It's all about choice. How the residential electricity market performed in 2015

Table of contents

A review of the residential electricity market

This market performance review focuses on the residential electricity market. It provides a snapshot of what happened in this market during 2015. It looks at what the retail market is delivering to consumers and how consumers themselves are changing the face of the market.

The Electricity Authority’s work involves matters that promote 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? 

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.

2015 highlights

At the end of 2015, residential electricity consumers were being supplied by one of 31 retail brands. This is a new high.

A major trend for the year was the expansion of brands into new regions across New Zealand. Twelve out of 16 regions enjoyed increases in the number of retail brands on offer in 2015. Gisborne, Southland, and the Hawkes Bay were the only regions with no retail brand expansion in 2015.

In 2015, 417,784 consumers from all segments switched retailers—a new high. Of these, 384,841 were residential consumers. The switching rate for North Island consumers continued to exceed the switching rate for South Islanders. 

Wellington was the region with the highest switching rate. In total, 24 per cent of Wellingtonians switched retailers in 2015. The region with the highest increase in switching was the West Coast, which saw a 70 per cent increase in switching activity compared to 2014.

For the year ended March 2016, the average residential cost per unit of electricity was 1.7 per cent lower than in the previous year.  This is the first time in 15 years that the annual average cost of electricity has declined. 

The estimated average saving available to consumers who switched was $175 in 2015. There were significant differences in the savings available across the country, with some regions having estimated average savings exceeding $200.

Solar installations continued to increase in 2015, with a total of 8,281 total connections by the end of the year, mostly in Auckland. This is 3,600 more installations than at the end of 2014.

A notable trend in 2015 was the increased number of residential customers on pre-pay electricity contracts. Pre-pay connections increased from 30,804 in 2014 to 43,560 in 2015.

The electricity system, and market, is designed to deliver efficient and reliable power to consumers. Peak load periods, which occur during winter evenings, typically drive the level of investment in the electricity system. Consumers can reduce their peak demand, and hence the cost on the power system, by changing the timing of their consumption. Price signals can provide incentives for consumers to shift their consumption. 2015 saw an increase in the number of consumers that have retail plans where there is price variation throughout the day. There were 119,953 residential consumers on these plans in 2015 compared with 108,428 in 2014.

 


EMI

Note: The figures in this publication are provided on the Authority's EMI (Electricity Market Information) website. Links are provided to allow the reader to get updated data or investigate further. EMI also 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 2015 calendar year unless stated otherwise.

We use the term consumers to mean consumer connections or installation control points (ICPs). We use the term ‘customer’ interchangeably with ‘consumer’ depending on the context—retailers typically view themselves as serving customers, not consumer connections. Note however that each retailer has their own methodology for defining their customers.

When we refer to ‘residential’, this means the residential segment of the retail electricity market.

We work to develop the electricity market

The Electricity Authority (the Authority) is an independent Crown entity. We broadly group our work to develop the electricity market under the following areas:

  • reducing barriers: so there are no harmful barriers for businesses 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.
  • improving price signals: to help inform electricity industry investment and consumption decisions.
  • increase flexibility and resilience: so the electricity sector is able to respond efficiently to changing circumstances.

In 2015 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 ensure that consumers have easier access to information upon which to make decisions about their electricity supplier. The retail data project allows any consumer to obtain their consumption information from their retailer which can be used to assess competing plans. With the consumer’s permission, third parties can be authorised by consumers to access the same information directly so that they can provide services such as price comparison websites to consumers.

We made developments in the hedge market including work with the Australian Securities Exchange (ASX) to make smaller contracts available for retailers. This change is important, as most entrants into the retail market are stand-alone retailers that do not have generation assets. Hedge contracts are a way for retailers to manage their risks.

New Zealand has 29 different distribution companies. Any retailer that wishes to enter a region has to sign an agreement to be able to connect to a distributor’s network. This means that a national retailer needs 29 different agreements to operate. This may increase costs for retailers and distributors so the Authority is working on a set of common terms and conditions that can be applied across all distributors.

We are also increasingly focusing our attention on the area of efficient price signals. This is important with the increasing affordability of new technologies such as electric vehicles for consumers as there is a range of new technologies available that are getting more affordable; including electric vehicles, battery technology and small-scale solar generation. Efficient price signals mean consumers are able to access the necessary information to make investment decisions.

More detail on all of these projects is available in our work programme.

Consumers have more choice than ever

The residential part of the electricity market is by far the largest market segment, when measured by the number of connections1. There are more individual consumers in this segment than all other segments combined.

Retailers targeting the residential market work to differentiate themselves through distinctive products and service offerings. Some choose to target specific consumer groups.

At the end of 2015 there were 31 retail brands on offer to residential consumers around the country. These brands were backed by one of 20 independent retailers.

