across New Zealand in 2014. Regions coloured in green experienced the largest decrease in HHI and improvement in competitive market structure. The improvement in these regions was followed by the regions that are yellow then orange. All regions saw a drop in HHI during 2014.
Figure 6 shows the changes over a longer time period with snapshots of HHI for the whole retail market from the most recent year (2014), 5 years ago (2009) and 10 years ago (2004). Clearly there has been a trend across all regions to a more diverse and competitive market, but some regions have performed better than others.
Figure 5: Change in HHI – all connections, 2014
Figure 6a: Snapshots of HHI – all connections, 2004
Figure 6b: Snapshots of HHI – all connections, 2009
Figure 6c: Snapshots of HHI – all connections, 2014
More information on regional market concentration in 2014 for the residential market segment is available in the regional highlights section.
The competitive component of residential electricity prices fell
The Ministry of Business, Innovation and Employment (MBIE) conducts a Quarterly Survey of Domestic Electricity Prices (QSDEP). Over 2014, the QSDEP showed a 2.41 per cent increase [3] in the average residential electricity price for a consumer using 8,000 kWh per annum. However, this increase was made up of a 6.95 per cent increase in the lines component (the monopoly part of the industry which are regulated by the Commerce Commission) and a 0.57 per cent reduction in the ‘energy and other’ component (these costs are set through the competitive part of the industry and are regulated by the Electricity Authority).
Figure 7 shows both the trends in these two components, as well as the total average New Zealand residential price.
[3] Retail price changes compare the final quarter 2014 to the final quarter 2013.
Figure 7: Nominal electricity price changes, 2004 – 2014
Figure 8 shows the average increase per annum in the nominal price components for the six years to the end of 2010 and compares this to the average for the four years to the end of 2014. [4]
[4] - Change is calculated as the annual compound growth rate.
Figure 8: Average change in nominal electricity price components
The 0.57 per cent decrease in the energy and other component over 2014, along with reduced annual increases over the last four years, is further indication that competition is improving. Prices that residential consumers pay are influenced by the topics we’ve discussed earlier in this report; competition and market concentration, customer activity and behaviour and retailer innovation and responsiveness, and for 2014 their combined effect led to a price reduction and savings for consumers. But we believe there is still more to achieve.
More information on the QSDEP is available at http://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-data-modelling/statistics/prices/electricity-prices/
Savings are available
The savings available for consumers increased slightly in 2014 to $162 from $155 in 2013.
We work out the average savings by looking at what consumers could have saved if they all switched to the cheapest retailer each month. Many consumers may stand to save more than the average.
The average savings available reduces as consumers switch to better deals or retailers with large customer bases respond to competitive pressure and shift their prices closer to the cheapest alternative.
Alternatively, average savings will increase if consumers remain with a retailer that increases their margin above the cheapest alternative; or if a retailer without many customers offers a cheaper deal without managing to attract significant numbers of consumers to it.
Figures 9 and 10 present the average regional savings available. More information is available in the regional summary section.
Figure 9: Average annual residential savings, 2014
Figure 10 shows the average residential savings available in each regional council region during 2014. Consumers in regions with higher savings stood to save more than $200 per year if they switched to the cheapest deal available to them.
Figure 10: Average annual residential savings, 2014
If all households had switched to the cheapest deal in 2014 they collectively stood to save $281 million.
Due to the large number of consumers in Auckland, this region had by far the biggest total savings available with $69 million. However, the average savings per consumer in Auckland was below average.
Don't forget to check
Ultimately, no matter how many brands are available, the performance of the retail electricity market relies on consumers being willing and able to shop around for electricity.
The ongoing What’s My Number campaign evolved in 2014 from a focus on switching to checking. The campaign encourages all consumers to compare their options, whether or not they actually switch retailers. Checking regularly that you are on the best deal by being active with your current retailer helps continue the competitive pressure in the electricity market.
What’s My Number continues to have good brand awareness and in 2014 the website received 196,151 unique visitors, and was used a total of 236,175 times.
We encourage everyone to check regularly—the benefits are real. What’s My Number will continue its important role of raising awareness in 2015 and 2016.
73 per cent of consumers recall the What’s My Number campaign, and 31 per cent recall visiting the website.
77 per cent of consumers believe it is worthwhile reviewing which provider can offer them the best deal, but only 30 per cent are likely to shop around.
- UMR Research, ‘Shopping around for electricity retailers’, February 2014.
International switching trends
While there is still work to be done, New Zealand’s retail electricity market remains an international leader, with our retailers being particularly proactive. In 2014, we surveyed consumers in Australia, Texas (US) and Alberta (Canada) to see how their views and behaviour compared to New Zealanders’.
