Gavin Male: NZ Compare CEO on the problems with New Zealand's electricity business model

There’s a belief that there's a problem with the New Zealand electricity business model, not just the new disclosure rules. 

Gentailers —companies that both generate and sell electricity— are required to disclose the price they use internally to sell power to their retail arms.  

But NZIER research found the new disclosure rules don't provide enough information to show if companies are artificially inflating prices. 

Chief executive of consumer group NZ Compare Gavin Male told Mike Hosking that the market wasn't designed to be dominated by a few large gentailers. 

He says a recent OECD report found there's a need for more competition in the sector. 

LISTEN ABOVE 

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
We've got new disclosure rules designed to show whether the
power companies are making excess a possive profits. Now, the
problem with these rules apparently they're failing. So this comes
from research from the Consumer Advocacy Council. They found that
companies do not disclose enough information around their internal transfer price.
Gavin mail As the CEO of New Zealand Compare and
As with us, Gavin, morning to you.

Speaker 2 (00:19):
Good morning mate.

Speaker 1 (00:20):
Is this exclusively Gen Taylor's or everyone in the market.

Speaker 2 (00:24):
Well, I think it's it's mostly focused around the Gen
Taylor's because they are pretty much the whole market, Okay,
I mean, they're just an enormous part of our power consumption.

Speaker 1 (00:35):
Is that model in and of itself, because the transferred
price is what you're creating the power for and what
you flip it onto your retailing arm for. Is the
model the problem or are they just not playing ball?
And if they are playing ball, wouldn't make any difference
because we might go, look, the GAP's too big anyway.

Speaker 2 (00:51):
Yeah, I think the model is pretty much part of
the problem. I mean, there was a OECD report out
last month and pretty much that flag to that we
need more competition within our electricity sector, and that's from
completely independent people who look at the whole world.

Speaker 1 (01:08):
Is that just competition though, or is it gin Taylor?
So in other words, if you broke up all the
gent tailors, where that solved the problem? Or do you
just need more people doing it?

Speaker 2 (01:18):
Well, those sort of rules have come in well twenty
five years ago now where there was meant to be
more competition coming into the market, which then would lead
to a reduction in these profits and people dominating it.
But we're still sitting with the majority of households, so
sort of eighty five percent of people are getting their
power from one of these gent tailors or their subsidiaries.

(01:41):
So until consumers start driving that competition by moving to
some of these alternatives, yes, nothing's really going to change.

Speaker 1 (01:48):
Ah, So let's talk about that. My understanding, correct me
if I'm wrong, is that there are plenty of people
who will offer you power. You can switch. Switching isn't
that hard. There's plenty of competition and there's plenty of
information out there if you want to, and we're just
not is that fear or not true?

Speaker 2 (02:04):
That is completely fair, Mike. I mean, we're looking at
forty percent of households and on the same provider for
more than five years, and if just one percent of
all the households switched, we'd look at seven million in
savings a year.

Speaker 1 (02:21):
So this is on basically, so we could do if
we're wanted, but we just can't be bothered.

Speaker 2 (02:27):
Absolutely. Apathy is the biggest problem in this market because
the competition is available, there are other companies there, there
are other people to switch to, but people just don't
do it, and that's leaving three hundred and eighty five
bucks a year on the table for most householders exactly.

Speaker 1 (02:44):
So if you're a Gin Taylor and if you, depending
on who you talk to, are creaming it at the moment,
can you blame them because the options there for you
to do something about it, and if you don't want to,
who are they to argue with you?

Speaker 2 (02:56):
Yeah, I mean it's a similar sort of thing that
we have in that grocery sector. Is Yeah, it's a
bit of apathy. People need to get to like power
compared dot co dot NZ and compare their bills.

Speaker 1 (03:07):
Having said that, so do we need I mean we've
had a market study. We have a market study these
day assumingly into everything. It's airlines, it's power companies. Is
there fundamentally a problem in this country or are we
just simply too small? We've got five million people and
this is the way it is.

Speaker 2 (03:25):
Now. I don't think it has to be that way.
I mean, we've seen in broadband, broadband prices have dropped
over the years, whereas that doesn't happen in some of
these other sectors. And that's dropped because it's become easier
for companies to enter the barriers who entry is smaller
and competition is more. Consumers do switch when there are

(03:46):
alternatives that are.

Speaker 1 (03:47):
Attractive, interesting. Kevin appreciate time very much. Devin Mail, Who's
New Zealand compares CEO.

Speaker 2 (03:52):
For more from News Talks B listen live on air
or online, and keep our shows with you wherever you
go with our podcasts on I Radio