The 'penalty for prepay'

“Prepay costs should be on the same level as everyone else. Why are they not?” - Financial Mentor

Roughly 30,000 New Zealand households use prepay electricity - many because they have struggled to pay power bills in the past and now have no other choice.

Yet prepay can be more expensive. According to Consumer NZ, as of June 2023, prepay customers in Wellington and Auckland could be paying about 15 and 11% more than their pay-monthly counterparts. Christchurch residents on prepay might be paying 17% more. People using prepay due to financial hardship are paying a premium for being poor.

Retailers’ higher prepay costs are harming people. “It’s heat or eat”, said one woman on prepay. “My house is freezing. I don’t use heaters, I can’t afford to or I can’t buy food.”

Consumer NZ estimates that each night, as many as 50 households on pre-pay are sitting without electricity because they can’t afford to top up.

Children’s health is at risk when families go without power. “I’ve got six kids,” one mother told us. “Our power runs out one day, sometimes two [days], before payday… We pretend we’re camping, or go to bed early. There’s no heating when there’s no power.” Official data about these prepay disconnections is not even recorded.

Researcher Dr Kimberley O’Sullivan has long called for change. “Companies are only required to report disconnections on post-pay (or ‘standard plans’) so we don’t know what’s happening with people on prepayment meters… There are potentially thousands of families [on prepay] that are sitting disconnected for more than twelve hours and we don’t even know because we’re not collecting those statistics and publishing them.”

The Electricity Authority has announced it will start collecting this information from 1 January 2025.

We’re calling on them to go further and require companies to ensure that prepay is no more expensive than their cheapest post-pay (standard) plan. They can do this by requiring retailers to publish data on the average overall cost for their prepay service per kWh (including fees), and comparing that with their cheapest post-pay plan (including fees and discounts).

"I really don’t like [prepay]. … but I have bad credit so I have no choice… The cost puts a lot of strain on me and then I’m stressed and not focused on my daughter. I feel like I’m letting my child down.” - Mother using prepay electricity