The research results show New Zealand consumers are most likely to be approached by electricity retailers about switching—69 per cent of consumers were approached at least once in a 2-year period, compared to 47 per cent in Alberta, the next highest.
However, when asked if they would proactively approach retailers to switch, New Zealanders were the least likely of all four locations to do so, with only 35 per cent of New Zealand respondents saying they would. This compares with 51 per cent of Texan consumers.
The competitive rivalry in the New Zealand retail market is significantly stronger than in the other markets we looked at.
UMR Research, ‘Consumer survey - switching and perceptions of electricity retailers’, August 2014.
Residential electricity use
There were 21,435 new residential connections in 2014 with every region in New Zealand experiencing an increase. Most of the growth was in Auckland, Canterbury and Waikato, although percentage wise, Northland was the fastest growing area with 1.9 per cent new connections.
Figure 11: Number of new residential connections, 2014
How much electricity do residential consumers use?
Residential consumption was 32 per cent of the total electricity consumption in 2014. This proportion ranges from 25 per cent in February to 37 per cent in July when more energy is used for heating.
Total residential consumption in 2014 was 12,551 GWh, increasing by 216 GWh (1.75 per cent) from 2013. This growth appears to be due to the combination of both more connections and slightly higher average residential consumption in 2014.
How much do you consume?
Household consumption depends on many factors, including the number of occupants, size, age and construction materials of the house, heating choices, and environmental factors. Some households also generate their own electricity that is consumed on site and does not contribute to the energy provided by their retailer.
It’s no surprise then that average consumption varies a lot depending on where you live. In 2014 in the South Island residential consumers used an average of 8,241 kWh compared to those in the North Island who used only 6,875 kWh.
A third of residential electricity is typically used for space heating in houses, so the fact that it is colder in the South Island is probably the main driver of this difference. Another potential reason for this difference is that many North Island consumers have access to reticulated gas that is regularly used for water and space heating, reducing their reliance on electricity.
Interestingly, in 2014 the South Island includes both the highest and lowest average consumption amongst the regions with Canterbury being the highest and the West Coast the lowest. Figure 11 highlights these regional differences for 2014.
Figure 12: Average residential consumption, 2014
If you live in a high consumption household, it’s even more important to keep up to date with the products and services on offer which can assist with your consumption and supply decisions.
For tips on managing consumption or improving energy conservation contact your retailer, energy services company or see http://www.energywise.govt.nz/your-home/save-money-on-your-energy-bill.
More information on regional consumption and the change on 2013 is available in the regional summary section.
Residential solar connections double
The number of customers with solar installations continued to increase in 2014, with the total number of residential connections with solar power more than doubling during the year to almost 4,500 connections. Combined, these residential solar connections have capacity of 15.8 MW.
Auckland was the most active area, with 1,336 solar connections by the end of the year, followed by Canterbury, Waikato and Otago. In percentage terms though, it was the upper South Island regions of Tasman, Nelson and Marlborough that had the highest uptake rates. In Tasman, 0.86 per cent of residential connections have some form of solar generation.
Figure 13: Residential solar connections with capacity less than 10 kW, 2014
Changes in buy-back rates
There were big changes in buy-back rates in 2014, with most retailers choosing to more closely align these to wholesale power prices. Buy-back rates are the amount electricity retailers will pay for any electricity generated by consumers and exported back into the local network. These 2014 changes have significantly reduced the economic viability of large solar installations on residential properties. However, if most of the solar power can be used onsite, then the change to buy-back rates will have little effect on an individual’s pay-back period for solar investments.
In February 2014 Vector introduced a trial scheme for customers to lease a combined battery and solar panel system. By using batteries solar energy can be stored and then used during evening peaks. Vector is able to control the units remotely, and this may allow some improvements in network efficiency. This scheme was very popular and the 250 units allocated for the trial were quickly acquired by customers.
Innovation and conduct
Electricity retailers continued to innovate in 2014, in particular in the way they engage and provide information to consumers.
Changes we observed in 2014 included:
- Improved website and mobile apps to allow customers to better monitor and manage their electricity usage.
- More TV advertising, with Trustpower and Nova Energy launching TV campaigns. Trustpower started TV advertising in selected regions with its ‘better together’ campaign. This was the first time in a decade that Trustpower used TV advertisements and marked an apparent change to compete actively in main centres for the first time. Nova Energy started TV advertisements for the first time with its Glover St ad campaign.
- A change in acquisition approach by some retailers to reduce the use of door to door sales techniques led by Genesis Energy.
