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The Spinoff
4 days ago
- Business
- The Spinoff
Could changing the incentives for power companies make electricity cheaper?
High power prices now seem normal in New Zealand, especially in winter. Could incentivising power companies to invest in generation capacity, rather than return dividends to the government, lower costs for individuals and businesses alike? One sign that electricity in New Zealand is expensive? The Powerswitch website, a service that lets you input some information and figure out if you could be getting a better deal with another plan. 'In June, we saw double the previous month's record for users,' says Paul Fuge, who runs Powerswitch on behalf of Consumer NZ, with funding from the Electricity Authority. Thousands of people are logging on every day – many of whom, Fuge says, find they could be paying up to $500 less a year just by switching plans. Retail power prices have increased 11% over the course of the year, Consumer says, partly because of changes in transmission costs and revenue limits for lines companies. There's a flow-on effect, Fuge says. 'Lots of people underheat their homes to save money but it's a false economy. People get cold and sick, end up in hospital, more kids don't go to school – it costs New Zealand more and makes it harder to participate in the economy.' It's not just individuals and households being affected by high power prices. When retail prices increase, wholesale power is pricier, too, although the cost fluctuates a lot more than a household plan. Manufacturers across New Zealand have said that power costs threaten their businesses; Winstone Pulp and Oji Fibre Solutions, paper mills that closed last year, said that the cost of electricity in New Zealand was one reason they couldn't continue. 'We should be in a position where our country has abundant renewable energy that is low cost and secure,' said Karen Boyes, the executive director of the Major Electricity Users Group, in an interview on Q + A in July. Fluctuating power prices make it hard for businesses to plan for the future. 'You need certainty for more than three to six years if you're going to keep investing in infrastructure,' she said. Headlines about expensive power are a kind of déjà vu; back every winter, as reliable as plunging temperatures and grey skies. Fuge, who gets a firsthand look at how much power prices hurt people through Powerswitch, feels this. 'We think markets are good for consumers, they drive innovation – but the results we're seeing aren't what you'd expect from a thriving competitive market,' he says. One response from the government has been to commission a review of the electricity sector, which began in February this year and is reportedly completed but yet to be made public. It follows a review of electricity prices conducted under the previous Labour government in 2018-19, and a review of the wholesale market in 2021. New Zealand's electricity market operates as a group of private companies, with generators Contact, Meridian, Genesis and Mercury publicly listed and traded on the New Zealand (and for some also the Australian) stock exchange. But the New Zealand government owns 51% of each company (except Contact, which is fully privately owned), meaning it gets paid dividends from electricity profits. Ed Miller, an economist, has calculated that the government gets nearly a billion dollars of returns from dividends and taxes from electricity generation each year – the figure was $980m in 2024. The companies also return money to their private shareholders, $655.8m in 2024. That's money that isn't being invested in generation – and, Miller argues, means individuals and businesses will continue to experience high electricity prices. The scarcity drives the price of electricity up, decreasing how much generating companies are willing to invest in increasing the amount of power they make. The power companies exist under the State-Owned Enterprises Act, which expects them to maximise returns, without the government making business decisions. 'That's a function of the market – the incentives to build [generation] relative to the risks aren't right,' Fuge says. It's worth noting that generators are investing in growing how much power they make as well as figuring out ways to make existing assets more efficient. Better batteries will increase Meridian's solar output; Genesis opened a new solar farm in Canterbury in April; Contact's geothermal plant near Taupō, which cost $924m to build, has been running at full capacity since November 2024; Mercury is building dozens of new wind turbines in Northland, and there are myriad other projects which have been approved or designed, though construction hasn't started yet. But after Meridian, Genesis and Mercury were partially privatised in the early 2010s, there were three years of the power companies making no investments in new renewable generation. As of 2024, the companies had spent $1.38bn since being publicly listed on new renewable energy projects, while paying out $9bn of dividends. Spending on generation has increased since 2019, and the companies have also invested lots of money in maintaining existing electricity infrastructure, which is often ageing. 'The new generation capacity is essentially late – we have a six to seven-year investment debit,' Miller says. Making electricity more abundant could lead to cheaper prices. 'You could have a lot more compassion in the system – lower-income users get cheaper electricity, you have more flexibility to support businesses in serious financial distress with cheaper electricity,' Miller says. 'The rules of the market presented to the gentailers are not to change generation or have the retailers price cheaper,' Fuge says. 'But if you don't like the rugby being played, you don't blame the players, you change the rules.' Miller says that increasing the incentives for gentailers would require reimagining the State-Owned Enterprise Act, which mentions dividends rather than profit. In the law, there's no reason for companies to reinvest profits to grow generation, or to support electricity users in need, whether they are low-income people or struggling businesses. Instead of David Seymour's vision of asset sales, the state would have to retain partial ownership of the electricity companies, rather than selling off its remaining 51% share. 'As long as electricity is a private market, we will contend with this,' he says. 'There's no single magic bullet,' Fuge points out. But with an estimated 40,000 people having had their power cut off in the last year due to not paying bills, there are lots of reasons to rethink the system that sells electricity.
