Most power firms quick to raise fixed daily charge to more than a dollar a day

Wednesday, 19 April 2023

The Government has allowed the fixed daily charge for low-users of electricity to rise above a dollar a day, and that is set to double by 2026.

Power giants Meridian, Mercury, and Contact Energy are moving to quickly raise their fixed daily electricity charge for customers on low usage plans to more than a dollar a day, after the Government increased the cap on those fees on April 1.

However, Genesis Energy said it had no plans to push through another increase this year.

Energy Minister Megan Woods decided in 2021 to phase out the cap on the daily charge for low-user plans, which the majority of households are on, over a period of five years.

That is allowing power firms to raise the charge from 34½ cents a day in 2022 to $2.07 a day, including gst, by April 2026, before the cap is removed altogether the following year.

* Biggest power company, Meridian Energy, increases profit 51%

Consumer Advocacy Council chairperson Deborah Hart says something needs to be done about electricity (video first published in November).

* Low-user electricity tariffs will be phased out over 5 years

The latest stepped increase has allowed the charge to rise from 69c to $1.03½ from the start of this month.

Meridian Energy said low-user residential customers on variable rate plans would see their daily charge rise to $1.03½ this month or in May.

Customers on fixed term plans will also be moved on to the higher rates when their plans expire.

However, Meridian advised that if a lines company’s standard residential daily rate was lower, it would align its charge with that.

Meridian acknowledged some households were doing it tough and said it encouraged any customers to contact it, if they needed support.

Contact Energy spokesperson Louise Wright said its low-user fixed daily charge for in-market plans had been updated to $1.03½ a day, in line with the regulatory phase out.

Genesis Energy has been bringing up the rear by delaying the alignment of its charge with the higher price cap by about a year.

”Any new customer or existing customer that changes plan will be on the new rate from now,” she said.

Mercury’s general manager of commercial operations, Craig Neustroski, said it would also be raising its charge for customers who were not impacted by the recent severe weather, this month or in May.

“We are, however, not currently proceeding with price changes as planned for our customers who were significantly affected by the weather events earlier in the year,” he said.

Neustroski said Mercury was “very conscious of the cost pressures many households were facing”, so it had limited average total bill increases to between 3% and 5% this year.

“We encourage any of our customers who are struggling with their bills to contact us, as we have a range of targeted solutions to help,” he said.

Explaining Mercury’s decision to raise its prices now, Neustroksi said it was recommended that the low-fixed charge increased gradually to minimise the impact on households “and we’ve decided to follow that advice”.

Genesis Energy spokesperson Estelle Sarney said it had no plans to increase its low-user fixed daily charge again this calendar year.

It was also the last of the major players to push through last year’s cap rise to 69c, which it did in March.

Last month, Meridian Energy reported a 51% increase in its interim profit to $201 million for the six months to the end of December.

Mercury reported an 86% rise in its operating profit for six months to the end of December in February, when it increased its interim dividend pay-out to shareholders by 9%.

However, its interim net profit was down on its bumper profit the previous year, which was boosted by a large one-off gain from the sale of its stake in its Australian wind farm business, Tilt Renewables.

Contact reported a net loss of $7m for the sixth months to the end of December, due to an $86m write-down on an underground gas storage facility which is experiencing water seepage.

Overall, analyst Forsyth Barr has forecast this year will be another good one for power company profits.

A spokesperson for the Consumer Advocacy Council, which was established by the Government to advocate for consumers and small businesses in the power market, said it was taking a close look at the Government’s policy of allowing the cap on the low-user daily charge to rise.

It has not voiced an opinion on the policy up to now.