New Tech Power Providers a ticking Consumer bomb?
Quote:
Originally Posted by
Joshuatree
Craigs latest update on the gentailers suggest that trust power are the main cause of churn currently and unlikely to stop for 18 months.
And if correct the below is not good.
Flick and Electric Kiwi point the way for product differentiation, billing disclosure and risk premiums
A new threat has emerged, which in our view removes the possibility that historical gentailer premiums will return. New electricity retailer Flick has highlighted the consumer thirst for a spot product and bills customers in a way that clearly defines all the cost components of the bill making comparability easy. Electric Kiwi is a low cost technology driven offering that offers a fixed priced residential contract, covered by the forward ASX hedge curve. This offering caps where risk cover pricing can head. It is our view that any premium for risk mitigation by having a gentailer model will likely be arbitraged away by the combination of technology and clarity of what is being paid by that customer for the risk.
top picks a buy on CEN and MEL Hold on GNE and MRP and TPW.
Quote:
Originally Posted by
horus1
Flick has cut my prices by 20% over 15 months. That is 40% of the energy margin as line charges are fixed. That shows how fat the margins are.
I am curious about the Flick business model.
From the Filick website, they pass on transmission/distribution at cost, metering at cost, the Electricity Authority levy at cost and a flick Retailer charge which is obviously not at cost, as Flick wouldn't be able to operate if they didn't make a profit on this. The explanation pricing graphic has no scale. But the visual impression is that Flick in house charges make up something like 15% to 20% of your power bill. Can any Flick user out there confirm?
The idea is that customers pay the wholesale cost of electriciy in the power market. This changes every half hour, and the price paid can vary wildly.
"If you switch to Flick and do nothing else, there may be some times that your bill is higher than it would have been if you’d been with another supplier. Past savings are no guarantee of future savings, but over a year, we think you’ll save around 7% if your pattern of energy use is about average. The serious savings (up to 20 – 25%) come when you change the way you use energy, taking advantage of lower prices."
The way I read this, real savings require a consumer to be quite active with their interactions with Flick and change power consumption behaviour. Flick doesn't own any power stations. So it seems like they are merely a consumer conduit. The business model hinges on the idea that consumers can manage their own consumption better than traditional power companies can. But what happens if power prices remain high for an extended period? You might end up being charged $100 to cook your dinner! Wouldn't users be outraged by that and leave on mass? How could Flick survive such an exodus?
Moving on to Electric Kiwi, they buy power on the ASX futures market. But who is on the other side of the transaction selling the power? Power can only be bought from a gentailer (are there any pure generators out there with a guaranteed supply of power to sell?) So what if the gentailers decide not to sell any power to the ASX player to resell on the sell side of the transaction? Electric Kiwi would just collapse in that case as they would have no power to sell to customers!
Both Electric Kiwi and Flick sound good and no doubt would work well 99% of the time. But when that 1% when things are not so favourable goes badly wrong? It looks to me like both companies are finished under this circumstance. How can these companies be a long term threat to an extablished gentailer like Genesis?
SNOOPY