Flick Electric CEO Steve O’Connor. Photo / Supplied
Flick Electric, who was named energy retailer of the year, says it is unable to take on new customers due to high wholesale electricity prices.
In an update to its customers today, the Wellington-based company, majority owned by Z Energy and Eastland Energy, said the move was temporary and would not affect its 27,000 existing customers.
“High wholesale prices mean it is no longer affordable to purchase electricity blankets in advance to cover new customers,” the company said.
“It says a lot about the state of New Zealand’s electricity market when Consumer NZ’s Energy Retailer of the Year for 2021 (that’s us) can’t accept new customers.”
Managing Director Steve O’Connor said there was no way to buy term coverage for clients at a price that made sense to both parties.
“It really reflects those forward prices, so it doesn’t make sense from a business point of view or a customer point of view to provide a price to new customers that doesn’t make sense to them or to them. we.”
The company was started to give retail customers direct access to the wholesale market, but in 2018 it started offering a covered product. The “vast majority” of its customers were now on the product covered, O’Connor said.
Markets have suggested wholesale prices will remain at unusually high levels for years, O’Connor said.
“We’ve been dealing with volatility and pretty high prices for quite a while now and if you look into 2024 – that’s how far the ASX goes in terms of futures, they stay insanely high and that are indeed prices that are unaffordable for new customers. “
O’Connor said it was clear from the Power Switch website (run by Consumer NZ to promote customer switching) that no independent retailer is looking to take on customers.
“It really takes the competition out of the market pretty quickly.”
Kerry McDonald, who served on Transpower’s governing board in the 1990s, said this week that the problems in the electricity market stemmed from the government ignoring his advice. He said that the problems now came up often, it was only a little worse than usual.
O’Connor said the market was showing “the same old problems”, but after looking at prices in the wholesale market since its inception, he thought the current situation was “completely unprecedented” and unsustainable.
“This not only affects independent retailers and their ability to compete, but it also impacts large industrial users. We are destroying productivity,” O’Connor said.
“Our view is that it highlights systemic issues that need to be addressed either by the government or by the acting Electricity Authority.”
Flick has started a petition calling for a structural separation of the electricity market, dividing the major utilities into separate generation or retail businesses.
This week, Meridian, by far New Zealand’s largest producer – which also has a significant retail business, notably through its subsidiary Powershop – rejected calls, saying a campaign was underway to discredit the vertically integrated model. .
“The two most vocal independent retailers, Flick and Electric Kiwi, are both backed by major companies that have the capacity to support new renewable builds, which would allow them to manage their risks more effectively,” said a spokesperson for Meridian.
O’Connor said the argument was patently flawed.
“It is inappropriate to say that just because we are a retailer that we should invest in production. The market is designed to accommodate those who want to specialize in retail.”
“Our market was designed to accommodate independent retailers,” he said. Retailers were typically customer-centric companies with a digital focus, while retailers were specialized engineering firms with a focus on capital management.
“It doesn’t make sense. It’s like saying Noel Leeming has to invest in washing machines. No, actually Fisher & Paykel are doing it. They are doing it very well.”
The Electricity Authority is examining the functioning of the wholesale spot and forward market. The results are expected to be released in about two months.