NZ Herald
28-07-2025
- Business
- NZ Herald
Could you get a cheaper plan for electricity? Most companies won't tell - Power to the People, part 2
You can use the Herald interactive graphic below to see which companies will do a best-plan check, which won't, and their responses when asked why not, along with their answers to other questions about energy hardship. Some companies said they checked best plans for customers in a different way - others claimed it was too hard to find the cheapest price for each customer. Consumer NZ says nine out of 10 people could pay less for power if they changed plans or providers. So while prices have jumped and winter spikes our usage, advocates say power companies have a responsibility to ensure customers are getting the best deal. And while Consumer runs its Powerswitch tool to compare prices and plans in the market, Powerswitch manager Paul Fuge told the Herald it should not be a customer's responsibility to understand the market so they could decide on the best plan for themselves. Consumer's 2025 annual energy survey found 20% of people have had difficulty paying their power bill in the past year. Statistics New Zealand data for June showed power prices had jumped 10.4% in a year. And MBIE's last energy hardship report in 2022 showed 110,000 households could not keep warm. Fuge said many people were paying more than they needed to and would not even know they could get a better deal. 'Our concern is particularly for those who are unaware that they could be paying significantly less." He said 93% of people who used Powerswitch found potential savings of $100 or more, and the average savings from switching was between $400 and $500 a year. 'For households already struggling, paying hundreds more than necessary for a basic service like electricity is something we should be working to change.' Fuge said 12% of Powerswitch users had given feedback saying they had used the information from the comparison tool to negotiate a better deal with their existing retailer. Consumer NZ's Paul Fuge says regular plan checks should be standard practice across the industry, not the exception. Photo / Supplied 'That's a great result. And it shows the opportunity is there, but the responsibility shouldn't fall solely on consumers to seek it out. Regular plan checks should be standard practice across the industry, not the exception.' Jake Lilley, from financial mentoring charity Fincap, said retailers had a responsibility because they were providing an essential service. 'Energy is an essential service, and there shouldn't be that loyalty tax built into it. 'There's also an information asymmetry that's involved; providers should have a better overview of what's likely to be the best plan. 'There are always some variables, but they should be helping their customers to get onto that plan or even potentially defaulting people to that best plan, because they have the ability to unilaterally change the price. Why don't they apply savings rather than putting prices up?' Fuge said people often did not realise their power companies were not proactively checking and informing them if they were on the best plan. 'We often find that many people assume their power company is already doing this for them. In reality, some retailers do it proactively, some only if asked. What really frustrates people is finding out—not only that they could save by switching providers—but that they could have been on a cheaper plan with their current provider." Says Fincap's senior policy advisor Jake Lilley: 'There's also an information asymmetry that's involved; providers should have a better overview of what's likely to be the best plan.' Photo / Fincap The Herald has worked with advocacy group Common Grace to analyse each power company's response to a list of questions on energy hardship. Common Grace's co-director Kate Day said the price check responses left her disappointed. 'Only two companies checked before winter. So Flick and [prepay service] Wise both said that they did check before winter for all their customers, and actually Flick had a practice of checking proactively every three months, which has been something they've promoted on their website. 'Among the other companies, there were some that do have at least a process of checking annually, that's Genesis, Frank, Ecotricity and Toast. 'But among the other companies, they never do this proactively, unless when they're required under the Consumer Care Obligations to check for customers who directly ask them, or for people who are in hardship. 'In the context of rising prices and predictable increased hardship, a very basic step they can take is just to make sure that all their customers are definitely on the cheapest plan that they offer to prevent people from falling into debt, being overcharged, and becoming further entrenched in hardship. 'If companies really care and want to reduce harm this winter, that could have been something that they chose to do.' 'The consumer knows best' However, the chief executive of the organisation representing generators and retailers said it was difficult to identify the best plan, and forcing companies to do so could just end up hurting customers. 'Finding the 'right' plan for a customer is not as simple as finding the cheapest option 'today',' Bridget Abernethy, chief executive of Electricity Retailers' and Generators' Association of New Zealand (Erganz), told the Herald. 