New electricity levy ‘not a tax’, PM says

Monday, 9 February 2026

The Government has short-listed possible proposals for a liquefied natural gas import facility, which could cost more than $1 billion.

The facility will be paid for by a levy on electricity – although Prime Minister Christopher Luxon and Energy Minister Simon Watts would not say how much that will cost households during the announcement at a post-Cabinet press conference on Monday.

Liquefied natural gas – or LNG – is gas that has been cooled and liquefied so it can be transported. Liquefying the gas reduces its volume by about 600 times, but means it has to be stored and transported at -160C.

To receive LNG, New Zealand needs an “LNG import terminal”. This is a piece of infrastructure, sometimes located offshore, which receives the LNG from the ships that deliver it, stores it and turns it back into a gas for use in New Zealand.

The Government initiated a procurement process for one of these facilities in October last year. Now, Watts has approved a short-list of accelerated delivery solutions, which could be operational as early as 2027.

Watts said there are six options on the short-list, which has provided the Government with an expected cost range for the facility’s build and maintenance.

The cost will be levied across the electricity sector, including gentailers, he said.

But as for the actual cost for households, the Government would not be pulled into providing a dollar figure.

“The reality of the commercial negotiation will dictate the exact operational costs for this facility, and then the levy’s purpose will be to cover that cost,” Watts said. “So we'll work through that once we conclude commercial negotiations.”

Levy not a tax, Luxon says

Labour leader Chris Hipkins was quick to jump on the proposed new levy, dubbing it a “gas tax”.

“It’s another kick for New Zealand households. Another increase in the cost of living for them,” he said.

But the prime minister was insistent.

“This is not a tax, it’s a levy. It is a levy to fund a key piece of infrastructure.

“There are a series of things that we have to do … to make sure that we have the supply in place, so that we get the low year risk down, so that we can keep stabilised prices for the consumer.”

Official advice was that households would see a net benefit of about $50 per year based on the range of potential costs and expected electricity price savings, Watts said.

However, at this stage, the details are sparse. “We’ve got to do the commercial negotiation. What we’re giving you is a broad cost-benefit of the investment in LNG,” he said.

The proposals will be further refined to a top two or three in the next couple of months, with the Government hoping to finalise a contract by June.

While Watts said it is too early to confirm a location, all the short-listed proposals are located in the Taranaki area.