To avoid any discrepancies in this report, retail brands that had less than three customers at the end of 2015 have been excluded from our analysis.


1. A connection refers to an electricity connection to a local or embedded network. These connections are called installation control points (ICPs).

Brands have expanded into new regions

A major trend in 2015 was the expansion of brands into new regions. New electricity brands typically start in one of the larger cities and then expand further across the country.

During 2015:

  • Electric Kiwi Limited (Electric Kiwi) launched and by the end of 2015 it was available in Auckland, Bay of Plenty, Taranaki, Manawatu-Wanganui, Wellington, Canterbury and Otago
  • Ecotricity Superceded Limited (Ecotricity) entered four new regions
  • Glo-Bug Limited (Glo-Bug) entered new regions and by the end of 2015 was available nationwide
  • Flick Electric entered five new regions 
  • Energy Direct NZ Limited (Energy Direct) expanded to Auckland
  • Bosco Connect Limited (Bosco Connect) entered four new regions
  • Nova Energy Limited (Nova Energy) started operating on the Marlborough network
  • Seven other new retailers entered the market in single regions: 
    • Wise Prepay Energy, Property Power Limited, EMHTrade Limited, Utilise Limited, and P2 Power started operating in Auckland
    • Electra Energy Limited and Paua to the People started operating in Wellington
  • Budgie Power exited the market. 

Twelve regions had an increase in retail brands consumers can choose from while the remaining four regions saw no change.

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. Note again that we use the term consumers to mean consumer connections or installation control points. We track how many consumers change supplier as one measure of consumer activity in the retail market.

Consumers can also save by changing the times that they consume

A number of retailers offer time of use tariffs which mean lower prices during times of low overall demand. This allows consumers to shift their load to times when electricity is cheaper. Consumers can do this simply by using timers on appliances such as dishwashers and washing machines.  

The highest national switching rate on record

In 2015, 417,784 consumers from all segments switched retailers. This was an increase from 2014 and the highest switching level on record.

Of these, 384,841 were residential consumers. This is a 21.9 per cent national average switch rate.

Switching rates2 differ between regions and there is a difference between North Island consumers at 22.6 per cent and South Island consumers at 19.8 per cent.

South Island switching hit 21 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 past four years.

Figure 1 shows regional switch rates. Wellington was the standout region in 2015, with the highest switching rates in the country.


 

2. Switching rate is the number of switches between traders over 2015 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, 2015

Competition in the retail market remains intense

Trustpower overtook Meridian Energy Limited (Meridian) to become the fourth largest retailer serving the residential electricity market in 2015. Trustpower Limited (Trustpower) and Nova Energy gained more than 20,550 customers between them.

Flick Electric had a strong performance in the residential market in 2015, gaining 6,721 customers to increase from 410 customers at the start of the year to 7,131 by the end of the year.

Brands of major retailers Glo-Bug (a brand of Mighty River Power Limited (Mighty River Power)) and Energy Online (a brand of Genesis Energy Limited (Genesis)) also experienced growth, gaining more than 23,000 customers between them.

Meanwhile Contact Energy Limited, one of the five large retailers, lost 17,317 customers in 2015.

Figure 2: Who did consumers switch to? Independent retailers, 2015

Small independent retailers were serving 78,975 residential consumers by 31 December 2015, an increase of 8,471 consumers or 12 per cent during the year.

Many of the smaller retail brands not only expanded geographically but grew dramatically in scale during 2015.

  • Flick Electric grew significantly to almost 7,050 customer connections by December 2015.
  • New retailer Electric Kiwi entered the market with 672 customer connections. 
  • New retailer Electra Energy entered the market with 502 customer connections. 
  • Ecotricity entered four regions and ended the year with 158 connections. 

Figure 3 shows the growth (or decline) in the number of consumers served by residential brands during 2015. 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, 2015

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.

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) for all connections—a measure of how concentrated the customer base is taking into account each retailer’s market share. HHI has been decreasing for the past 10 years. This provides further evidence that the retail electricity market is becoming more competitive.

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 HHI being one of these. For the HHI presented here we only consider the market share of retail parent companies including all their brands, and includes all connections.

It is worth noting that it becomes progressively harder to further reduce HHI, as HHI reduces.

Figure 4: National average HHI all connections, 2004 – 2015

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 how 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 2015. 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 2015.

Figure 6 shows the changes over a longer time period with snapshots of HHI for the whole retail market from the most recent year (2015), five years ago (2010) and 10 years ago (2005). 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, 2015

Figure 6a: Snapshots of HHI all connections, 2005

Figure 6b: Snapshots of HHI all connections, 2010

Figure 6c: Snapshots of HHI all connections, 2015

More information on regional market concentration in 2015 for the residential market segment is available in the regional highlights section.

