Otago electricity users are being overcharged millions of dollars a year because they do not regularly review their energy contracts, according to an Internet-based electricity supplier.
Powershop, a subsidiary of Meridian Energy, has been looking for business in Otago and says small and medium-sized businesses were on average being charged 24% more for their electricity than they should be paying, and domestic consumers 16%.
Chief executive Ari Sargent based this claim on a comparison of what consumers were paying for electricity and what they could be paying if they shopped around for a cheaper supplier.
Mr Sargent said the gap was widest in Dunedin, with Auckland small and medium-sized business allegedly paying 8% more, Wellington 9% and Christchurch 17%.
Jonathan Hill, a spokesman for one of the region's largest suppliers, Contact Energy, rubbished the claim, and said the company would need to see the figures being used by Powershop to ensure a fair comparison was being made.
"It is absolute nonsense.
"From our perspective the electricity we sell to customers is very competitively priced," he said.
Electricity prices had been flat for the past 12 to 18 months and Mr Hill said Dunedin consumers had not had a price rise for a year.
Mr Sargent said a reason for the discrepancy in actual and possible pricing could be historical, stemming from the days of regional power boards when the cost of electricity to businesses subsidised domestic supply.
"This practice ended in the nineties, but the relative lack of competition means, in our opinion, power companies are getting away with charging businesses more than they should," Mr Sargent said.
Rather than determining a wholesale unit price and adding a profit, he said companies appeared to be starting at the historic figure and only dropping prices if pushed by competitors or customers.
The Powershop claim lent some support to a Commerce Commission report last May which said consumers had been charged $4.3 billion more between 2000 and 2008 than they would have been charged in a truly competitive electricity market.
The report said the four large generators did not break the law, but used their combined market muscle to maximise profits in dry years and to raise prices 72% in that period, during which inflation was only 29%.
Mr Sargent said that he was making a serious claim, and stood by his reckoning.
"There is enough evidence from what we are seeing that there is a degree of high pricing going on."
Residential consumers were also paying 16% more than Mr Sargent believed they should.
He said an average city residential consumer using 9000kWh a year on an all-day economy plan would spend $1974.56 a year, but could save $324.39 a year by switching to a cheaper supplier.
Elm Lodge Backpackers owner Ben Luke, said switching to Powershop would save him $4000 in the next year, 30% of his previous year's electricity bill.
Mr Luke said some of the savings came from a reclassification from large residential user to business.
Otago Chamber of Commerce chief executive John Christie was surprised at the size of potential savings and said small and medium-sized businesses should shop for a cheaper supplier, while also looking at practical things they could do to save energy in their business.
Consumer New Zealand testing manager Hamish Wilson said while changing supplier can be difficult, financially it could be worthwhile as an encumbent was unlikely to concede it was overcharging.
Mr Wilson said Powershop had been accurate with previous residential pricing claims.
"So far we have found their savings claims have been accurate and I wouldn't be surprised if that applied to business as well," he said.
