What went wrong for Flick Electric?
When it launched in 2014, Flick Energy was something innovative in the New Zealand electricity market.
It claimed to be a tech-based company on a mission to "disrupt Aotearoa's outdated, self-serving industry". It offered customers something different - a way to purchase power directly from the wholesale electricity market.
But this week, it was revealed that Flick's now-owner Ampol-owned Z Energy, would transfer all Flick and Z Energy customer contracts, and the related hedge book, to Meridian, one of the country's big gentailers.
So what went wrong?
Things first started to wobble in 2017, when a period of high spot prices hit Flick's customers exposed to wholesale electricity spot prices.
While it previously said customers had saved an average of upwards of $500 a year on the spot price plan, customers were complaining on social media that they were paying $100 or more for power per week through the price spike.
In October 2018, spot prices hit another even higher peak.
Since the start of 2021, wholesale prices have been still more volatile.
Flick stopped taking new customers in 2021, saying it would not begin again until wholesale prices became more affordable. It did so, but did not offer its wholesale pricing offer, and then stopped again earlier this year.
Octopus Energy chief operating officer Margaret Cooney said that since Z bought Flick in 2018, the market had been plagued with problems.
"This includes refusals to supply and a margin squeeze whereby wholesale prices have been elevated above the cost of retail, this means mass market retail has been running at a loss - even for the big four gentailers.
"It looks like Flick has been sold for the long-term value of their hedge book.
"Flick's initial model was spot-based, it worked for a limited niche, so they evolved to offer a standard fix price offer as well.
"The initial offer was probably ahead of its time because Tibber and Amber are similar offers internationally and have been very successful.
"But at the end of the day you can be the most efficient and technically advanced retailer, but the wholesale market problems make growth impossible.
"I think the unfortunate thing is that the market is becoming increasingly concentrated on both the generation and retail side at just the time consumers really need the investment from independent generators and retailers to improve the dynamism and affordability of the market."
Cooney said prices would remain high unless there was action on the problems in the market.
Huia Burt, co-founder of Electric Kiwi, agreed that market conditions had been challenging in the past few years.
"We made the complaint to the Commerce Commission at the end of 2023 that we felt there were two key areas where competition was really being stifled in the market and one was around the refusal or constructive refusal to supply hedge contracts which is being looked at by the energy competition task force.
"There's this retail margin squeeze where effectively the gentailers are cross subsidising profits in general by really keeping a lid on their retail profits, and you could see through the last few years that their retail arms were either making no money or actually making large losses. And that was being subsidised through these huge profits and generation.
"So yeah, it's very, very difficult to operate as a retailer."
She said Flick's initial spot price offer was innovative when it was brought to the market.
"That's what we're arguing for about why independent retail is so important, because we are focused on thinking really innovatively about what problem does the customer have and how might we be able to solve it?
"So while spot prices might not be for all customers, certainly there may be a segment that that really works for, you know, people who have their own solar panels and batteries for example.
"That innovation that was brought to the sector by independent retailers like Flick and like Electric Kiwi … That is really, really important for driving our the future of the market in New Zealand."
She said that as independent retailers dropped out, it took the price pressure off the bigger players.
Electric Kiwi has closed to new customers. Another provider, Raw Energy, is understood to have left the market. Energyclubnz also closed and handed its customers to Contact.
"One thing we do know is that we saw last winter when a lot of the independents closed their doors for some time saying, it's just too risky, that the gentailers at exactly the same time withdrew their most competitive offers from the market, so the top of the market contracted and so that meant if you were moving house, if you were looking around for a new supplier, suddenly you were paying a lot more.
"Even if a gentailer was offering a good deal, it wasn't as good as it was before."
Paul Fuge, general manager at Powerswitch, said Flick had historically rated well in energy retailer surveys.
"It's disappointing to see it absorbed by a larger player, particularly given Flick customers are typically among the most satisfied.
"Unfortunately, it's consumers who will bear the brunt of reduced competition yet again."
Meridian chief customer officer Lisa Hannifin said there was still a "really great choice" of retailers in New Zealand.
"There's more retailers per capita in New Zealand than in both the Australian and UK markets."
Any customers still on the wholesale pricing plans will have four months before they move on to a Meridian plan.
"We know that some customers want to control when they use their energy. Meridian has been developing time-of-use products that can help reduce monthly bills, like the product Flick did have, and these will be available for Flick customers should they select them," Hannifin said.
"We have two great retail brands that offer a range of products that customers value, but we're still working through options on which brand customers will transition to.
"We think Flick customers will enjoy the products, service and value that Meridian offers.
"We've grown our customer base by over 27,000 customers this financial year, which shows that customers are choosing us to be their retailer."
rnz.co.nz
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David Fisher is based in Northland and has worked as a journalist for more than 30 years, winning multiple journalism awards including being twice named Reporter of the Year and being selected as one of a small number of Wolfson Press Fellows to Wolfson College, Cambridge. He joined the Herald in 2004. Sign up to The Daily H, a free newsletter curated by our editors and delivered straight to your inbox every weekday.
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