'Many different plans are now available to consumers, making it difficult for retailers to predict the best option for each customer based solely on usage statistics. A household's circumstances and behaviours will influence the best plan choice for that household, so the consumer often makes the best plan choices through engagement with a retailer or by using the Powerswitch tool. Bridget Abernethy, chief executive of Erganz, says it is difficult for power companies to identify the best plan for their customers, and forcing companies to move customers could just end up hurting them. Photo / Supplied 'Retailers will always discuss the available plan options with customers who inquire, but price is not always the primary factor in plan selection.' Abernethy said mandating retailers to move customers onto a cheaper plan automatically could lead to unintended consequences, like a customer suddenly being moved to a high-user plan. 'Customers may suddenly change from low to high electricity users due to a change in circumstances, or customers could end up paying more if they are switched to a time-of-use plan but didn't shift their usage to outside of peak times,' she said. Abernethy said the best way for retailers to make sure their customers were on the right plans was for those customers to call and discuss it. She acknowledged it could be hard for people to understand their power bills, which was why the industry had invested in EnergyMate, an in-home coaching service to help people get the most out of electricity services. What the power companies say Power company Flick, now owned by Meridian, checks every 90 days if its customers are on the best plan and will tell them if they could be on a better one. These quarterly checks include looking at the times of day each customer typically uses power, and whether they would be better off on a 'flat' or 'off-peak' plan. 'This [Best Plan Promise] initiative is one we proudly offer to all our customers, and we would welcome more electricity retailers taking similar action in Aotearoa New Zealand,' Naz La Gamba, head of Flick Electric, told Common Grace and the Herald in March. In May, Flick was sold to Meridian. It is not accepting new customers and its current customers will be transferred to Meridian. When asked what would happen to the Best Plan Promise under new ownership, Meridian said, 'all Flick plans end as soon as those customers are migrated to Meridian'. Wise, which also did a best-plan check, said it would continue to do so and would make sure all its customers were on the most suitable plan for their usage before June 1. Genesis said it, along with its subsidiaries Frank Energy and Ecotricity, did an annual check, and this was scheduled for August. The company said its customer service staff also reviewed accounts when customers phoned. Contact said, 'Customers can also track their usage on an hourly, daily or monthly basis through our customer app, EnergyIQ. They can also access a forecast on upcoming bills based on current usage, along with energy-saving tips, insights and weather forecasts.' Meridian said it, and its subsidiary Powershop, would not check unless customers called to ask or a customer was in hardship. Mercury said it wouldn't, but it 'endeavours to ensure that any customer who is receiving support from our Here to Help team is on the plan that best suits their energy usage and personal needs'. Pulse Energy Alliance also wouldn't, but said, 'When engaging with our customers, we do check to make sure they are on the right plan for their home. Pulse pointed to its recently launched Power Shift plan with half-price weekends and discounted rates. Nova wouldn't do a best-plan check, but said its support teams provided 'a personalised approach when dealing with customers who contact us for advice or are experiencing payment difficulties'. Electric Kiwi said its plans were 'already deliberately simple'. Switch Utilities gave a similar answer, pointing to one plan for low users and another for standard users. Electric Kiwi said: 'Often the best prices can only be achieved by behaviour change. For example, our MoveMaster plan has very large incentives for off-peak usage, but could be the wrong plan for a customer who is not aware of, or able to access, the benefit from this. We also provide usage tracking and tools to help people choose what suits them best.' And Switch said, 'We ensure people are on the correct plan at sign up, and allow people to switch between low and standard as they need. Most people won't need to change often or at all, unless their usage patterns change remarkably.' Toast also pointed to its simple two-plan structure, but said it does check its customers' usage once a year and when they are first signed onto a plan. 'We check in spring as this gives us a good lens to gauge last winter's use [which effectively dominates the annual usage]. 'As we have a very simple offering, we would want to be sure customers are either well under or well over the low/standard user threshold before recommending that they change plans. Contact's response echoed Abernethy's: 'To compare past energy use against current plans is not a one-size-fits-all approach'. 'Circumstances can change, such as a change of address, a new baby, a new job, or a change of numbers in the household. Our Time of Use plans give customers free energy in return for off-peak use.' Experts say it shouldn't be difficult Fuge said energy providers had 'all the necessary information' to check if their customers were on the best plan. He said there was little excuse for the majority of companies not doing it. 