14/03/2014 - 14:35

Contestability comes at a cost, says Alinta

14/03/2014 - 14:35

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Alinta Energy has given a lukewarm response to reforms that could provide the state’s residential customers with a choice of electricity retailers for the first time.

Contestability comes at a cost, says Alinta
Alinta Energy chief executive Jeff Dimery.

Alinta Energy has given a lukewarm response to reforms that could provide the state’s residential customers with a choice of electricity retailers for the first time.

While the sector broadly supports increased competition, Alinta chief executive Jeff Dimery said the electricity generator and retailer had mixed experiences from its participation in more competitive environments on the east coast.

“I’m not here advocating one way or the other,” Mr Dimery said.

“The good, bad and the ugly, I suppose, come with full retail contestability.

“The (WA) market has the potential to be highly competitive, but there’s a lot of work that needs to be done before customers can enjoy the benefits of choice.”

Speaking at the Informa power and gas conference this week, Mr Dimery said the state government’s current subsidy needed to be reduced before WA could go to full retail contestability.

Once electricity costs became more efficient, he said, customers then needed to be exposed to the true cost of electricity supply, which would require hard decisions to be made by government.

“It’s easy to say that you want cost reflectivity in the marketplace. It’s much harder to do when your job comes up every three or four years,” Mr Dimery said.

In order for the market to be able to cope with increased customer churn, which would occur once more retailers became available, Mr Dimery said investments needed to be made in upgrading systems.

“If we do all that customers may well see a benefit through full retail contestability.”

Mr Dimery said the government would have to carefully legislate how to deal with unpaid energy bills, customer hardship and disconnection policies.

“Over on the east coast today we probably reject about 20 per cent of all customers that choose to do business with us on credit grounds,” he said.

“In the early days ... we were very happy to sign any customer, but the problem is a lot of them don’t end up paying their bills, especially when they can stick with you for a limited period of time and then go with somebody else.”

While Kleenheat Gas launched a large mass media campaign when it entered the gas retail market less than a year ago, Mr Dimery said Alinta would draw on its strong brand recognition rather than mass advertising if retail electricity became contestable.

“A key learning for us is while it’s important to have a trusted and recognised brand when a customer has a choice, our personal experience indicates that above the line advertising has at best a very tenuous relationship with customer acquisition,” he said.

Mr Dimery said customers were attracted by product offerings that included no lock-in contracts, product innovation, good service and added value deals.

 

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