Not to put too finer point on it, but we think that charging people more so you can pretend to give them a discount is scandalous. This is exactly what happens with prompt payment discounts.
We don’t believe that these “discounts” are actually discounts at all.
And we agree with the Commerce Commission that “discounts should be off the usual selling price”, not an inflated price invented specifically so that the discount could be added.
Some retailers, like Electric Kiwi don’t use prompt payment discounts. That’s because prompt payment discounts are really just late payment fees in disguise and we don’t think that’s very cool. You should pay for what you have used and nothing more. If that is the case, then how are these actually discounts at all?
It’s one of the big retailers’ dirty little secrets that their favourite customers are customers that pay in the end, but don’t pay on time.
One big retailer, for example, offers a 22% “discount” if you pay on time, while they use a cost of capital in their annual results of 7.4% per annum. That's a lot of extra cash collected on people who miss the odd bill!
We reckon these late payment fees are excessive and punitive for those customers who fail to pay bills on time.
All of us forget the odd bill, is a 22% penalty fair?
And even if you always pay on time, we ask that you look at the prices after these discounts and don't assume that a big discount means a better price!
The problem with large late penalties is made worse because it’s actually vulnerable households that are disproportionately affected. “Consumer NZ” survey found more than a quarter of households with incomes of less than $50,000 a year reported missing out on prompt payment discounts because they paid late”.
We reckon action is needed to stop this and we hope that the Electricity Price Review follows through on their proposal to ban them.