Is it a tax? Is it a levy? Government stumbles over new charge to pay for LNG

Tuesday, 10 February 2026

Is it levy? Is it a tax? No, it's a 'net benefit to Kiwi households' says Energy Minister Simon Watts.

Is it a tax? Is it a levy? An additional charge for a liquefied natural gas import terminal has turned into a communications nightmare for the Government.

On Monday, the Government announced they had short-listed six proposals for the new LNG import terminal, which will allow New Zealand to import and store LNG (gas that has been cooled to -160C and turned into liquid for transport) for use in dry years. It is hoped the terminal will be operational as early as 2027.

This will be paid for via “a levy on electricity”, according to a fact-sheet released by the Government.

Speaking at Monday’s post-Cabinet press conference, Energy Minister Simon Watts compared the charge to the levy that funds the Electricity Authority - which is on-charged to consumers via electricity companies - but refused to reveal the likely cost for households.

“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,” he told media.

Asked if this was a new tax on households, the prime minister was quick to intervene.

“This isn’t a tax, it’s a levy to fund a key piece of infrastructure,” he said.

However, on Tuesday, Watts appeared to contradict this point. Questioned on the difference between a levy and a tax in his capacity as revenue minister, Watts initially denied the new funding mechanism was either.

“The reality is that what we proposed is neither of those. It is a net savings to Kiwi households,” he said.

Pressed again on the issue on Tuesday afternoon, Watts conceded it is a levy - albeit on electricity companies, not households, he said.

On Monday, Energy Minister Simon Watts called a new electricity charge a “levy”. On Tuesday, he seemed to backtrack on that.

But according to the Opposition - which has dubbed the charge a “Gas Tax” - that levy will inevitably be passed on to consumers.

So, what is it? A levy, a tax, a net benefit, or all of the above? And will it be paid by energy companies, or consumers? Here’s what we know.

It’s not a tax, Government says

The Opposition was quick to dub Monday’s announcement a “gas tax”. Labour leader Chris Hipkins seemed almost gleeful on Tuesday morning, as he reversed roles with the National Party.

“I’ll quote from Nicola Willis directly. It’s a quote you might want to go back and find: ‘If it walks like a tax and it quacks like a tax, it’s a tax,’” he said.

Even the Government’s coalition partner called them out on the messaging. “We should not be wasting our time here with different sorts of language, trying to explain things away. It’s a tax,” New Zealand First leader Winston Peters said.

But the Government stood strong: It was not a tax, it was a levy.

“[Labour is] absolutely wrong. The only reason we are progressing this policy is the definitive advice that it will reduce household electricity costs,” Finance Minister Nicola Willis said on Tuesday morning. “The small price that the energy companies pay for the levy will be outweighed by the significant benefit to households.”

The prime minister echoed that point.

“The levy will be charged on to electricity companies. And because of that facility being created, New Zealanders will have lower power bills,” he said.

In short: it’s a levy, paid by electricity companies.

But… is it a levy?

However, in the scramble to deny that households were being taxed to fund the new LNG facility, Watts also denied the charge was a levy.

“What we announced yesterday is a net savings to New Zealand households in regards to energy bills.”

Asked about the documentation released by his office on Monday, which referred to a “levy”, Watts wouldn’t be drawn in.

“We’re simply saying the reality - in terms of the impact on New Zealand households - of this policy decision is net savings and downward pressure on power bills.”

“If it walks like a tax and it quacks like a tax, it's a tax,” Labour leader Chris Hipkins said.

But the questioning didn’t stop, and by Tuesday afternoon he conceded that the LNG facility will be paid for by a levy. “The levy is a fund that will fund the infrastructure via the electricity sector,” he said.

So who is paying?

Levy, charge, fee or tax, by Tuesday afternoon the Government had shored up one key message. The levy would be placed on electricity companies, who will be responsible for funding the new LNG terminal.

And there will be a net benefit for households, when increased security in supply leads to a drop in electricity prices, Watts said. The logic there is that the electricity industry won’t have to spike prices when it looks like supplies are running low - because the LNG will be on-hand to help meet demand.

The issue is whether that charge gets passed on to consumers.

On Monday Watts compared the new levy to the Electricity Authority one, which is paid by electricity companies to fund the regulator, but passed on to consumers.

“It’s on-charged through your electricity bill – about 0.5% of a typical monthly household bill,” the Authority’s website says.

Does that mean this levy will be passed on to households as well?

Faced with intense questioning about the likely cost to households on Monday, neither Watts nor Luxon suggested that wouldn’t be the case. But on Tuesday, Watts seemed to say it wouldn’t.

“The levy is on the electricity sector, which will also receive the benefit in terms of reduced prices. What is passed on to New Zealand consumers is a net savings,” he said.

However, he declined to comment on the anticipated time frames for when the levy will be charged and when sector prices are expected to ease.

“The initial payment is a tax. This one may of course bring you a benefit at the same time … but it’s a tax,” Peters said.

Stuff approached Watts’ office for clarification.