Competition resulted in lower costs for consumers for the year ended March 2016

The Ministry of Business, Innovation and Employment (MBIE) publishes two metrics as part of its electricity cost and price monitoring function; the Quarterly Survey of Domestic Electricity Prices (QSDEP) and sales-based electricity costs for residential consumers. Each metric provides an indicator of how the competitive pressures in the market are translating into prices that retailers offer, and what consumers are paying for electricity.

The sales-based cost data for residential consumers calculates the average cost per kWh paid by residential consumers. It uses actual volumes and revenues related to all electricity sold to residential consumers in its calculation; including the impact of any discounting or other incentive and retention payments.

Average sales-based electricity cost data for the year ended March 2016 indicates the average residential cost per unit of electricity used over the period was 1.7 per cent lower than in the previous year.

The QSDEP series shows how publically advertised residential electricity tariffs have changed over time. There are three key assumptions worth noting:3

  1. the modelled consumer uses 8,000 kWh of electricity per year with a common connection to their network
  2. incentive or retention payments made to consumers are not included in the calculations
  3. rates paid by consumers on fixed-term plans or receiving special deals are not included in the calculations.

Over 2015, the QSDEP showed a 0.6 per cent increase in the average residential electricity price for a consumer using 8,000 kWh per annum.4

Figure 7 shows both the trends in these two components and the total average New Zealand residential price.


3. You can read more about the QSDEP and the sales based electricity costs for residential consumers on the MBIE website.

4. Retail price changes compare the final quarter 2015 to the final quarter 2014.

Figure 7: Nominal electricity price changes, 2004 - 2015

Figure 7: Nominal electricity price changes, 2004 - 2015

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 five years to the end of 2015. 5


5 Change is calculated as the annual compound growth rate.

Figure 8: Average change in nominal electricity price components

Figure 8: Average change in nominal electricity price components

Both the sales-based cost data and the QSDEP indicate that the topics we’ve discussed earlier; costs, competition and market concentration, customer activity and behaviour and retailer innovation and responsiveness, resulted in real benefits for consumers in 2015. Consumers would do well to contact their current retailer and see if they can get a better deal.

Consumers can save money by switching 

The average estimated savings available for consumers increased eight per cent in 2015 to $175, from $162 in 2014.

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, 2015

Figure 10 shows the average residential savings available in each regional council region during 2015. 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 by region, 2015

If all households had switched to the cheapest deal in 2015 they collectively stood to save $307 million.

Due to the large number of consumers in Auckland, this region had by far the biggest total savings available with $80 million. However, the average savings per consumer in Auckland was below the national average.

We encourage consumers to regularly check their options

Ultimately, no matter how much choice consumers have, 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 focused on encouraging consumers to check that they are on the best plan to suit their needs in 2015. The campaign encourages all consumers to compare their options, whether or not they actually switch retailers. In addition, 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 2015 the website received 198,580 unique visitors, and was used a total of 236,865 times.

We encourage everyone to check regularly—the benefits are real. What’s My Number will continue its important role of raising awareness in 2016.

In 2015 the Authority surveyed electricity consumers. The survey showed that 63 per cent of consumers believed that a price comparison website—for example Powerswitch—was the most useful source of information. And 39 per cent of those consumers that reviewed their electricity retail plan used a price comparison website.

Sixty-five per cent of consumers believe it is worthwhile reviewing which provider can offer them the best deal, but only 23 per cent are likely to switch. In addition, 59 per cent of consumers thought it was easy to switch retailers.

The survey that these results come from was developed in conjunction with the Australian Energy Market Commission; the rule-maker for Australian electricity and gas markets. Later in 2016 we plan to publish a comparison between New Zealand and Australian consumers.

 

Residential electricity use varies around the country

There were 14,563 new residential connections in 2015 with every region except Gisborne experiencing an increase.

Most of the growth was in Auckland, Canterbury, the Bay of Plenty and Waikato, although percentage wise, Nelson was the fastest growing area with an increase of over two per cent for new connections. Against this trend Gisborne lost 92 connections (0.59 per cent) in 2015.

Figure 11: Number of new residential connections, 2015

Residential consumption was 32 per cent of the total electricity consumption in 2015. This proportion ranges from 26 per cent in January to 40 per cent in July when more energy is used for heating.

Total residential consumption in 2015 was 12,726 GWh, increasing by 175 GWh (1.39 per cent) from 2014. This growth appears to be due to the combination of both more connections and slightly higher average residential consumption in 2015.

Household consumption is highest and lowest in the South Island 

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 is no surprise then that average consumption varies a lot depending on where you live. In 2015 in the South Island residential consumers used an average of 8,225 kWh compared to those in the North Island who used only 6,903 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 2015 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 13 highlights these regional differences for 2015.

Figure 12: Average residential consumption, 2015

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 is available in the regional highlights section.

