Power bills set to rise again

Tuesday, 5 November 2024

More power price pain is coming, with changes to lines charges on the way the phase-out of low-user charges continuing. (File photo)

Higher wholesale electricity prices are starting to flow through to consumers, data shows.

Changes to lines charges and the ongoing phase-out of low-user charges are set to push prices even higher, an expert warns.

Lines charges could increase by 8% to 10% come April 1.

A “perfect storm” of power price changes is brewing, with households facing significant increases in the coming months.

Lloyd Burr explains the power price shock hitting industries hard.

Soaring wholesale electricity prices have put pressure on businesses and contributed to the closure of several high-use factories this year.

Powerswitch general manager Paul Fuge said the higher wholesale prices had been expected to flow through to retail prices at some point and analysis showed that had started to happen.

Octopus Energy used Powerswitch data to compare prices offered to customers in January with those available in late September.

It found standard prices from three of the country’s largest power providers ‒ Contact, Meridian and Mercury ‒ had increased by 5% to 15% in Auckland, Wellington and Christchurch. Prices for short-term discounted plans had increased by as much as 40%.

Powerswitch general manager Paul Fuge says a “perfect storm” of power price increases is brewing. (File photo)

And more power price pain was looming, with changes to lines charges on the way the phase-out of low-user charges continuing, Fuge said.

“You've got a perfect storm of price increases, all going in the same direction.”

Lines charges were one factor at play, he said.

Power is provided to households by local lines companies. Those companies are charged a fee by Transpower, the national grid operator, for using its network.

The lines companies add their fees to the Transpower charges and pass that total amount on to power retailers. Retailers then add their fee before bills are sent to customers.

A change in the way lines charges are calculated could lead to increases of 8% to 10% come April 1, Fuge says.

Lines charges can generally be changed once a year, on April 1. Both Transpower and the lines companies are monopolies, regulated by the Commerce Commission, which has rules for how they can set their prices.

Those rules are set for five-year periods, with the current term ending this year and a new formula for calculating the charges coming into play in 2025.

That could lead to lines price increases of 8% to 10% come April 1, Fuge said.

Meanwhile, the ongoing wind-up of the low-user scheme was also driving power prices up for some consumers.

The scheme allowed people to pay a lower daily fee in return for a higher charge on the power they used, and was intended to help people who didn’t use much power.

A phase-out of the scheme began in 2021, after the then-Government concluded it was having unintended consequences and could mean that big families or those in poorly insulated homes ended up paying more.

Since then, the maximum daily charge for people on low-use power plans had increased by 30 cents on April 1. This year, it rose from 90c to $1.20 a day, pushing bills up by about $110 a year.