Consumer choice of electricity supplier: Investigating preferences for attributes of electricity services

The retail electricity market in New Zealand is evolving as the government continues to promote the development of a competitive and efficient market. Encouraging consumer switching through the “What’s My Number” campaign is expected to put pressure on electricity retailers to reduce prices. Recent reports indicate that relatively few customers have switched supplier in the past two years despite potential average savings of NZ$165 per year per household. This suggests that non-price factors are also important determinants of switching behavior. We use choice experiments to investigate residential consumers’ preferences for the attributes of electricity suppliers and the possible role of attitudes in explaining preference heterogeneity among the sampled respondents. Data required for the study was collected through a web survey administered to an online panel of bill payers in New Zealand. Willingness to pay (WTP) is estimated for attributes of electricity suppliers such as renewable portfolio, local ownership, discount rates, fixed rate plan, loyalty rewards and supplier type. WTP estimates indicate the importance of the attributes and hence provide guidance to suppliers in designing their price and service offers. Knowledge of how attitudes influence switching behavior may inform future policy directed at stimulating competition in the retail market.