Energy hardship ‒ the rising cost of keeping the home fires burning

Saturday, 26 July 2025

As the country shivers through the coldest winter months Kiwis are staring down an unprecedented rise in the cost of keeping warm.

Rather than turning on the heat pump or electric heater many are instead pulling out the extra blankets and the hot water bottles, enduring the cold in stoic silence or as one 88-year-old puts it, a veil of gentility that hides very real financial strain.

Alongside housing costs and food, power is one of the primary drivers of the cost of living. But while some expenses can be trimmed, electricity remains an essential – and increasingly unaffordable – necessity.

Stats NZ data released earlier this week showed electricity prices were up 8.4% on the same time last year, while the Ministry of Business, Innovation and Employment’s latest survey of domestic electricity prices shows power prices rose about 11% nationally in the first half of this year.

The figures reflect the most recent step in the phase-out of the low user tariff and recent increases in lines charges, a move expected to add between $10 and $25 a month to most household power bills.

And despite lines charges now exceeding actual electricity use at some properties, there’s even more pain on the way with further, smaller increases likely between 2026 and 2030.

For Wellingtonian Judith Aitken, a more than doubling of her daily fixed charge (from $0.6 to $1.50), as outlined in an email from her power company, was the final straw. The 88-year-old took to her keyboard.

“Good morning Mercury Board and management,” she wrote. “This pricing increase by Mercury in the daily charge is outrageous.”

She continued: “There no evidence of any interest by you in the short and longer term impact of this cost increase on consumers.

“Your lack of concern for non-industrial consumers and continued failure, along with your other gentailing colleagues, to invest sufficiently in generating capacity to ensure what the now much-derided old state electricity agency used to provide – safe and reliable supply – is not only shameful but extremely poor long term planning and failed strategic market analysis.”

Aitken held corporate roles in what was then the Ministry of Energy and with Electricorp ‒ the state-owned enterprise set up in the late 1980s as part of the process of deregulating the electricity market.

She says where electricity was once regarded as a social good, “a public good, almost a human right”, the break-up of the industry into the now-familiar gentailers – companies that both generate and sell electricity – changed the sector irrevocably.

Since then shareholder profit has been the focus and the country has under-invested in new capacity. That was demonstrated by the chaos across the country last year as low hydro levels – 60% of New Zealand’s electricity is generated through hydropower – and falling gas reserves set off a chain of outages and business closures and cheap coal was brought in from overseas to keep the lights on.

Aitken is now calling for a commission of inquiry to look into the feasibility and benefits of alternative energy generation.

“New Zealand is literally the envy of many other countries because we have so much hydro. On the other hand, it’s not enough, and we have to be able to supplement it.

“So solar, wind, wave, those are alternatives, but also using hydrogen, using biomass … they’re not going to be the full answer, but they can supplement our very strong hydro base.”

At 88, Aitken still collects her own firewood for her wood-burner because, she says, delivery is too costly. She also uses a small electric heater.

“I’m lucky, I’m fit. But many of my friends can’t manage like this. They bring out the quilts and the satin-edged blankets and keep quiet about it; they’re keeping up a front of gentility because little old ladies don’t want to seem like they’re struggling.”

Her home has no insulation and isn’t double-glazed, “so you know, you look for everything else you can do to keep it warm”.

A neighbour with a seriously ill family member recently insulated her home and immediately saw big savings, but Aitken points out that many, especially the elderly and those on limited incomes, simply can’t afford the upfront costs – even with subsidies.

Aitken’s call for an inquiry comes on the back of an open letter from a number of organisations representing businesses and consumers, urging Prime Minister Christopher Luxon to take urgent action to “reshape the energy market”.

Signatories, including the Auckland Business Chamber, headed by former National Party leader Simon Bridges, Consumer NZ, the Major Electricity Users Group and the Employers and Manufacturers Association, described the electricity market as dysfunctional and said the status quo could not be allowed to continue because it was holding back the country’s productivity and driving up the cost of living.

Grey Power, whose members are among the hardest hit by the removal of low fixed charges and the subsequent price hikes, has also taken the Government to task, asking that the winter energy payment be increased to compensate for the “triple whammy bill shocks” ahead.

The payment is paid to anyone receiving a main benefit, New Zealand Superannuation or the Veteran’s Pension from May until October. It ranges from $20.46 a week for singles to $31.82 for couples or people with dependent children.

Grey Power president Gayle Chambers said one Wellington member’s energy bill was set to increase by $47.12 a month ($570 a year) ‒ a jump of 16% and considerably more than inflation, which has just hit 2.7%. There are plenty of gripes on social media too.

Research by Consumer NZ reveals they are not alone. More than half of Kiwis are concerned about the cost of their household’s energy, highlighted by the fact its power comparison tool is in hot demand.

In the four months to March 2025 more than 10,000 people used Powerswitch to switch to a better deal, an increase of 48% on the same period last year, and the highest on record for that timeframe, spokesperson Abby Damen said.

Its most recent survey found 20% of households struggled to pay their power bills, with 11% reporting living in cold homes after reducing heating to cut costs.

Explaining the average power bill, Damen said generation (the production of electricity which includes line charges) made up almost 40% of a household's overall bill, with distribution (building and maintaining the power lines) another 24.5% and retail (your power company’s operating costs) sucking up 11%.

Capacity concerns

The Government launched a review of the performance of the electricity market last year in response to what the prime minister labelled an “energy security crisis” and winter spot prices hitting more than $800/MWh.

Between 2018 and 2023, the average winter price was around $180/MWh. In August last year the average daily price reached $820/MWh. The actual long-run cost of generating power is about $100/MWh.

Energy Minister Simon Watts, who now has the final report and confirmed he would have more to say on it shortly, lays much of the blame on the policies of the previous government.

“[It] could have been avoided if New Zealand had enough fuel and electricity generation to supply the energy we needed. The ban on new gas exploration, the drive to immediately achieve 100% renewable electricity, and disappointing drilling results from our gas fields have left us in this difficult situation.”

New Zealanders could be assured there would not be a repeat of 2024 this winter, Watts said.

Given all the issues currently testing the resilience of the country’s electricity system, it’s perhaps unsurprising that the Electricity Authority ‒ which oversees and regulates the electricity market ‒ and national grid owner Transpower are warning of worse to come.

In its just released statement of performance expectations 2025/26 the authority notes demand for electricity is projected to increase by up to 82% by 2050, with an estimated $27 billion-$37b of new investment needed to meet that demand.

Transpower also believes power firms could have too little capacity to meet demand for electricity over winter 2026, with only their existing capacity and power plant developments determined so far.

Infrastructure NZ chief executive Nick Leggett said power prices had gone up for a mix of reasons; drought conditions in 2024 meant hydro generation was reduced in favour of more expensive fossil-fuel generation. General inflation and increases in materials and labour had been felt across all areas of the economy, including energy and this has been felt in people's bills.

“If we want infrastructure to be reliable and deliver for us, we need to invest in its renewal. That costs money.”