Retailers are innovating in product and payment options

Electricity retailers continued to innovate in 2015, particularly by offering new products and alternative ways for consumers to pay for their electricity.

Trustpower continued to grow on the back of its bundled services introduced in 2014.

In 2015 particular innovations included:

  1. the entry of Electric Kiwi, which offered a ‘free hour of power’ at selected time periods to its customers
  2. Flick Electric and Paua to the People, which pass on spot electricity pricing to customers.

A number of retailers introduced new payment options. These included payment options to allow customers to spread their payments or choose a payment date.

A number of retailers introduced apps and web tools to allow customers to pay bills, monitor their usage and compare their prices and plan option.

Genesis piloted a solar scheme for residential customers, and plans to trial a battery scheme in 2016.

Meridian and Mighty River Power introduced plans targeted at electric vehicles.

Pre-pay connections have increased

Total pre-pay connections increased from 30,804 in 2014 to 43,560 in 2015. This was driven largely by Glo-Bug—a brand of Mighty River Power offering pre-pay plans to its customers. Glo-Bug more than doubled its number of consumers; from 12,705 in 2014 to 31,119 in 2015.

These gains were in part due to Glo-Bug offering a discount to Community Services Card holders beginning in February 2015. Mighty River Power also marketed Glo-Bug heavily in 2015 and the marketing focused on customers being able to avoid disconnection fees and late payment penalties for non-payment of their electricity bill.

Solar connections continue to increase

2015 saw increased residential solar connections, a continuation of the trend we saw in 2014. Residential solar connections of less than 10kW rose from 4,688 to 8,281 connections in 2015. 

Figure 13: Residential solar connections less than 10kw

Smart meter roll-out continues

Many of the innovative activities around billing rely on smart meters. In 2015, another 129,896 smart meters were installed at residential connections. Connections with smart meters now make up 71 per cent of the residential market.

Figure 14: Installed smart meters by retail parent company, December 2015

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 consumers having a smart meter to deliver their service.

Figure 15: Proportion of retailer's residential connections with a smart meter, December 2014

Regional highlights

This section highlights trends and performance across the regions. Simply click on 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.

What choices are available?

At the end of 2015, there were 20 independent retailers retailing through 31 retail brands to residential consumers. Twelve regions experienced an increase in available retail brands in 2015, and four regions experienced no change.

Table 1: Consumer choice—retail brands, 2015

Table 1: Consumer choice—retail brands, 2015

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. Our surveys of consumers tell us that price is the most important consideration when switching retailers. Our latest consumer survey is available here: http://www.ea.govt.nz/monitoring/enquiries-reviews-and-investigations/2015/consumer-survey/

In 2015, more consumers could save from switching. We measure the percentage of consumers paying below the average offer. Thirteen regions experienced a decrease in this measure. Overall for New Zealand there were 54 per cent of consumers paying below the average offer, compared with 55 per cent in 2014.

Table 2: Consumers paying below the average offer, 2015

Table 2: Consumers paying below the average offer, 2015

What average savings are available?

In 2015 there was an increase in the savings available across 12 of the 16 regions. Taranaki, Manawatu-Wanganui, Wellington and Gisborne saw decreases in available 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 2015.

In 2015 consumers in the Bay of Plenty, West Coast and Otago stood to gain the most from switching to the cheapest retailer in their region.

Table 3: Average savings available

Table 3: Average savings available

Regions switch at different rates 

National residential switching rates in New Zealand increased slightly in 2015 to 21.9 per cent; higher than the previous recorded in 2013 of 20.8 per cent. Only three out of 16 regions experienced a decrease in switching rates.

Regional switching rates are highly variable year to year and often reflect retailer acquisition strategies and advertising in specific areas.

Table 4: Residential switching rates, 2015

Table 4: Residential switching rates, 2015

How often do we switch?

Just over half of all consumers have switched electricity supplier once or more in the   last five years and this proportion is increasing in about half of 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 can all benefit.

Table 5: Consumers switching one or more times in the past five years, 2015

Table 5: Consumers switching one or more times in the past five years, 2015

Is that market structure competitive?

We use 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, 2015

Table 6: Market concentration—competitive market structure, 2015

Top retailers’ market share 

The top four retailers market share measure is another way of tracking market concentration. In all regions the combined market share held by the biggest four retailers is declining. Overall in New Zealand, the market share for the top four retailers fell by 2.6 per cent. 

Table 7: Top four retailer market share, 2015

Table 7: Top four retailer market share, 2015

The top retailer’s market share is the market share of the largest retailer in the region. This is a useful measure because New Zealand began with a retail market consisting of regional monopolies, so the top retailer’s market share shows how far competition has eroded these regional monopolies.