- More variety in options for pricing structures, including an increase in the availability of time-of-use (TOU) pricing plans. Notable changes were the further roll-out of Flick Electric Ltd, which exclusively offers TOU plans. At 31 December, 81,611 consumers were paying a different price depending on when they chose to use electricity. More than half of these consumers were in Canterbury where distribution charging helps create a clear incentive to consume at off peak times.
- The first charging rate targeted at electric vehicles with Mighty River Power introducing a special electric vehicle charging rate which is 30 per cent cheaper than normal pricing, but is interruptible and only applies during off-peak hours.
- More bundled product offerings. Traditionally bundling has occurred with gas and electricity services, but we are now seeing bundles with broadband and telephone options too. This gives consumers more choice in how they receive these products and services.
- More join-up incentives such as Genesis Energy’s first month free campaign and Powershop’s ‘savings guarantee’.
- A range of new billing management systems to make it easier for customers to pay their bill. An example of this is Meridian’s “Deferred Winter Payment” for agribusiness. This service lets customers align their cash flows by allowing winter electricity expenditure to be deferred until November.
- Disconnections as a result of overdue debt fell in each quarter over 2014. A range of new or improved payment options, to assist with paying down debt or smoothing out payments, may have contributed to this result.
Conversely, there was very little change in prepaid contract arrangements. At 31 December 2014 there were 30,767 consumers on prepaid contracts, largely unchanged from a year earlier.
Like products in most markets the price of energy (cents per kWh) changes with scarcity and production costs. In New Zealand, the wholesale electricity price changes every 30 minutes of every day at more than 250 locations on the national grid depending on how generation is offered into the market by suppliers and the level of demand. Most retailers insulate their consumers in some way from this price volatility. However, these prices provide important signals on the value of energy and can provide a signal to reduce consumption.
Smart meter roll-out continues
Many of the innovative activities around billing rely on smart meters. In 2014, another 170,000 smart meters were installed at residential connections. Connections with smart meters now make up 62 per cent of the residential market.
Figure 14: Installed smart meters by retail parent company, December 2014
Retailers have adopted smart meters at different rates reflecting different company policies and priorities. Most retailers with high installation rates are actively using smart meters to provide new services to their customers. For example, Mighty River Power uses the capabilities of smart meters to provide their ‘Good Energy Monitor’ service.
Many of the smaller retailers have every customer on a smart meter, with some relying on a smart meters to deliver their service.
Figure 15: Proportion of retailer's residential connections with a smart meter, December 2014
Regional highlights
Jump to the topic area of your choice to check the performance of your region and how your local market stacks up. The results are ranked from 1 (highest performer) to 16 (lowest performer). The statistics are reported by regional council regions.
At the end of 2014, there were 15 independent retailers retailing through 24 retail brands to residential consumers. There were also three retail brands that retailed only to commercial consumers. All regions experienced an increase in available retail brands in 2014.
Independent retailers Flick Electric and Ecotricity began operating in a limited number of regions, while independent retailers Nova Energy, King Country Energy, Simply Energy and Opunake Hydro expanded into more regions. Pulse Energy expanded into all network regions.
Major retailers also expanded their brands into more regions:
- Mighty River Power expanded its Budgie Power, Glo-Bug, Bosco Power and Tiny Mighty brands
- Genesis Energy expanded its Energy Online brand into all regions
- Trustpower expanded its Energy Direct brand.
Only one brand was disestablished—Mighty River Power’s Jimmi brand.
Table 1: Consumer choice - retail brands, 2014
Are consumers taking the best deal?
We looked at the average offer available in each region and then whether consumers are paying above or below this average. If they are paying below it means they’ve moved to a comparatively cheaper rate—which is a good sign that consumers are actively looking for and choosing better deals. If they are paying more than the average, it means they could be saving by switching retailers.
The most interesting aspect of this metric is how little it has changed from 2013. The largest change across all regions is 6 per cent. This may indicate minimal changes in pricing structure from retailers with large market share in 2014.
Table 2: Consumers paying below the average offer, 2014
What average savings are available?
In 2014 there was an increase in the savings available across 12 of the 16 regions. Only Marlborough, Hawke’s Bay, Auckland and Canterbury saw decreases in savings. Average annual regional savings of between a little over $100 to over $300 were available.
We calculate this result by looking at what residential consumers could have saved if they all switched to the cheapest retail offer available in their region in 2014.
In 2014 consumers in Bay of Plenty, West Coast and Gisborne stood to gain the most from switching to the cheapest retailer in their region.
Table 3: Average savings available, 2014
Switching rates
National switching rates in New Zealand decreased slightly in 2014 to 20.2 per cent compared to 2013’s record high of 20.8 per cent. Only seven out of 16 regions experienced an increase in switching rates which reflects the national decrease.
