A gas retailer will stop supplying customers next year, amid what Consumer NZ calls a “death spiral” for the industry.
Genesis Energy-owned Frank Energy launched in 2021. But it has told customers that it will stop supplying gas from March next year.
“NZ’s natural gas supply is clearly in decline at present and with uncertainty around its long term availability and price,” a Genesis spokesperson said.
“As the supply of different fuels changes, Frank has chosen to focus on electricity only. Removing gas and LPG from our product range also simplifies our ability to digitise customer service and ordering and reduce cost from our business. The dual fuel offering is not common among challenger retailers.”
She said people who had gas or LPG with Frank were being offered the opportunity to switch to Genesis.
“Customers moving from Frank to Genesis will be placed on Genesis rates, although they will be on an open plan and can therefore choose to switch to another provider without penalty.”
Consumer NZ head of Powerswitch Paul Fuge said gas supply to residential homes was in a “death spiral”.
About 46% of households have gas — split evenly between bottles and reticulated supply.
But the price had lifted about 15% and providers were trying to recoup costs of an expensive network from a falling number of consumers.
He said people with gas could pay an extra $700 a year just from having a gas connection.
“It’s quite an expensive option for people now, on average about $1.90 a day to have a connection and then you have to have the electricity connection as well and it limits the number of options you have for supply because some retailers won’t supply you with gas unless you have electricity as well.
“That limits your choices because some don’t supply gas at all… the pool of plans you can choose from is reduced.”
He said some of the cheapest electricity suppliers did not have gas as an option.
Consumer NZ’s advice has been that people replacing appliances could think about converting to electricity, but some customers had been told that they had to pay to be disconnected from gas.
“They’re being charged up to $1500 to have the connection removed,” Fuge said.
“It’s a large infrastructure with fewer and fewer people connected to it and the more people disconnect, the more the price goes up for those connected. You can see how that can escalate but it has the feeling to me that they’re trying to claw back costs from people trying to do the right thing.”
The Climate Change Commission had suggested that there should be no new connections to the natural gas grid from next year for commercial or residential buildings.
Marketing expert Bodo Lang from Massey University is a Frank customer.
He said people could react negatively to the impression their choices were being limited.
“First, they are likely to want the item they cannot obtain even more. Second, alternative options become less appealing. Third, consumers are likely to develop negative feelings towards the person or organisation they believe is restricting their choice.”
He said that effect would have been felt by people who received the Frank email — potentially magnified by the fact that energy retailing involved contracts and larger regular payments.
“Frank Energy did a number of things to minimise consumer reactance. Firstly, they sent their notice many months ahead of when they would stop supplying gas. Secondly, they apologised and expressed empathy for how their decision might impact their customers. Thirdly, they outlined the process clearly and encouraged consumers to use an online comparison tool developed by Consumer NZ, a credible and independent organisation, to find the energy retailer best suited to supply them with natural gas.
“This is a good example of what businesses can do to reduce consumer reactance and thus minimise the damage that bad news might have caused.”
Frank’s spokesperson said there would not be a fee charged for disconnecting from gas.
“A disconnection fee might be charged by gas network companies if a gas user decides to stop using gas completely and switch their gas appliances to electric. In that case an employee of the gas network company might have to go to that property to physically switch off the gas supply.
“Gas network companies, such as Vector, First Gas and PowerCo, operate the pipes that take gas into peoples homes. Retailers just sell the gas that runs through the pipes. Frank is a retailer that has decided to no longer sell gas.”
rnz.co.nz
