The Electricity Authority is stepping in at the expense of lines companies to protect flagging competition in the electricity market.
Some electricity retailers could be forced to pull the plug and exit the market because of bad debts caused by the coronavirus crisis, the industry’s regulator has warned.
The Electricity Authority said many electricity retailers were concerned that the Covid-19 lockdown would lead to more consumers and small businesses being unable to pay their bills.
“At the same time, there is increased pressure on retailers to try to avoid disconnecting customers,” it said.
The authority said that, as a result, there was “a real and increased potential for some retailers to exit the market”.
It has responded by announcing it will make an “urgent” rule change giving some retailers an extra 60 days — instead of the usual 30 days —to settle their debts with the country’s six largest lines companies.
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Retailers would qualify for the delayed payment terms if they were facing “liquidity problems” and might exit the market due to the consequences of the Covid-19 pandemic, but were otherwise financially sound, it said.
The more lenient payment terms would be in place for up to nine months.
Electricity retailers bill customers for both the power they use and lines charges, and then need to pass on the proportion of the bills that cover distribution charges to the relevant lines company.
“While all retailers successfully made their settlement payments on April 20, it is currently unclear to us if this will be the case on May 20,” the Electricity Authority said.
“The authority considers the uncertainty requires quick and decisive action to reduce the potential for multiple trader default.”
The authority said it wanted to ensure the Covid-19 lockdown didn’t result in a substantial reduction in the number of electricity retailers that would damage competition.
“Less competition means less choice for consumers and potentially higher electricity bills,” it said.
Electricity Networks Association chief executive Graeme Peters criticised the move, saying help for struggling small retailers should not come at the expense of the 27 lines companies that it represents.
The association’s members were sympathetic to the “potential financial pain of their retailer partners” and generally supported retailers in their request to the Government for bad-debt relief, he said.
“What we can’t support, however, is the decision just announced by the Electricity Authority that the six largest lines companies must give 90 days credit relief to the smallest retailers for the next nine months to help keep them afloat.”
Lines companies would see their income fall by $280 million this year because of a drop in regulated charges and “just don’t have the margins built-in to our businesses to provide relief for bad debt that may be faced by retailers”, Peters said.
Vector, the country’s largest lines company, said however that it had no comment on the authority’s statement.