Real solutions for the powerless

Here is a sad but all too common story of everyday poverty in New Zealand. It concerns an elderly couple in a onebedroom rental in Porirua who are so frugal with their power that they often turn off the hot water cylinder and don’t heat the flat.

They suffer from coughs and colds all winter. But when grandchildren come to stay, they turn the heating up and the hot water goes back on, as they can’t have kids in a freezing flat. However, the higher bills that follow means they fall behind on their payments until the power is disconnected.

That story will be alien to some and familiar to others. It is one of four case studies that emerged from interviews with budgeting services, relayed in a discussion document released this week as a key part of the Government’s Electricity Price Review.

The good news is that our power supply is reliable. The bad news is that for many it is too expensive and, worse, unfair.

After adjusting for inflation, residential power prices are 79 per cent higher now than in 1990 and have risen faster than in most other OECD countries. More than 100,000 New Zealand households – 6.1 per cent – spend more than 10 per cent of their income on domestic energy, which meets the definition of ‘‘energy hardship’’.

A Salvation Army survey found 45 per cent of 1000 respondents went without home heating because of power prices and 10 per cent used the oven or stove to heat for winter heating.

There are many worrying but predictable details. Children are over-represented in households undergoing ‘‘energy hardship’’. Meanwhile, the benefits of shopping around and paying power bills quickly tend to go to higherincome households. The same wealthier consumers will also be more likely to benefit from new technology such as solar power and electric vehicles, with lower-income households bearing a disproportionate share of the cost of building extra network capacity for the vehicles.

Other kinds of unfairness are built into the system. Since 1990, against the significant rise in residential prices, commercial prices have fallen by 24 per cent and industrial prices have risen by just 18 per cent. There are three reasons, the report’s authors explain: ‘‘Distribution charges shifted from businesses to households; generation and retailing related charges went up a lot for households; and GST, which only residential consumers ultimately pay, rose from 10 per cent to 15 per cent.’’

In the interests of fairness, network costs may have to be shifted from households back to other consumers. Consumers need to be empowered. A Consumer NZ survey found that only 38 per cent of 1500 respondents think retailers make it easy to compare prices and contracts. And while there are advocates for big commercial and industrial consumers, and Grey Power represents the elderly, many lower-income and vulnerable households feel they lack advocates. Some, including migrants, Ma¯ ori and Pasifika, are unwilling to make a fuss in case it affects their credit rating.

The problems are abundantly clear. Now we need to hear about real solutions. The Government’s winter energy payment is useful but does not address the greater structural issues of uneven pricing and communities that feel they lack the knowledge to help themselves.

Energy Minister Megan Woods said the second of two reports from the Electricity Price Review will look at remedies. It is eagerly awaited.

‘‘. . . our power supply is reliable. The bad news is that for many it is too expensive and, worse, unfair.’’