Electricity review a smoking pop-gun

Wednesday, 12 September 2018

Power price review finds households are paying more, business is paying less - and you need to shop around for a good deal.

OPINION: Anyone hoping for a radical shake-up of the electricity sector would have been sorely disappointed by this week's first report from the Government-appointed review group.

A creature of New Zealand First's coalition demands, the review found a lot to like about the way the electricity sector is set up.

The fact that power company share prices all bounced up after the report's release is a powerful indication that investors see more bark than bite in the review process.

Among the pluses: achieving 80 per cent-plus renewable electricity without subsidies, a lack of evidence of excessive profits, and a highly competitive retail electricity market in which prices have hardly moved since 2015.

* Rising power prices pushing Kiwi households into power poverty

The average household is only paying 3 per cent of its income on electricity,

* Being cold and rationing heating is now 'normal' in New Zealand**

Most of its market design issues are either tweaks or forward-looking to a future where customers generate their own electricity and can better control their energy spend.

Not that you'd know that from most of the reports of the review's findings, which focused on the more than 100,000 households spending more than 10 per cent of their income on power.

These are often the same households squeezed by high rental costs caused by housing market dysfunction and skyrocketing petrol prices. Energy costs are clearly part of a wider problem of unaffordability for this group.

Self-appointed big business basher, Shane Jones, has been itching all year to add power company bosses to his list of corporate miscreants. But the report gives him little to go on.

But the average household is only paying 3 per cent of its income on electricity, customer switching rates are strong, and trust in the sector is high compared to Britain or Australia.

In other words, it's not quite the problem NZ First had in mind when it pressed for the inquiry.

The party's self-appointed big business basher, Shane Jones, has been itching all year to add power company bosses to his list of corporate miscreants. This report gives him little to go on.

Pattrick Smellie says: 'It's time to stop the rort of pre-paid metered power being so much more expensive than other electricity. It's a tax on the poor that can't be justified.'

Energy Minister Megan Woods was also clearly struggling for an attack line in her press statement on the report. The best she could find was that the electricity market 'isn't working for everyone'.

There are hints, too, of tensions between the industry experts and consumer advocates on the review group itself.

Energy Minister Megan Woods struggled for an attack line on the report. The best she could find was that the electricity market 'isn't working for everyone'.

In her foreword, chairwoman Miriam Dean notes that: 'We can be proud that New Zealand is ranked ninth out of 125 countries in the World Energy Council's Energy Trilemma ranking (measuring security of supply, equity and environmental sustainability), and that we are the only non-European country in the top 10.'

Yet just a few lines later, Deans's letter suggests the review group is grappling with accepting the trilemma argument that says it's generally impossible to fully satisfy the desire for electricity that is simultaneously sustainable, cheap, and reliable.

'In our view, the aim should be to replicate our World Energy Council ranking for a different trilemma – that of fairness, affordability and competitiveness.'

Given that fairness and affordability are two sides of the equity coin, and that a market with 36 electricity retailers looks pretty damn competitive, this sentence looks more like an attempt at compromise within the review team than a statement of principle.

That said, there are several areas where the Government could decide to act against energy poverty, and hopefully more effectively than the blunderbuss 'winter energy payment', which is paid to all eligible recipients irrespective of income and can be spent on anything.

One area already under way is rental home warrants of fitness – a housing rather than electricity market intervention.

Another is the ludicrous low-user regulations, which were supposed to make electricity more affordable for some customers but miss out large families with big power bills while favouring apartment-dwelling yuppies.

Another is the absence of a retailer of last resort. It is not acceptable that people with terrible credit records can be turned away by every retailer in the country. Even bad creditors have a right to turn the lights on. Other countries do this. So should we.

And finally, it's time to stop the rort of pre-paid metered power being so much more expensive than other electricity. It's a tax on the poor that can't be justified.

Pre-payment meters save power companies not only millions of dollars chasing unpaid bills, but also protect their reputations by putting disconnection in the hands of the customer rather than the company's.

- BusinessDesk