Frank Energy has told its customers that gas deliveries will cease from March next year. File photo.
Photo: 123RF
A gas retailer will stop supplying customers next year in what Consumer NZ describes as a “death spiral” for the industry.
Frank Energy, part of Genesis Energy, launched in 2021. However, the company has informed its customers that it will stop gas deliveries from March next year.
“New Zealand's natural gas supply is currently clearly declining and long-term availability and price are uncertain,” a Genesis spokesperson said.
“As the supply of different fuels changes, Frank has decided to focus exclusively on electricity. Removing gas and LPG from our product range also simplifies our ability to digitize customer service and ordering and reduce costs in our business. The dual-fuel offering is not common among challenger retailers.”
She said people who had gasoline or LPG at Frank were offered the opportunity to switch to Genesis.
“Customers who switch from Frank to Genesis will receive Genesis plans even though they have an open plan and can therefore switch to another provider without penalty.”
Paul Fuge, head of consumer NZ at Powerswitch, said residential gas supply was in a “death spiral”.
About 46 percent of households have gas, which is evenly distributed between cylinders and networks.
But the price had risen by about 15 percent and providers were trying to recoup the costs of an expensive network by reducing the number of consumers.
He said people with gas could pay $700 more a year just from the gas connection.
“Nowadays it's a pretty expensive option for people, on average about $1.90 a day for a connection, and then you also have to have an electricity connection and that limits the number of supply options because some retailers They don’t supply you with gas unless you also have electricity.
“This limits your choices as some don't provide gas at all…the pool of plans you can choose from is smaller.”
He said some of the cheapest electricity providers don't have an option for gas.
Consumer NZ's advice was that people replacing appliances could consider switching to electricity, but some customers were told they would have to pay to be disconnected from the gas connection.
“They will be charged up to $1,500 to remove the connection,” Fuge said.
“It's a large infrastructure with fewer and fewer people connected to it, and as more people disconnect, the price of those connected increases. You can see how this can escalate, but I feel like they're trying to get hold of people who are trying to do the right thing.”
The Climate Protection Commission had proposed that there should be no new connections to the natural gas network for commercial or residential buildings from next year.
Marketing expert Bodo Lang from Massey University is a Frank customer.
He said people could react negatively to the perception that their options were being limited.
“First, they probably want the item they can’t get even more. Second, alternative options become less attractive. Third, consumers are likely to develop negative feelings toward the person or organization they perceive as limiting their choices.”
He said people who received Frank's email felt this effect – perhaps compounded by the fact that energy retail involved contracts and larger recurring payments.
“Frank Energy has taken a number of measures to minimize consumer backlash. First, they sent their notice many months before they would stop supplying gas. Second, they apologized and expressed sympathy for the impact their decision may have on their customers. Thirdly, they set out the process was clear and encouraged consumers to use an online comparison tool developed by Consumer NZ, a credible and independent organisation, to find the energy retailer best suited to supply natural gas. This is a good example of what companies can do to reduce consumer reactance and thereby minimize the damage that bad news may have caused.”
Frank's spokesman said there is no fee for disconnecting the gas.
“Gas network operators can charge a switch-off fee if a gas consumer decides to stop using gas completely and switch their gas appliances to electricity. In this case, a gas network operator employee may need to go to that property to physically turn off the gas supply.
“Gas network companies such as Vector, First Gas and PowerCo operate the pipes that transport gas to people’s homes. Retailers only sell the gas that flows through the pipes. Frank is a retailer who has decided to stop selling gas.”
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