Proposal to ban saves and win-backs
The Electricity Authority aims to ensure that retail electricity markets are as competitive and efficient as possible for the long-term benefit of consumers. The Authority wants all retailers, large and small, old and new, to be able to compete for customers on an equal footing.
To support this objective, the Authority is proposing to ban retailer-initiated saves and win-backs by a losing retailer until 180 days have elapsed after a customer has switched to a gaining retailer. This proposal should help small and new entrant retailers to compete for customers, putting incumbent retailers under more competitive pressure. View the consultation paper.
In 2015 the Electricity Industry Participation Code was amended with the introduction of a save protection scheme. Retailers can opt in to the scheme thereby receiving a degree of protection from saves. Read the description of saves and win-backs.
The scheme was intended to prevent retailers who are losing customers from exploiting information about impending customer switches to attempt saves. This scheme prohibits a losing retailer from initiating contact to offer inducements to any of its customers that are being acquired by a ‘protected’ gaining retailer, prior to the completion of the switch. The scheme does not prohibit win-backs after a switch has been completed.
Following the introduction of the scheme retailers increased switching speeds, which made it possible to substitute permitted win-backs for prohibited saves. The post implementation review of the scheme suggested that the increase in switching speeds has undermined the scheme’s contribution to retail competition.
A subsequent review of switching arrangements by the Market Design Advisory Group concluded that there was no regulatory or market failure, even though a number of submissions to the review argued that win-backs were problematic.
The Electricity Price Review also considered win-backs and recommended that they should be prohibited (see option C5 in the options paper). The Government subsequently agreed with this recommendation.
The proposed Code amendment aims to restore competitive pressure; reduce retail margins; increase innovation; increase customer acquisition and consumer search; and place retailers on a level competitive playing field. The proposed amendment would make it easier for small and entrant retailers to expand in size, increasing competitive pressure on large incumbent retailers and fostering innovation in business processes and product offerings.