Table 8 shows that the largest retailer in 15 out of 16 regions experienced a decrease in market share and the remaining region had a very small increase. The average largest market share for New Zealand is just over 44%, with the South Island less than 41%. The low and falling market shares of the largest retailers are indicators of the competitiveness of the retail market.

Table 8: Top retailer's market share

Table 8: Top retailer's market share

How much electricity do we consume?

There’s a large difference between South Island and North Island average electricity consumption. In 2015, average consumption increased in 11 out of 16 regions, with the national average increasing by 0.28 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 9: Average residential consumption, 2015

Table 9: Average residential consumption, 2015

Regional summaries

We’ve summarised the 2015 highlights for each region. These highlights include the impact consumer activity in the regions is 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 below.

Table 10: Retail parent companies and their brands residential market segment, 2015

Table 10: Retail parent companies and their brands residential market segment, 2015

In addition to these retail parent companies and brands in the table we’ve excluded Opunake Hydro’s Hampton Electric brand as it held less than three residential ICPs at 31 December 2015.

Northland

In 2015:

  • Northland’s switching rate increased slightly to 21.1 per cent. The proportion of consumers who have switched in the previous five years increased to 53 per cent, just below the national average of 54 per cent.
  • Consumers in Northland had 13 brands to choose from, depending on their network. Ecotricity entered the region in 2015.
  • The average annual savings available in Northland was $160, the eighth lowest in the country. Based on standard tariffs, Northland had 57 per cent of consumers paying below the average offer available to them at 31 December 2015, well above the national average.
  • Northland was the eighth largest regional market with 4.1 per cent (72,408) of national residential connections, adding 395 new connections in 2015.
  • Average residential consumer demand in Northland was 6,211 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 just above the national average.

Figure 16: Change in market share of residential connections by retail parent company—Northland region, 2015

Figure 17: Residential connections by retail brand—Northland region, 31 December 2015

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 2015, while the average possible savings were low, indicating that consumers made the most of the savings available to them.

In 2015:

  • The residential switching rate increased to 23.4 per cent, maintaining Auckland as the fourth highest region for switching. The proportion of consumers who switched in the previous five years increased to 57 per cent, well above the national average of 54 per cent.
  • Consumers in Auckland had between 11 and 26 brands to choose from, the most in the country. Energy Direct, Electric Kiwi, Wise Prepay Energy, Property Power, EMHTrade, Utilise and P2 Power entered the region in 2015.
  • The average annual savings available of $156 increased from $136 in 2014. Based on standard tariffs, 53 per cent of consumers were paying below the average offer available to them at 31 December 2015.
  • Auckland was the largest regional market with 29.2 per cent (514,437) of national residential connections.
  • Average residential consumer demand in Auckland was 7,139 kWh, the second highest in the North Island.
  • Solar connections less than 10 kW grew to 2,329, the most of any region.
  • The market share held by the four largest retailers decreased by 3.7 per cent to 90.8 per cent, just above the national average. Market concentration as measured by HHI value improved slightly, but still remains just above average.

Figure 18: Change in market share of residential connections by retail parent company—Auckland region, 2015

Figure 19: Residential connections by retail brand—Auckland region, 31 December 2015

Waikato

Waikato consumers remained active in 2015, and market concentration continued to decline.

In 2015:

  • Switching rates were the fifth highest in the country at 23.1 per cent. The proportion of customers who switched in the previous five years was 53 per cent, just below the national average of 54 per cent.
  • Customers in Waikato had between 11 and 18 brands to choose from, depending on their network. Electric Kiwi entered the region in 2015, and Budgie Power exited.
  • The average annual savings available of $157 increased slightly from 2014 but was below the national average of $175. Based on standard tariffs, 53 per cent of customers were paying below the average offer available to them at 31 December 2015.
  • Waikato was the fourth largest regional market with 10.4 per cent (183,625) of national residential connections, and was the fourth fastest growing adding 1,129 residential consumers in 2015.
  • Average residential consumption in Waikato decreased by 0.3 per cent to 6,828 kWh in 2015.
  • Market concentration as measured by HHI value and market share of the four largest retailers in the region continued to improve slightly. The market share of the four largest retailers was slightly below the national average, but market concentration remained above the national average.

Figure 20: Change in market share of residential connections by retail parent company—Waikato region, 2015

Figure 21: Residential connections by retail brand—Waikato region, 31 December 2015

Bay of Plenty

The Bay of Plenty region had the highest available savings in the country at $331.25. It remained a highly concentrated market with only moderate switching activity.