Regional switching rates are highly variable year-to-year and often reflect retailer acquisition strategies and advertising in specific areas. The large increase in Gisborne switching rates suggests that the region was targeted by retailers in 2014.
Table 4: Residential switching rates, 2014
How often do we switch?
Just over half of all consumers have switched electricity supplier once or more in the last 5 years and this proportion is increasing across almost all regions. It is encouraging to see consumers becoming more active and being more prepared to switch for a better deal. The increase in consumer awareness and activity means retailers offering more value can gain market share. In turn, this increases competition and we all benefit.
Table 5: Consumers switching one or more times in the last 5 years, 2014
Is that market structure competitive?
We use the Herfindahl-Hirschman Index (HHI) to see how concentrated and dispersed the market share in each region is. A low number indicates a less concentrated market with lots of players. A high number means a more concentrated market. If a region has one or two large players, with few competitors, there is generally less incentive for the large players to offer competitive pricing or to innovate.
Across the board, market concentration is decreasing, which is a great sign of increasing competition.
Table 6: Market concentration - competitive market structure, 2014
What about the top four?
This measure looks at the top four retailers’ market share in each region, and is another way of tracking market concentration. In all regions the combined market share held by the biggest four retailers is declining, although it is pretty slow in some regions.
Table 7: Top four retailer market share, 2014
How much electricity do we consume?
There’s a large difference between South Island and North Island average electricity consumption. In 2014, average consumption increased in 9 out of 16 regions, with the national average increasing by 0.3 per cent.
The West Coast is notable as the region with the lowest average consumption, despite being in the South Island. This may reflect a preference for non-electric heating sources.
Table 8: Average residential consumption, 2014
Regional summaries
We’ve summarised the 2014 highlights for each region. These highlights include the impact consumer activity in the regions are having on the local markets and how retailers including new entrants are responding.
We talk about both retail parent companies and retail brands in these regional summaries. The relationship between these two entities is shown in below.
Table 9: Retail parent companies and their brands - residential market segment, 2014
| Retail brand (24) | Retail parent company (15) |
| Genesis Energy | Genesis Energy |
| EnergyOnline | Genesis Energy |
| Contact Energy | Contact Energy |
| Mercury Energy | Mighty River Power |
| Tiny Mighty | Mighty River Power |
| Glo-Bug | Mighty River Power |
| Bosco Connect | Mighty River Power |
| Budgie Power | Mighty River Power |
| Meridian Energy | Meridian Energy |
| Powershop | Meridian Energy |
| Trustpower | Trustpower |
| EnergyDirect | Trustpower |
| Nova Energy | Todd Energy |
| Just Energy | Pulse Energy |
| Grey Power Electricity | Pulse Energy |
| Pulse Energy | Pulse Energy |
| King Country Energy | King Country Energy |
| Hunet Energy | Hunet Energy |
| Simply Energy | Simply Energy |
| Flick Electric | Flick Electric |
| Payless Energy | Payless Energy |
| Prime Energy | Prime Energy |
| Opunake Hydro | Opunake Hydro |
| Ecotricity | Ecotricity |
In addition to these retail parent companies and brands in the table we’ve excluded EMH Trade and Electric Kiwi (along with their brands of the same name) and Opunake Hydro’s Hampton Electric brand as they held less than three residential ICPs at 31 December 2014.
Northland
Northland is a fast growing region in terms of new connections and had the largest increase in available brands in 2014. However, average savings in the region were below national average.
In 2014:
- Northland’s switching rate declined slightly to 20 per cent. The proportion of consumers who have switched in the previous 5 years was also below average at 50 per cent.
- Consumers in Northland had between 12 and 13 brands to choose from, depending on their network. Energy Online, Glo-Bug, Bosco Connect, Pulse Energy and Simply Energy all entered the region in 2014.
- The average annual savings available in Northland was $133, the third lowest in the country. Based on standard tariffs, Northland had 56 per cent of consumers paying below the average offer available to them at 31 December 2014, slightly above the national average.
- Northland was the eighth largest regional market with 4.1 per cent (72,017) of national residential connections, and was the fastest growing with 1,397 new connections.
- Average residential consumer demand in Northland was 6,229 kWh, the second lowest in the country and the lowest in the North Island.
- Northland had below average market concentration as measured by HHI value. Market share held by the largest four retailers was similar to the national average.
Figure 16: Change in market share of residential connections by retail parent company—Northland region, 2014
Figure 17: Residential connections by retail brand—Northland region, 31 December 2014
Auckland
The Auckland market is large, both in terms of number of consumers and in terms of average residential consumption. Competition between existing retailers is strong. Switching rates remained high in 2014, while the average possible savings were low, indicating that consumers made the most of the savings available to them.
