Retailers welcome low-user power scheme review

Friday, 26 May 2017

Luke Blincoe, of Electric Kiwi, says the low fixed-charge scheme may be having the opposite effect of what was intended.

Action is needed to stop poorer households picking up the bill as wealthier people adopt new technology, electricity retailers say.

A review is under way of the low fixed-charge tariff, which is available to households using less than 8000kWh a year, or 9000kWh in parts of the South Island.

ERANZ chief executive Jenny Cameron says a review is needed.

It was implemented in 2004, designed as a way to save money for poorer households. The threshold was the average power consumption at the time.

Power companies usually hand their customers a fixed daily charge, and then a cost per kWh. Those on a low-user plan pay less in the fixed daily charge and more for the power they use.

But there are growing concerns that the system is not working.

Luke Blincoe, chief executive of Electric Kiwi, said it was incorrect to assume that poorer households used less power. He said with better insulation and often better-constructed houses, those who were wealthier could often use less.

Technology such as solar power may compound the problem. If households start to use more solar power, it is likely to bring them under the low-fixed charge tariff cut-off.

'That leaves those that can least afford it having to effectively fund the existing grid,' Blincoe said.

He said tariff innovation was necessary but restrained by the lack of smart meters in some parts of the country.

Energy Minister Judith Collins announced the review this week.

Electricity Retailers Association chief executive Jenny Cameron said the low fixed charge system had had the opposite effect of what was intended.

'Retailers have been calling for some time for the low fixed-charge to be looked at, so asking the Ministry of Business, Innovation and Employment (MBIE) to review it is a welcome development.

'The International Energy Agency highlighted in their 2017 report on New Zealand's energy sector that a review was needed. They identified that artificially low fixed charges result in some customers paying higher tariffs for their electricity consumption and have the potential to distort the market at the expense of consumers,' she said.

Cameron said retailers were willing to work with the government to find a more targeted solution for people who needed help meeting their energy needs.

'It's a complex issue. It's linked to income, housing quality, and appropriate appliances, as well as education and behaviour, and needs to be looked at with a cross-sectoral, targeted investment approach involving the public and private sector.