In 2015:

  • Residential switching rates in Bay of Plenty fell slightly to 20.1 per cent. The proportion of consumers who have switched in the previous five years increased slightly to 45 per cent, but this remained well below the national average of 54 per cent.
  • Consumers in Bay of Plenty had between 14 and 17 brands to choose from, depending on their network. Bosco Connect, Flick Electric and Electric Kiwi entered the region in 2015.
  • Bay of Plenty had the highest available savings in the country at $331, an increase from $318 in 2014. Based on standard tariffs, 54 per cent of consumers were paying below the average offer available to them at 31 December 2015.
  • Bay of Plenty was the fifth largest regional market with 6.75 per cent (119,066) of national residential connections.
  • Average residential consumer demand in Bay of Plenty was 6,639 kWh, an increase of by 1.2 per cent from 2014 and below average for the North Island.
  • Bay of Plenty had the most concentrated market in the country as measured by HHI value, although this measure fell slightly during 2015. The market share of the four largest retailers also fell slightly, decreasing by 0.9 per cent to 90.7 per cent—still above the national average of 89.3 per cent.

Figure 22: Change in market share of residential connections by retail parent company—Bay of Plenty region, 2015

Figure 23: Residential connections by retail brand—Bay of Plenty region, 31 December 2015

Gisborne

It was a big year for Gisborne. In 2015 it had the second highest switching activity and high available savings. This hot competition also meant the third highest fall in market concentration in the country as consumers sought better deals.

In 2015:

  • Gisborne had the second highest residential switching rate at 23.8 per cent down 14 per cent on 2014. The proportion of consumers who have switched in the previous five years increased nearly eleven per cent to 61 per cent, well above the national average of 54 per cent.
  • Consumers in Gisborne had 12 brands to choose from, the same as the brands in 2014.
  • The average annual savings available in Gisborne was $214, the fourth highest in the country. Based on standard tariffs, Gisborne had 55 per cent of consumers paying below the average offer available to them at 31 December 2015. This was a decrease of one per cent compared to 2014.
  • Gisborne was the second smallest regional market with less than one per cent (15,454) of national residential connections.
  • Average residential consumer demand in Gisborne was 6,312 kWh, a decrease of 1.2 per cent from 2014.
  • Gisborne had the fourth largest reduction in market concentration as measured by HHI value, and is the second least concentrated market. However, market share held by the four largest retailers in the region of 89.5 per cent was just above the national average of 89.3 per cent.

Figure 24: Change in market share of residential connections by retail parent company—Gisborne region, 2015

Figure 25: Residential connections by retail brand—Gisborne region, 31 December 2015

Hawke's Bay

Switching rates slightly decreased and market concentration dropped by five per cent in Hawke’s Bay. There were limited savings available, but with one new brand entering the region in 2015, consumers had slightly more choice of supplier.

In 2015:

  • Residential switching rates were low at 17.5 per cent, almost identical to 2014. The proportion of consumers who switched in the previous five years was the lowest in the country at 45 per cent.
  • Consumers in Hawke’s Bay had between 12 and 14 brands to choose from depending on their network, the same number of brands to choose from as 2014.
  • The average annual savings available was $135, the lowest in the country but was an increase from $115 in 2014. Based on standard tariffs, 52 per cent of consumers were paying below the average offer available to them at 31 December 2015, the same as 2014.
  • Hawke’s Bay accounted for 3.7 per cent (65,767) of national residential connections up 251 connections from 2014.
  • Average residential consumer demand in Hawke’s Bay was 7,227 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.

Figure 26: Change in market share of residential connections by retail parent company—Hawke’s Bay region, 2015

Figure 27: Residential connections by retail brand—Hawke’s Bay region, 31 December 2015

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. Average annual savings in Taranaki fell by more than any other region.

In 2015:

  • Taranaki’s residential switching rate increased to 23.5 per cent—the third highest level in the country. This was also the third highest increase in switching. Taranaki’s proportion of consumers who have switched in the previous five years remains the highest in New Zealand at 64 per cent.
  • Consumers in Taranaki had 16 brands to choose from, depending on their network. Flick Electric and Electric Kiwi entered the region in 2015.
  • The average annual savings in Taranaki decreased by 14 per cent to $138, well below the national average. Based on standard tariffs, 56 per cent of residential consumers were paying below the average offer available to them at 31 December 2015.
  • Taranaki had 2.7 per cent (48,128) of national residential connections.
  • Average residential consumer demand in Taranaki increased by 0.4 per cent to 6,291 kWh. This was the third lowest in the country.
  • Taranaki had the third lowest HHI value and the second lowest market share held by the largest four retailers (83 per cent).

Figure 28: Change in market share of residential connections by retail parent company—Taranaki region, 2015

Figure 29: Residential connections by retail brand—Taranaki region, 31 December 2015

Manawatu-Wanganui

Manawatu-Wanganui had the second highest proportion of consumers paying below the average offer—an indication the region has savvy consumers. The savings available decreased to $141.84 in 2015.