In 2014:
- The residential switching rate decreased to 21.2 per cent, and Auckland slipped from the second most active region to the fourth. The proportion of consumers who switched in the previous 5 years increased to 55 per cent, and remains above average.
- Consumers in Auckland had up to 21 brands to choose from, the most in the country. Tiny Mighty, Flick Electric, Opunake Hydro and Ecotricity entered the region in 2014.
- The average annual savings available of $136 decreased from $158 in 2013. Based on standard tariffs, 55 per cent of consumers were paying below the average offer available to them at 31 December 2014.
- Auckland was the largest regional market with 29.2 per cent (510,474) of national residential connections.
- Average residential consumers demand in Auckland was 7,118 kWh, the highest in the North Island.
- Solar connections less than 10 kW grew to 1,336, the most of any region.
- The market share held by the four largest retailers in the region remained high, but decreased by 2.2 per cent to 94.3 per cent. Market concentration as measured by HHI value improved slightly, but still remains above average.
Figure 18: Change in market share of residential connections by retail parent company—Auckland region, 2014
Figure 19: Residential connections by retail brand—Auckland region, 31 December 2014
Waikato
Waikato consumers remained active in 2014, and market concentration continued to decline.
In 2014:
- Switching rates were the second highest in the country at 22.4 per cent. The proportion of customers who switched in the previous 5 years improved to 51 per cent, but remained below average.
- Customers in Waikato had between 10 and 17 brands to choose from, depending on their network. Energy Direct and Flick Electric entered the region in 2014.
- The average annual savings available of $147 increased slightly from 2013 but was below the national average of $162. Based on standard tariffs, 55 per cent of customers were paying below the average offer available to them at 31 December 2014.
- Waikato was the fourth largest regional market with 10.4 per cent (182,433) of national residential connections, and was the second fastest growing.
- Average residential consumption in Waikato increased by 2.4 per cent to 6,847 kWh in 2014, the largest increase in the country.
- Market concentration as measured by HHI value and market share of the four largest retailers in the region continued to improve slightly, decreasing from 2013 levels.
Figure 20: Change in market share of residential connections by retail parent company—Waikato region, 2014
Figure 21: Residential connections by retail brand—Waikato region, 31 December 2014
Bay of Plenty
The Bay of Plenty region had the highest available savings in the country at $318. It remained a highly concentrated market with only moderate switching activity.
In 2014:
- Residential switching rates in Bay of Plenty increased slightly to 20.7 per cent. The proportion of consumers who have switched in the previous 5 years increased slightly to 42 per cent, but this remained well below the national average of 53 per cent.
- Consumers in Bay of Plenty had 12 to 16 brands to choose from depending on their network. Energy Direct, Pulse Energy and Budgie Power entered the region in 2014.
- Bay of Plenty had the highest available savings in the country at $318, an increase from $288 in 2013. Based on standard tariffs, 56 per cent of consumers were paying below the average offer available to them at 31 December 2014.
- Bay of Plenty was the fifth largest regional market with 6.7 per cent (117,506) of national residential connections.
- Average residential consumers demand in Bay of Plenty was 6,558 kWh, a small decrease from 2013 and below average for the North Island.
- Bay of Plenty had the most concentrated market in the country as measured by HHI value, and this changed little during the year. The market share of the four largest retailers also did not change significantly, decreasing by 1.6 per cent.
Figure 22: Change in market share of residential connections by retail parent company—Bay of Plenty region, 2014
Figure 23: Residential connections by retail brand—Bay of Plenty region, 31 December 2014
Gisborne
It was a big year for Gisborne. In 2014 it had the highest switching activity, the highest increase in switching activity and high available savings. This hot competition also meant the biggest drop in market concentration in the country as consumers sought better deals.
In 2014:
- Gisborne had the highest residential switching rate at 27.8 per cent and it also had the largest increase in switching rates—up a massive 42 per cent on 2013.
- Consumers in Gisborne had 12 brands to choose from, with Energy Online, Glo-Bug and Pulse Energy entering the region in 2014.
- The average annual savings available in Gisborne was $218, the third highest in the country. Based on standard tariffs, Gisborne had 56 per cent of consumers paying below the average offer available to them at 31 December 2014. This was an increase of 6 per cent compared to 2013, the largest increase in the country.
- Gisborne was the second smallest regional market with 1 per cent (16,754) of national residential connections.
- Average residential consumer demand in Gisborne was 6,390 kWh, a small decrease from 2013.
- Gisborne had the largest reduction in market concentration as measured by HHI value, and is the fourth least concentrated market. However, market share held by the four largest retailers in the region of 93.5 per cent was above the national average of 91.7 per cent.
