Daily power charge set to rise again in April amid no sign of early rethink

Tuesday, 25 October 2022

The Government is advising people unhappy with rising fixed power fees to shop around.

Most power users face a further 34.5 cent hike in their daily charges from April after Energy Minister Megan Woods brushed off a call to reverse the phase-out of low-user tariffs before the next price increase kicked-in.

In 2004, power companies were ordered to start offering power plans with a low daily fixed charge to customers who used less than about the average amount of electricity each year.

Since then average household electricity consumption has fallen, and about 68% of households now benefit from the low daily charges.

But Woods announced last year that the price caps would be phased out over five years.

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The cap was raised from 34½ cents a day in April to 69c now and is set to rise in equal steps to $2.07 by April 2026, before the cap is removed altogether a year later.

Christchurch resident Ross Divett presented a petition to Parliament in March with 221 signatures, calling for a rethink.

Appearing in front of Parliament’s Economic Development, Science and Innovation Committee on Thursday, Divett said the low user plans had succeeded in encouraging electricity conservation and their removal had simply enabled power firms to make more money.

“From a retail power company's perspective, the low-user tariff was too successful. The power companies wanted it gone to increase profit,” he told MPs on the committee, none of whom pushed back on his claims.

Woods said in response that she remained committed to a “mid-point” review of the phase-out late next year, by which time the daily cap will have risen to $1.03½ a day.

“We have worked with the sector to ensure there is a power credits scheme to support low-use households and I encourage those people to contact their power companies if they need this support,” Woods said.

“I also encourage households to shop around for cheaper pricing plans from other retailers. Consumer NZ says the average household can save $388 a year by finding the best pricing plan for their needs.”

The Government’s expectation has been that as power firms raise their low daily fixed charges, they will make corresponding cuts to charges paid by households who use more than the average amount of electricity.

Osmond Borthwick, energy policy manager at the Ministry of Business, Innovation and Employment (MBIE), admitted to the select committee in July, after the first cap rise, that there was “some uncertainty” over what the overall impact on consumers of phasing out low-user tariffs would be.

“MBIE considers that further evidence is needed to allow for a fair assessment,” he said.

Borthwick indicated that an important advantage of abolishing the caps was that would help electricity lines companies adopt new plans that had different prices for different times of the day.

The purpose of such plans would be to encourage households to switch their electricity usage to times of the day when demand on the electricity network was low.

That could help “avoid expensive upgrades that could see costs passed on to consumers”, he said.