Questions to Ask When Switching Power Plans

When choosing a new power plan, don’t get sucked in by flash freebies, or fail to properly research if a plan is right for you and your power usage. Canstar Blue looks at the key questions to ask when choosing a new power plan.

Choosing a power plan: what type of power user are you?

When a customer signs up for a power plan, they are asked one important question: are they a low user or standard user?

To be considered a low electricity user, a household must be one that uses 8000kWh a year or less (0r 9000 kWh for households from Christchurch southwards, due to the cooler climate).

Whether you’re a low-user or a standard user affects how much a power company charges you for the energy your household consumes. This is because a power bill is made up of two key charges:

• Fixed-rate daily charge – a fixed rate charged every day regardless of how much power you use
• Variable usage/per unit charge – a rate that is charged for every kWh used

The way these charges are implemented varies depending on whether you are a standard or a low user.

Standard user

A standard user consumes relatively high amounts of electricity each month. As a result, power companies offer competitive variable usage rates. To balance this, they charge a higher fixed-rate daily charge.

Low user

Low users pay a much lower fixed-rate daily charge, but significantly higher prices for the power they use. This means that their fixed costs are much lower than those of a standard user. As long as they don’t use much power, their bills will be lower.

However, because most Kiwi homes are now low users, over the next five years the low-user electricity tariff is being phased out. As a consequence if you’re on the low-user tariff, your power bills could have already started to rise.

This is because for each year of the five-year phase-out, power companies are able to increase their daily charges for low-users by approx. 30c, until they are on a par with standard-user charges. However, not all electricity companies are increasing their charges. Currently some are charging around 66c per day for low-users, others are charging half that and others have cut the daily tariff altogether.

Of course, you need to balance the per kWh charge of each power plan when comparing the savings you can make from shopping around for the lowest daily charge, but there are big savings to be made.

Choosing a power plan: when do you use most of your power?

Take a minute to check when you’re using most of your electricity. You can check this through your provider’s website/app. Do you use a lot of off-peak power, and at weekends, or are you predominately a peak power user?

The exact times differ between plans, and even location and/or network. But, generally speaking, peak times are Monday to Friday, 7am-11am and  5pm-9pm.

Knowing when you use most power is important because many power providers offer different rates at different times of the day. For example, here are the current different standard rates offered by my provider:

Standard electricity rates per kWh

• Peak: 0.23c
• Off-peak: 0.14c
• Night 0.12c

As you can see, if you burn most of your electricity outside of peak times – or can easily move most of your power consumption to off-peak – there are savings to be made.

Choosing a power plan: how does the bundle really stack up?

Some power companies offer fancy freebies when you join. This can be in the form of home appliances, or cut-price deals if you agree to sign up for fixed long-term periods, or bundle with other utilities, commonly broadband. But you need to ask yourself how free the freebies really are.

“Bundle and Save” is a simple promise. But doing the math is often more complicated. A 10% discount on your power if you add broadband might seem attractive, but how does the broadband deal compare with other packages in the market?

No-frills providers such as Skinny and 2degrees offer some very good value broadband deals. So before being sucked in by the promise of bundled discounts, get your calculator out and work out the true savings.

The same goes for the offer of free fridges, TVs or laptops. Power companies don’t give away devices at a loss. The consumer pays, in the form of higher unit prices for the power they use on their plans.

→ Related article: NZ’s Cheapest Broadband Plans

Choosing a power plan: why are you sticking with the same provider?

How long have you been with your power provider? And why are you sticking with them? Chances are that you’ve just not got around to swapping.

While Canstar Blue’s latest research shows that most of us want cheaper electricity:

• 68% actively practise energy savings to reduce power bills
• 45% rug up inside during winter rather than turn up the heat
• 41% cite energy efficiency is a key factor in appliance purchases

Just a third of power consumers have actively compared electricity prices over the past 12 months. The extra we pay as consumers for not making a concerted effort to change is sometimes called a “lazy tax”. And most of us are paying it in some form.

But while swapping banks or mortgage providers can be time consuming, changing a power provider doesn’t have to be. It only takes a few minutes online to get quotes from different providers.

And it’s even easier to swap providers. The power companies do all the paperwork and the process only takes a few days.

So if you’ve been with your power company for a while now, and haven’t shopped around for a better deal, there’s another question you need to ask yourself about switching power plans: why not?

Compare electricity providers with Canstar Blue

Looking for the best power provider? We can help with that! Canstar Blue rates NZ power companies for customer satisfaction and value for money, see the table below for some of the results, or you can click on the button below for the full results of our survey.

Canstar Blue’s latest review of NZ power companies compares them on customer satisfaction. The table below is an abridged version of our full results, available here.

Compare electricity providers for free with Canstar Blue!

About the author of this page

This report was written by Canstar’s Editor, Bruce Pitchers. Bruce began his career writing about pop culture, and spent a decade in sports journalism. More recently, he’s applied his editing and writing skills to the world of finance and property. Prior to Canstar, he worked as a freelancer, including for The Australian Financial Review, the NZ Financial Markets Authority, and for real estate companies on both sides of the Tasman.