Figure 24: Change in market share of residential connections by retail parent company—Gisborne region, 2014
Figure 25: Residential connections by retail brand—Gisborne region, 31 December 2014
Hawke's Bay
Switching rates increased and market concentration dropped significantly in Hawke’s Bay. There were limited savings available, but with four new brands entering the region in 2014, consumers had more choice of supplier.
In 2014:
- Residential switching rates were low at 17.7 per cent, but improved from 15.8 per cent in 2013. The proportion of consumers who switched in the previous 5 years was the second lowest in the country at 41 per cent.
- Consumers in Hawke’s Bay had between 11 and 14 brands to choose from depending on their network. Glo-Bug and Flick Electric entered the region in 2014.
- The average annual savings available was $115, the lowest in the country which was a slight decrease from $122 in 2013. Based on standard tariffs, 52 per cent of consumers were paying below the average offer available to them at 31 December 2014, also the lowest in the country and a large drop from 55 per cent in 2013.
- Hawke’s Bay accounted for 3.7 per cent (64,306) of national residential connections up 0.3 per cent from 2013—the second smallest increase in the country.
- Average residential consumer demand in Hawke’s Bay was 7,136 kWh, above the North Island average.
- Market concentration as measured by HHI value was higher than average, as was the market share held by the four largest retailers. However, Hawke’s Bay experienced the second biggest improvement for both these metrics in 2014.
Figure 26: Change in market share of residential connections by retail parent company—Hawke’s Bay region, 2014
Figure 27: Residential connections by retail brand—Hawke’s Bay region, 31 December 2014
Taranaki
Taranaki had the largest proportion of consumers who had switched in the previous 5 years, but significant savings remained available for those who were willing to take advantage of them. The region also saw the biggest increase in average annual savings available in 2014.
In 2014:
- Taranaki’s residential switching rate declined the most in the country, dropping by from 2013 highs to 20.3 per cent. However, Taranaki’s proportion of consumers who have switched in the previous 5 years remains the highest in New Zealand at 62 per cent.
- Consumers in Taranaki had between 14 and 15 brands to choose from, depending on their network. Glo-Bug and Budgie Power entered the region in 2014.
- The average annual savings in Taranaki increased by 86 per cent to $161 near the national average. This was the biggest increase in New Zealand for 2014. Based on standard tariffs, 58 per cent of residential consumers were paying below the average offer available to them at 31 December 2014, the highest of any region.
- Taranaki had 2.8 per cent (48,139) of national residential connections.
- Average residential consumer demand in Taranaki increased by 0.6 per cent to 6,268 kWh. This was the third lowest in the country.
- Taranaki had the second lowest HHI value and the lowest market share held by the largest four retailers (83.9 per cent).
Figure 28: Change in market share of residential connections by retail parent company—Taranaki region, 2014
Figure 29: Residential connections by retail brand—Taranaki region, 31 December 2014
Manawatu-Wanganui
Manawatu-Wanganui had the second highest proportion of consumers paying below the average offer—an indication the region has savvy consumers. However, the savings available increased significantly from 2013 to $150.
In 2014:
- Manawatu-Wanganui’s switching rate of 20.4 per cent was similar to the national average, down slightly from 2013. The proportion of consumers who have switched in the previous 5 years was 54 per cent.
- Consumers in Manawatu-Wanganui had between 10 and 15 brands to choose from, depending on their network. Glo-Bug, Budgie Power and Simply Energy entered the region in 2014.
- The average annual savings available in Manawatu-Wanganui increased in 2014 to $150, below the national average, but up from $94 in 2013. Based on standard tariffs, Manawatu-Wanganui had 57 per cent of consumers paying below the average offer available to them at 31 December 2014, the second highest rate in the country.
- Manawatu-Wanganui had 5.6 per cent (98,201) of national residential connections.
- Average residential consumption in Manawatu-Wanganui was 6,370 kWh. Unchanged from 2013.
- Manawatu-Wanganui had below average market concentration as measured by HHI value and the third lowest level of market share held by the largest four retailers at 85.5 per cent.
Figure 30: Change in market share of residential connections by retail parent company – Manawatu-Wanganui region, 2014
Figure 31: Residential connections by retail brand – Manawatu-Wanganui region, 31 December 2014
Wellington
Switching remained high in Wellington and 2014 also saw an increase in the savings available.
In 2014:
- Wellington had the third highest residential switching rate, and the proportion of consumers who have switched in the previous 5 years is above average at 55 per cent.
- Consumers in Wellington had between 14 and 19 brands to choose from, depending on their network. Flick Electric, Opunake Hydro and King Country Energy entered the region in 2014.
