War Breaks Out Between Power Retailers As Customers Quit Contact Energy
November 5th, 2008
• Contact could lose 5% of customers.
• Rival companies quick to muscle in.
• Contact defiant in fighting back.
Contact Energy is fighting to stem a flood of customers deserting the company in protest at recent power price rises and an increase in its Directors’ fee pool. The situation has reached virtual warfare in lower half of the South Island, where TrustPower and Meridian Energy have been aggressively courting disillusioned Contact customers. During the past week, TrustPower says it has acquired more than 1500 customers from Contact in Otago and Southland. Meridian Energy has also picked up a similar number of customers from Contact in both Dunedin and Wellington. Meridian says its phones have been running red hot with Contact customers inquiring how much they would save if they jumped ship.
Meanwhile, Mercury Energy has also been offering incentives for both Wellington and Dunedin consumers to come on board. In the capital, Mercury is guaranteeing no price increases for two years to any Contact customers who make the switch. Mercury is a relative newcomer to the Dunedin market, where it has also picked up a lot of customers during the past week. Contact Energy’s Communications Manager, Jonathan Hill, acknowledges the company has been losing customers to rival power retailers but is attempting to play down the situation and won’t disclose any figures. Contact is offering incentives to customers who telephone the company threatening to leave, including 200 Fly Buy points and $50 off their bill for the next two months if they stay. But this appears to have backfired, with the Otago Daily Times reporting some Contact customers are now threatening to switch, simply in order to get the inducements, while those who don’t threaten to leave are feeling cheated by missing out.
Hill says it is common practice among power retailers to offer incentives, adding, “We’re doing everything we can to keep customers.” Contact has been running newspaper advertisements in the South Island promising customers it is “hearing you and listening” and also pointing out the company is building new renewable generation. Forsyth Barr financial adviser Ken Lister predicts Contact will lose up to 5% of its customers by the end of 2009 and he believes it will take a long time for the company to recover from what has been a public relations disaster. Forsyth Barr has also downgraded Contact’s 12-month share target value by 3% although it still maintains a “buy” recommendation on the stock because Contact has new generation coming on stream and is building gas storage facilities.
Consumer NZ’s Powerswitch website received a surge of 3081 visitors on October 23, the same day Contact announced it was almost doubling its Directors’ fee pool from $770,000 to $1.5m a year. During the past week the website has averaged about 2800 visitors, about four times the normal number. The website allows consumers to calculate which power company will offer them the cheapest deal.
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