'They absolutely can – and they should. It shouldn't be difficult at all,' he said. 'If Consumer NZ can do it through Powerswitch – often with less data than retailers have access to – then there's no reason retailers can't do the same. 'Providers have all the necessary information: their customers' usage history and the details of their own plans. The capability is certainly there.' And Fuge said that comparing a customer's past usage to current usage was often just a distraction. 'What really matters is matching a customer's usage pattern –whether past or present – to the pricing structure that offers them the best value. Most people's electricity use doesn't change dramatically month to month, and using that data to check whether they're on the most cost-effective plan is both possible and reasonable. Paul Fuge from Consumer NZ says energy providers have 'all the necessary information' to check if their customers are on the best plan. Photo / 123RF 'So yes, in our view, there's little excuse. Retailers could and should be more proactive in helping customers avoid paying more than necessary. Relying on customers to navigate complex plans or monitor shifting tariffs on their own isn't good enough, especially when many households are already under financial strain.' Fuge said smart meter data, which captured usage on a half-hourly basis across the year, along with modern data analysis tools made it 'entirely feasible' for retailers to do a best-plan check. 'This kind of analysis is well within the capabilities of all major electricity retailers,' he said. 'Genesis and Toast say they carry out annual reviews, and that's a good thing. Toast's reasoning– that winter usage dominates the annual profile – makes sense from a technical standpoint. Winter is generally the highest cost months for households, so analysis in spring would offer a full view of the previous winter's consumption." 'Flick's approach shows it's entirely possible. The tools and data are there, and it's well within the capabilities of all major electricity retailers to regularly review customer plans against usage and recommend better options. Fuge noted Flick had the highest customer satisfaction score among retailers in Consumer's most recent survey, data he said was unsurprising. 'It is a shame that the two retailers with the highest customer satisfaction scores – Flick and Frank Energy – have both announced they are leaving the market.' And reacting to those providers who pointed to the simplicity of their plan structures, Fuge said this could be 'an excuse for inaction'. He added, 'It's good that consumers have a choice – some value simplicity and may knowingly pay a little more for a straightforward, easy-to-understand plan. Others are quite happy to engage with more complex pricing structures if it means saving money. Fincap's Jake Lilley says if power companies find it hard to look at a customer's usage and figure they'd be better off on another plan, those customers will have an even harder time. Photo / NZME 'But simplicity shouldn't be used as an excuse for inaction. Even among 'simple' plans, there can still be significant price differences depending on a customer's usage pattern. Retailers have a responsibility to help customers understand those differences.' Lilley, from Fincap, said if a retailer believed it was too difficult to check if a customer was on the best plan, it would be even more difficult for a customer to check themselves. 'It points to issues with the whole set-up of the market if an energy provider is feeling they can't do that, because you can imagine then how hard it is to the average punter out there who's trying to read an energy bill and make sense of it and make sense of what to do next. 'Energy retailers should be experts in these things and be able to help their customers rather than all of us having to be experts to engage with an essential service and get a fair price from it. 'People are juggling a whole lot, life is messy, and then having to constantly keep an eye on the price of your essential services - there's another burden on people that they really shouldn't have.' Lilley said people should end up on the best plan by default. 'Even I, as a person working for a decade looking at energy affordability, struggle to navigate and find the exact best price for me. I can maybe get an idea of what's reasonable.' Monday: As Kiwis battle rising electricity bills, campaigners call for change Tuesday: Could you get a cheaper plan for electricity? Most companies won't tell Wednesday: Major company moves to stop disconnecting customers in hardship Thursday: Why our biggest power companies should be broken up (and why they shouldn't)
RNZ News
04-07-2025
- Business
- RNZ News
How to keep your power bill down this winter
20% of New Zealanders are struggling to pay their power bills with 11% cutting back on heating their homes, according to Consumer New Zealand's latest energy survey. Stats NZ figures show the price of electricty has gone up almost 9% in 12 months. Some people have told Checkpoint they are in bed by five to save on heating costs, others are taking extreme measures like turning off their hot water cylinder or bathing in cold water. Consumer's Manager of Powerswitch, Paul Fuge spoke to Lisa Owen about how to keep your power bill down this winter. To embed this content on your own webpage, cut and paste the following: See terms of use.