- The average annual savings available of $177 was a large increase from $134 in 2013. Based on standard tariffs, Wellington had 54 per cent of consumers paying below the average offer available to them. This is below the national average.
- Wellington was the third largest regional market with 11.1 per cent (194,501) of national residential connections.
- Average residential consumer demand in Wellington was 7,063 kWh, slightly above the North Island average.
- Wellington had an average level of market concentration and a slightly lower than average level of market share of the four largest retailers (89.1 per cent). The market share of the four largest retailers in the region decreased by 3.9 per cent, the biggest reduction in the country.
Figure 32: Change in market share of residential connections by retail parent company—Wellington region, 2014
Figure 33: Residential connections by retail brand—Wellington region, 31 December 2014
Tasman
In Tasman, switching activity remained low and the market remained concentrated, although there were some improvements during 2014.
In 2014:
- Tasman had a very low switching rate of 13.9 per cent, the second lowest in the country. Only 48 per cent of consumers have switched in the previous 5 years.
- Consumers in Tasman had 9 brands to choose from, up one from 2013 with Energy Online entering the region in 2014.
- The average annual savings available of $143, the fourth lowest in the country, was an increase from $125 in 2013. Based on standard tariffs, 56 per cent of consumers were paying below the average offer available to them at 31 December 2014.
- Tasman has 1.1 per cent (19,928) of national customer connections.
- Average residential consumer demand in Tasman was 7,238 kWh, very similar to the national average.
- Tasman had the highest uptake of solar connections at 0.86 per cent of residential connections.
- Tasman had the fourth largest drop in market concentration in 2014 as measured by HHI and the market share of the four largest retailers reduced from 97.2 per cent in 2013 to 94.8 per cent in 2014. However, it still remains one of the more concentrated markets.
Figure 34: Change in market share of residential connections by retail parent company—Tasman region, 2014
Figure 35: Residential connections by retail brand—Tasman region, 31 December 2014
Nelson
Nelson is one of the smallest regional markets (with only 1.2 per cent of residential connections), but its consumers were the most active in the South Island in 2014 with 21.1 per cent switching electricity supplier.
In 2014:
- Nelson had the second largest increase in switching rates. 56 per cent of Nelson consumers have switched at least once in the last 5 years.
- Consumers in Nelson had between nine and 10 brands to choose from, depending on their network. Glo-Bug entered the region in 2014.
- Average annual savings of $185 were available in 2014, an increase from $148 in 2013.
- Based on standard tariffs, Nelson had 56 per cent of consumers paying below the average offer available to them at 31 December 2014. This was a slight increase from 2013.
- The region experienced the second biggest reduction in average demand, down from 7027 kWh to 6971 kWh.
- Nelson had the second highest uptake of solar connections at 0.62 per cent of residential connections.
- Nelson had the third highest decrease in market concentration as measured by HHI value; with market concentration improving to slightly lower than average. The market share of the four largest retailers reduced to 92.4 per cent, slightly higher than the national average.
Figure 36: Change in market share of residential connections by retail parent company—Nelson region, 2014
Figure 37: Residential connections by retail brand—Nelson region, 31 December 2014
Marlborough
Marlborough remained one of the most competitive regions in the country in 2014, but switching activity continued to decline.
In 2014:
- Residential switching rates dropped to 16.8 per cent, the third lowest rate in the country. However, 57 per cent of Marlborough consumers have switched in the previous 5 years, which is the second highest rate in the country. It’s important for all consumers to check regularly that they are still on the best deal for their situation.
- Consumers had 11 brands to choose from with Glo-Bug and Energy Online entering the region during 2014.
- The average savings dropped $42 to $172 in 2014 from 2013, the largest drop in available savings in the country, but still above average. Based on standard tariffs, 55 per cent of residential consumers were paying below the average offer available to them at 31 December 2014.
- Marlborough had 1.2 per cent (21,170) of national residential connections.
- Average annual residential consumption in Marlborough increased by 1.4 per cent to 7,193 kWh, similar to the national average.
- Marlborough remains the region with the lowest HHI measure of market concentration. However, it slipped to second place in terms of the least market share held by the top four retailers in a region (84.1 per cent).
Figure 38: Change in market share of residential connections by retail parent company—Marlborough region, 2014
Figure 39: Residential connections by retail brand—Marlborough region, 31 December 2014
West Coast
West Coasters had the lowest switching rates in the country in 2014, but high savings were available in the region. The West Coast is the smallest regional market, with the lowest average consumption.
In 2014:
- West Coast had the lowest switching rate in the country at 13.0 per cent, a further decrease from 15.5 per cent in 2013. West Coast also had the lowest proportion of consumers who switched in the previous 5 years at just 41 per cent.