In 2015:

  • Manawatu-Wanganui’s switching rate increased to 22 per cent, similar to the national average, up from 2014. The proportion of consumers who have switched in the previous five years was 54 per cent, again sitting just at the national average.
  • Consumers in Manawatu-Wanganui had between 11 and 17 brands to choose from, depending on their network. Bosco Connect, Flick Electric, Electric Kiwi and Electra Energy entered the region in 2015.
  • The average annual savings available in Manawatu-Wanganui decreased in 2015 to $142, below the national average. Based on standard tariffs, Manawatu-Wanganui had 56 per cent of consumers paying below the average offer available to them at 31 December 2015, the second highest rate in the country.
  • Manawatu-Wanganui had 5.6 per cent (98,611) of national residential connections.
  • Average residential consumption in Manawatu-Wanganui was 6,438 kWh, an increase of 1.1 per cent from 2014.
  • 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 84 per cent.

Figure 30: Change in market share of residential connections by retail parent company – Manawatu-Wanganui region, 2015

Figure 31: Residential connections by retail brand Manawatu-Wanganui region, 31 December 2015

Wellington

Wellington had the highest switching rate, but the savings available decreased in 2015.

In 2015:

  • Wellington had the highest residential switching rate at 24.1 per cent, and the fifth highest proportion of consumers who have switched in the previous five years at 56 per cent, just over the national average of 54 per cent.
  • Consumers in Wellington had between 15 and 21 brands to choose from, depending on their network. Electric Kiwi, Electra Energy, Ecotricity and Paua to the People entered the region in 2015.
  • The average annual savings available of $153 decreased from $177 in 2014. Based on standard tariffs, Wellington had 52 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 (195,470) of national residential connections.
  • Average residential consumer demand in Wellington was 7,093 kWh, slightly above the North Island average.
  • Wellington had a below average level of market concentration as measured by HHI, and a lower than average level of market share of the four largest retailers (85.2 per cent). The market share of the four largest retailers in the region decreased by 4.4 per cent in 2015.

Figure 32: Change in market share of residential connections by retail parent company—Wellington region, 2015

Figure 33: Residential connections by retail brand—Wellington region, 31 December 2015

Tasman

In Tasman, switching activity remained low and the market remained concentrated, although there were some improvements during 2015.

In 2015:

  • Tasman had the lowest switching rate in the country of 15.4 per cent. Only 46 per cent of consumers have switched in the previous five years, well below the national average of 54 per cent.
  • Consumers in Tasman had 10 brands to choose from, with Glo-Bug entering the region in 2015.
  • The average annual savings available of $152, the fourth lowest in the country, was an increase from $143 in 2014. Based on standard tariffs, 55 per cent of consumers were paying below the average offer available to them at 31 December 2015.
  • Tasman has 1.1 per cent (19,650) of national customer connections.
  • Average residential consumer demand in Tasman was 7,278 kWh, a slightly higher than the national average.
  • Tasman had the highest uptake of solar connections at 1.1 per cent of residential connections.
  • Tasman had the second largest drop in market concentration in 2015 as measured by HHI and the market share of the four largest retailers reduced from 94.8 per cent in 2014 to 90.5 per cent in 2015. 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, 2015

Figure 35: Residential connections by retail brand—Tasman region, 31 December 2015

Nelson

Nelson is one of the smallest regional markets (with only 1.2 per cent of residential connections) but its consumers were the second most active in the South Island in 2015, with 21.2 per cent switching electricity supplier.

In 2015:

  • Fifty-four per cent of Nelson consumers have switched at least once in the last five years.
  • Consumers in Nelson had 11 brands to choose from, up one from 2014 with Ecotricity entering the region in 2015.
  • Average annual savings of $198 were available in 2015, an increase from $185 in 2014.
  • Based on standard tariffs, Nelson had 54 per cent of consumers paying below the average offer available to them at 31 December 2015. This was a two per cent decrease from 2014.
  • Average residential consumer demand in Nelson was 7,017 kWh, slightly higher than 6,971 kWh from 2014.
  • Nelson had the second highest uptake of solar connections at one per cent of residential connections.
  • Nelson had the fourth highest decrease in market concentration as measured by HHI value. The market share of the four largest retailers reduced to 88.8 per cent, slightly below the national average.

Figure 36: Change in market share of residential connections by retail parent company—Nelson region, 2015

Figure 37: Residential connections by retail brand—Nelson region, 31 December 2015

Marlborough

Marlborough remained one of the most competitive regions in the country in 2015 and switching increased 21 per cent from 2014.