Newsroom
27-06-2025
- Business
- Newsroom
The double-whammy bill natural gas users have to pay
A controversial $200-million fund for investment in local gas exploration aims to tackle ever-dwindling supplies, but it won't be soon enough for thousands of households trapped with gas connections they don't want, a consumer expert says. The four-year contingency fund to subsidise new fossil fuel fields was announced by Resources Minister Shane Jones at last month's Budget. Just weeks later, the Ministry of Business, Innovation and Employment revealed that our natural gas supply is running out faster than previously thought, with latest data showing reserves have fallen 27 percent from last year. But any new developments will take years, and gas households already face surging costs, says Paul Fuge, manager of Consumer New Zealand's Powerswitch. Residential consumers make up only 4 percent of the country's total gas use and Fuge says it won't be running out in the near future. But that is no consolation for gas customers who are being hit in the pocket twice. 'It costs more to have gas than electricity so an electricity-only house is much cheaper to run than a gas-electricity house because you can substitute all your gas appliances for electric appliances … but you can't run a TV on gas or your lights on gas,' says Fuge. That means gas customers have to have an electricity connection, which means double the costs of the infrastructure – gas pipes and electricity lines – needed to deliver the energy to people's homes. Gas customers are also locked out of cheaper electricity plans because most gas suppliers also demand that customers take their electricity. The companies that provide cheap electricity don't provide gas, Fuge says. Add to that the phasing out of low electricity charges for low users, which was a benefit for gas customers. 'What that means is people's electricity connections for the low users are getting more expensive every year over five years and that disadvantages gas customers,' he says. Customers who are renters are stuck with gas, as are people on low incomes because they can't afford to switch, Fuge says. He explains to The Detail why he thinks thousands of new households have connected to gas in recent years, despite rising prices. 'I wonder if it's when people are building new houses, developers may be putting in gas for various reasons.' The Ministry of Business, Innovation and Employment does not have specific figures for new connections but based on rising residential use, Fuge calculates that the number of household connections has increased by around 18,000 since 2019, to 290,000. Residential customers make up the smallest proportion of gas use. According to industry group GasNZ more than half a million New Zealand homes and businesses rely on gas and Liquified Petroleum Gas (LPG). There are 300 large industrial gas customers, from methanol exporter Methanex to dairy plants and wood processors. Newsroom senior political reporter Marc Daalder says the large industrial users are more imperilled by the declining gas supply, as well as the electricity generators that rely on gas. He says the coalition's plans to repeal a ban on new oil and gas exploration will not solve our dwindling gas supplies any time soon. 'The fastest we've had from a conversion from finding that gas to producing that gas is 10 years and it's hard to say in 2035 we know exactly what our gas needs are going to look like. 'The reality is they're probably going to be a lot lower because we're going to be electrifying everything and some of the industries that we've got that rely on gas are going to be electrifying or closing down.' The other option is finding more gas in the existing fields which has been going on consistently and continually for many years, including since the exploration ban was put into place. 'About a billion dollars has been spent trying to find extra gas in those existing fields and there have been a few minor successes but nothing major.' However, two fields are showing potential new gas finds, which the $200-million government co-investment fund could boost. 'Shane Jones would really like for the Government to be able to completely revitalise the gas industry and send people out looking for brand new gas in brand new places. The reality is we haven't found any gas in a brand new place for two decades or longer,' says Daalder. 'It's not like the Gulf of Mexico where there is all this gas sitting there. The resource probably isn't that strong; $200 million isn't going to suddenly make it commercial to take that big of a gamble.' Check out how to listen to and follow The Detail here. You can also stay up-to-date by liking us on Facebook or following us on Twitter.
