Photo: 123RF
Forty percent of New Zealanders are paying more in their power bills because of the phase-out of low-user tariffs, according to a new report.
The low-user tariff scheme was designed to encourage lower consumption of power and to help lower-income households by offering them a lower daily fixed charge in return for higher rates for their power use.
But a review found that low-income households were not necessarily the lowest power users, and people on standard plans could be paying more to cover the low-user option.
That led to the tariff being phased out, in a process that started in 2022 and is due to finish in 2027.
A report commissioned by the Ministry of Business, Innovation and Employment (MBIE) and produced by Sense Partners has been released as part of a review of the phase-out at the halfway mark.
It found that the phaseout was generally delivering the benefits expected. More customers had their bills fall than increase.
There were 880,000 households that used more than 7000kWh of power a year that had an average decrease in their bills because of the phaseout of $62 since 2021.
For another 280,000 households, the impact was essentially neutral. Almost 800,000 households had their power bills increase. Of them, 72 percent had an increase of less than $104 a year.
There were 2000 households in the group that had been most affected, with an average increase of $168 a year.
The biggest increases were for single-person households on low incomes.
A power credits scheme has been available to help low-user households adjust to the phase-out. The report said only 1.04 percent of customer bills had increased by more than the $110 they could claim through this scheme. It has been extended to 2032.
The analysis showed other increases in electricity costs, beyond the phaseout, were affecting power bills. Lines charges are increasing and there has been pressure on wholesale power prices.
"Even among very low users who are most affected by the phase-out, other electricity cost increases have typically had a bigger impact on their bills."
The review said it was important that the country had regulatory settings for power that prioritised opportunities to make wholesale and network prices more efficient and ensure households could take advantage of innovations to reduce their bills.
It is understood that some innovation is constrained because of the requirement under the low-user tariff scheme to offer a low-user option with any new scheme.
The review noted that some of the ways the market was changing might not help those struggling with bills.
"Consumer groups have made convincing arguments that the increasing complexity of pricing tariffs - which is a desirable outcome from the phase-out - could make plan choices more confusing.
"It is critical that households are supported to identify the pricing plans that are best suited to the ways they use electricity. While time-of-use and other innovative pricing approaches will provide new ways for households to make significant savings on their bills, they could also increase some bills if a consumer is unable to respond to their price signals."
MBIE said it and the Electricity Authority had work under way to ensure comparison and switching websites were able to give much more personalised information about the plans that best suit households' usage patterns.
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