- Consumers in West Coast had 8 or 9 brands to choose from depending on network. Energy Online entered the region in 2014.
- West Coast had the second highest available savings in the country at $224 despite having the lowest level of consumption. Based on standard tariffs, 56 per cent of consumers were paying below the average offer available to them at 31 December 2014.
- West Coast was the smallest regional market with 0.8 per cent (14,853) of national residential connections and was the slowest growing region with a 0.2 per cent growth rate.
- Average residential consumption in West Coast was 6,005 kWh, the lowest in the country.
- West Coast had the second most concentrated market as measured by HHI value, and also showed the least improvement in this value. It had the highest market share held by the four largest retailers in the country at 95 per cent, and this only improved very slightly compared to 2013.
Figure 40: Change in market share of residential connections by retail parent company—West Coast region, 2014
Figure 41: Residential connections by retail brand – West Coast region, 31 December 2014
Canterbury
Canterbury residential consumers are the highest users of electricity in the country. They have been very active in the market with a high proportion switching in the previous 5 years. However, it is one of only two regions where this proportion dropped in 2014.
In 2014:
- Canterbury had a below average residential switching rate of 17.4 per cent, and the proportion of consumers who have switched in the previous 5 years decreased to 56 per cent.
- Consumers in Canterbury had between 8 and 14 brands to choose from, depending on their network. Energy Online, Pulse Energy, Budgie Power and Simply Energy entered the region in 2014.
- The average annual savings available of $150 was slightly below the national average of $162. Based on standard tariffs, Canterbury had 55 per cent of consumers paying below the average offer available to them at 31 December 2014, up 4 per cent compared to 2013.
- Canterbury was the second largest regional market with 13.4 per cent (233,715) of national residential connections and was the third fastest growing region.
- Average residential consumption in Canterbury was 8,716 kWh, the highest in the country.
- Solar installations of less than 10 kW capacity increased to 758, the second highest number behind Auckland.
- Canterbury had below average market concentration as measured by HHI value but it had a high level of market share held by the largest four retailers in the region at 93.9 per cent. The market share of the four largest retailers reduced by 2.8 per cent in 2014, the third largest such decrease.
Figure 42: Change in market share of residential connections by retail parent company—Canterbury region, 2014
Figure 43: Residential connections by retail brand—Canterbury region, 31 December 2014
Otago
Otago is a highly competitive retail market, with a large proportion of consumers paying below the average offer available to them. However, in 2014, the below average switching rates and above average levels of savings available suggest that consumers could have taken better advantage of the offers available to them.
In 2014:
- Otago had a slightly below average residential switching rate of 18.0 per cent. Fifty-four per cent of consumers have switched in the previous 5 years, slightly above the national average.
- Consumers in Otago had between 8 and 13 brands to choose from, depending on their network. Energy Online, Glo-Bug and Budgie Power entered the region in 2014.
- The average annual savings available was above average at $188, an increase from $162 in 2013. Based on standard tariffs, 57 per cent of residential consumers were paying below the average offer available to them at 31 December 2014, the third highest of any region.
- Otago had 5.4 per cent (93,936) of national customer connections.
- Average residential consumer demand in Otago was 8,017 kWh, the third highest in the country.
- Otago had the third lowest HHI value and low market share held by the largest four retailers in the region (87.1 per cent).
Figure 44: Change in market share of residential connections by retail parent company—Otago region, 2014
Figure 45: Residential connections by retail brand—Otago region, 31 December 2014
Southland
Southland is a small region with high market concentration and below average savings available. However, the competitiveness within the region appears to be improving with an increase in switching rates and the entrance of five new brands in 2014.
In 2014:
- Residential switching rates were low at 17.1 per cent, but increased significantly from 14.8 per cent in 2013. The proportion of consumers who switched in the previous 5 years was low at 49 per cent.
- Southland consumers had 12 brands to choose from with 5 new retailers, the most in the country. Energy Online, Nova Energy, Glo-Bug, Pulse Energy and Simply Energy entered the region in 2014.
- The average annual savings available was $130 the second lowest in the country, but a slight increase from $127 in 2013. Based on standard tariffs, 54 per cent of consumers were paying below the average offer available to them.
- Southland has 2.3 per cent (40,766) of national residential connections.
- Average residential consumer demand in Southland was 8,503 kWh, the second highest in the country.
- Market concentration and market share held by the four largest retailers were above average, but decreased slightly from 2013 levels.
Figure 46: Change in market share of residential connections by retail parent company—Southland region, 2014
Figure 47: Residential connections by retail brand – Southland region, 31 December 2014
