Power prices in the spotlight in major Government review of electricity market

Are New Zealanders paying too much for their power?

The International Energy Authority says power prices in NZ have risen much faster than other countries. Source: 1 NEWS

That's the question the Government is asking, with a major new review of the electricity market.

The International Energy Authority last year said that household electricity prices have grown faster than in other countries and that rises between 2009 and 2014 were "significant".

Energy Minister Megan Woods points to a 50 per cent increase in retail prices since 2000 and she is particularly worried about the impact on low-income families.

So, she's launching a review of the entire electricity market - from generation to retail and distribution. It will look at whether the price we pay is fair, if the market is competitive and properly regulated and if companies are geared up for emerging new technologies.

The Government also wants all electricity generation to be from renewable sources by 2035 - so electricity companies agree that the time is right for a major review.

"We need to look at all the bits of the electricity sector to get a view of where it is that the price pressures are really coming on for what people see when they open their envelopes at the end of the month and see their power bill,"  Ms Woods said.

There are nearly 30 lines companies that distribute power across New Zealand. Many are owned by local communities.

"There certainly are a lot - for a country the size of New Zealand to have 29 lines companies there is no denying. What I want to know is what impact that is having on pricing, what impact that has on the market," Ms Woods said. 

"What we also do know is that many communities see this as security of supply - having more community ownership of their electricity. But what we have to do is examine that across the whole market, and in terms of the whole sector right from generation through to the retail side of electricity."

She is also concerned about a "low tariff" pricing system, set up 13 years ago to encourage people to conserve energy. Low users pay a lower price for power, but there are fears that middle-class households, with access to more energy-efficient housing and appliances, and solar panels are exploiting the system.

The Electricity Networks Association wants this subsidy scrapped before the Government introduces a $700 winter energy payment for pensioners and beneficiaries later this year.

"Smaller, wealthier homes who have really modern appliances who are very well insulated, probably own their own homes, they are paying less than they should. That's really unfair to those bigger homes, they might have four or five kids in the house, they don't have any other way of accessing energy and they might have a rented home that is not very well insulated," said Graeme Peters, the association's chief executive.

The Electricity Retailers Association's Jenny Cameron is also worried about poorer families.

"We've got this really high functioning market, but some people struggle to heat their homes. And that's a really important thing for the electricity sector to see how we can be part of working with the other agencies to see how we can help make that better," she said.

Mr Peters says consumers are getting good value for money.  

"If you look at it on an income basis, those numbers haven't changed in the last 12 years. So people are spending roughly the same amount on electricity as they were in 2004, which is about three per cent of their income."

Ms Cameron says prices did rise after major re-regulation in the 1990s, but have "flattened off" in the last five years.

Ms Woods wants the inquiry to report back by early next year. So, is our electricity going to get cheaper? 

"Well that is the hope," she said. "That we will have a really good understanding of what is driving the prices and that we can make sure and we can be certain that New Zealanders are paying a fair price for their electricity."