In 2015:

  • Residential switching rates increased to 20.3 per cent, just below the national average. However, 57 per cent of Marlborough consumers have switched in the previous five years, which is the third highest rate in the country. 
  • Consumers had 13 brands to choose from with Bosco Connect and Nova Energy entering the region during 2015.
  • The average savings increased $14 to $185 in 2015 from 2014; this is above the national average. Based on standard tariffs, 52 per cent of residential consumers were paying below the average offer available to them at 31 December 2015.
  • Marlborough had 1.2 per cent (21,291) of national residential connections.
  • Average annual residential consumption in Marlborough decreased by 1.7 per cent to 7,067 kWh, below the national average.
  • Marlborough remains the region with the lowest HHI measure of market concentration and is also the region where the largest four retailers have the smallest market share (80.9 per cent)

Figure 38: Change in market share of residential connections by retail parent company—Marlborough region, 2015

Figure 39: Residential connections by retail brand—Marlborough region, 31 December 2015

West Coast

West Coasters had the second highest savings in the country. The West Coast is the smallest regional market, with the lowest average consumption.

In 2015:

  • West Coast had the highest increase in switching rate in the country going from 13.0 per cent in 2014 to 22.1 per cent in 2015. The proportion of consumers who switched in the previous five years was just 45 per cent, well below the national average of 54 per cent, placing it equal last.
  • Consumers in West Coast had 10 brands to choose from depending on network. Glo-Bug entered the region in 2015.
  • West Coast had the second highest available savings in the country at $237 despite having the lowest level of consumption. Based on standard tariffs, 52 per cent of consumers were paying below the average offer available to them at 31 December 2015.
  • West Coast was the smallest regional market with 0.85 per cent (14,965) of national residential connections and added just 108 connections in 2015.
  • Average residential consumption in West Coast was 6,015 kWh, the lowest in the country.
  • West Coast had the second most concentrated market as measured by HHI value, but showed the greatest improvement in this value in 2015. Market share held by the four largest retailers was 89.4 per cent which is about the national average, but as with HHI, West Coast showed the greatest improvement in this measure.

Figure 40 - Change in market share of residential connections by retail parent company—West Coast region, 2015

Figure 41 - Residential connections by retail brand – West Coast region, 31 December 2015

Canterbury

Canterbury residential consumers are the highest users of electricity in the country. They have been active in the market with a high proportion switching in the previous five years. However, it is one of four regions where this proportion dropped in 2015.

In 2015:

  • Canterbury had a below average residential switching rate of 19.8 per cent, and the proportion of consumers who have switched in the previous five years decreased to 52 per cent.
  • Consumers in Canterbury had between 10 and 16 brands to choose from, depending on their network. Bosco Connect, Electric Kiwi, Ecotricity, and Flick Electric entered the region in 2015.
  • The average annual savings available of $185 was higher than the national average of $175. Based on standard tariffs, Canterbury had 54 per cent of consumers paying below the average offer available to them at 31 December 2015, a decrease of two per cent compared to 2014.
  • Canterbury was the second largest regional market with 13.5 per cent (238,243) of national residential connections and was the fastest growing region adding 4,456 connections in 2015.
  • Average residential consumption in Canterbury was 8,677 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 highest level of market share held by the largest four retailers in the region at 92.3 per cent.

Figure 42 - Change in market share of residential connections by retail parent company—Canterbury region, 2015

Figure 43 - Residential connections by retail brand—Canterbury region, 31 December 2015

Otago

Otago is a highly competitive retail market, with a large proportion of consumers paying below the average offer available to them. However, in 2015, 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 2015:

  • Otago had a slightly below average residential switching rate of 20.8 per cent. Fifty-two per cent of consumers have switched in the previous five years, slightly below the national average.
  • Consumers in Otago had between 13 and 15 brands to choose from, depending on their network. Electric Kiwi, and Flick Electric entered the region in 2015.
  • The average annual savings available was above average at $214, a 14 per cent increase from 2014. Based on standard tariffs, 57 per cent of residential consumers were paying below the average offer available to them at 31 December 2015, the highest proportion of any region.
  • Otago had 5.4 per cent (94,837) of national customer connections.
  • Average residential consumer demand in Otago was 8,022 kWh, the third highest in the country.
  • Otago had the fourth lowest HHI value and the fifth lowest market share held by the largest four retailers in the region (86.2 per cent).

Figure 44 - Change in market share of residential connections by retail parent company—Otago region, 2015

Figure 45 - Residential connections by retail brand—Otago region, 31 December 2015

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 in 2015.

In 2015:

  • Residential switching rates were low at 17.5 per cent and the proportion of consumers who switched in the previous five years was low at 51 per cent.
  • Southland consumers had between 12 and 13 brands to choose from, depending on their network, the same brands to choose from as 2014.
  • The average annual savings available was $161, an increase of 24 per cent from 2014. Based on standard tariffs, 52 per cent of consumers were paying below the average offer available to them.
  • Southland has 2.3 per cent (40,980) of national residential connections.
  • Average residential consumer demand in Southland was 8,561 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 2014 levels.

Figure 46 - Change in market share of residential connections by retail parent company—Southland region, 2015

Figure 47 - Residential connections by retail brand Southland region 31 December 2015