RNZ News
26-06-2025
- Business
- RNZ News
The double-whammy bill natural gas users have to pay
Photo: 123RF A controversial $200 million fund for investment in local gas exploration aims to tackle ever-dwindling supplies, but it won't be soon enough for thousands of households trapped with gas connections they don't want, a consumer expert says. The four-year contingency fund to subsidise new fossil fuel fields was announced by the Resources Minister Shane Jones at last month's budget. Just weeks later, the Ministry of Business, Innovation and Employment revealed that our natural gas supply is running out faster than previously thought, with latest data showing reserves have fallen 27 percent from last year. But any new developments will take years, and gas households already face surging costs, says Paul Fuge, manager of Consumer New Zealand's Powerswitch. Residential consumers make up only four percent of the country's total gas use and Fuge says it won't be running out in the near future. But that is no consolation for gas customers who are being hit in the pocket twice. "It costs more to have gas than electricity so an electricity-only house is much cheaper to run than a gas-electricity house because you can substitute all your gas appliances for electric appliances ... but you can't run a TV on gas or your lights on gas," Fuge says. That means gas customers have to have an electricity connection, which means double the costs of the infrastructure - gas pipes and electricity lines - needed to deliver the energy to people's homes. Gas customers are also locked out of cheaper electricity plans because most gas suppliers also demand that customers take their electricity. The companies that provide cheap electricity don't provide gas, Fuge says. Add to that the phasing out of low electricity charges for low users, which was a benefit for gas customers. "What that means is people's electricity connections for the low users are getting more expensive every year over five years and that disadvantages gas customers," he says. Customers who are renters are stuck with gas, as are people on low incomes because they can't afford to switch, Fuge says. He explains to The Detail why he thinks thousands of new households have connected to gas in recent years, despite rising prices. "I wonder if it's when people are building new houses, developers may be putting in gas for various reasons." MBIE does not have specific figures for new connections but based on rising residential use, Fuge calculates that the number of household connections has increased by around 18,000 since 2019, to 290,000. Residential customers make up the smallest proportion of gas use. According to industry group GasNZ more than half a million New Zealand homes and businesses rely on gas and Liquified Petroleum Gas (LPG). There are 300 large industrial gas customers, from methanol exporter Methanex to dairy plants and wood processors. Newsroom senior political reporter Marc Daalder says the large industrial users are more imperilled by the declining gas supply, as well as the electricity generators that rely on gas. He says the coalition's plans to repeal a ban on new oil and gas exploration will not solve our dwindling gas supplies any time soon. "The fastest we've had from a conversion from finding that gas to producing that gas is 10 years and it's hard to say in 2035 we know exactly what our gas needs are going to look like. "The reality is they're probably going to be a lot lower because we're going to be electrifying everything and some of the industries that we've got that rely on gas are going to be electrifying or closing down." The other option is finding more gas in the existing fields which has been going on consistently and continually for many years, including since the exploration ban was put into place. "About a billion dollars has been spent trying to find extra gas in those existing fields and there have been a few minor successes but nothing major." However, two fields are showing potential new gas finds, which the $200 million government co-investment fund could boost. "Shane Jones would really like for the government to be able to completely revitalise the gas industry and send people out looking for brand new gas in brand new places. The reality is we haven't found any gas in a brand new place for two decades or longer," says Daalder. "It's not like the Gulf of Mexico where there is all this gas sitting there. The resource probably isn't that strong; $200 million isn't going to suddenly make it commercial to take that big of a gamble." Check out how to listen to and follow The Detail here . You can also stay up-to-date by liking us on Facebook or following us on Twitter .
