Government plans levy on power users to pay for $1 billion LNG import terminal
Monday, 9 February 2026
The Government plans to put a levy on electricity users to pay for the $1 billion-plus cost of an import terminal that would allow Liquefied Natural Gas to be imported in bulk.
Information released by Energy Minister Simon Watts indicated the levy was likely to equate to about $15 to $30 per household per year on average, but he forecast they would be much better off overall as a result of the investment.
Watts said Cabinet had made a definitive decision to build the LNG terminal. “We're not going back to Cabinet for a follow-up conversation. It's been delegated to relevant ministers, and we're going to get on and make this happen.”
The next step is for the Government to seek more information from companies that have been short-listed to build the import terminal, which will almost certainly be located in Taranaki, with the goal of signing a contract during the middle of this year.
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Watts put the likely cost of the terminal at “north of $1b” but indicated the bill would be in the form of a lease costing between $90m and $180m a year.
The Government has been working out over the past 18 months how best to respond to an unexpectedly steep reduction in the supply of domestically produced gas.
The decline contributed to an energy crunch in the winter of 2024 that saw some factories close or cut back production.
Establishing an LNG import facility was an important next step in improving the affordability and availability of energy, Watts said.
Imported LNG would be a reliable backup fuel that would reduce the risk of electricity prices spiking in future “dry years” when the supply of hydro electricity was constrained, he said.
It would also add another layer of resilience by giving New Zealand access to additional supply options if domestic gas supply tightened unexpectedly, he said.
The facility could be operational “as soon as” 2027 or early 2028, according to Watts’ statement.
The cost of the import facility would be met via a levy estimated between $2 and $4 per megawatt-hour (MWh) on electricity, while the cost of the imported gas itself would be paid for by the users of that gas, according to the Government’s plan. The average household uses about 7.5MWh of electricity a year.
Labour leader Chris Hipkins labelled the proposed levy a “gas tax” and “another kick for New Zealand households”, saying it wasn’t going to lower power bills, save jobs, make the country more energy-independent or tackle climate change.
“Power bills are likely to continue to keep going up. $1 billion would buy you a hell of a lot of solar panels and batteries, which would save households a significant amount of money,” he said.
“We need to have a gas transition plan. That’s something that this government seems to have completely abandoned, any notion of.”
But Watts emphasised during a post-Cabinet press conference that the advice of officials was the option of importing LNG would put downward pressure on power prices, leaving electricity users materially better off overall.
The availability of LNG was likely to reduce power prices by about one cent a kilowatt hour (kWh) regardless of whether it was used, saving Kiwis about $400m a year and leaving them about $265m a year better-off overall, according to a “fact sheet” released alongside his statement.
“Electricity generation that is fuelled by gas produced from LNG is expected to cost somewhere between $200 and $250 a megawatt-hour (1000 kWh), which will have the effect of reducing spot prices during dry years. This is below the more than $800/MWh experienced in August 2024,” it stated.
Watts said New Zealand was experiencing a renewable electricity boom, but a rapidly declining gas supply had left the electricity sector exposed during dry years, when hydro lakes run low.
“The result is greater reliance on coal and diesel, and ultimately higher electricity prices, putting more financial pressure on families and making businesses less competitive.”
LNG would be imported in large shipments only when needed, “minimising exposure to international gas prices and keeping the door open for new technologies”, he said.
An update on the Government’s plans for an LNG import facility had been widely expected.
Energy Resources Aotearoa chief executive John Carnegie told The Post shortly before the announcement that there were “any number of scenarios” about how an investment in an LNG terminal could play out in practice.
He agreed it was possible it might be built but never used, but said the country had got to the point where it was widely acknowledged it would need the option of LNG imports “as an insurance scheme”.
“There is a lot of uncertainty around the extent to which we’ll use it, but if it’s seen as an insurance scheme — as a backstop — I think it will have a place in the market, one way or another.”