Are we being stiffed by power prices?
The Labour-led coalition is cementing its reputation as the government of inquiries, with the power industry being the latest cab off the rank.
Maybe we need to commission an inquiry into why so many inquiries are being commissioned. Although in fairness, during the election Labour did telegraph its intention to conduct a full-scale electricity sector review, which was duly enshrined in the coalition agreement.
The multi-pronged review will assess if the market is competitive, properly regulated and if companies are geared up for emerging new technologies.
But as Energy Minister Megan Woods has highlighted, determining whether residential power prices are fair is the top priority.
She cites the International Energy Authority’s report last year, which claims New Zealand is paying some of the world’s highest power prices, shooting up 50 per cent since 2000, with the steepest hikes occurring between 2009 and
2014.
However there is substantial contrary data.
In 2008, when National swept into office, the new Energy Minister, Gerry Brownlee, launched a major power pricing review in a bid to bend the arc on the price hikes.
Power price data signalled average consumer bills had rocketed by 78 per cent between
2000 and 2008.
The previous government unleashed a package of reforms, including rolling promotional campaigns to encourage people to shop around for the best pricing deals and simplifying the switching process. And there is ample evidence to suggest the curve was indeed flattened.
The Ministry of Business, Innovation and Employment’s (MBIE) Quarterly Energy Report graphically illustrates how household power prices have remained reasonably static in recent years.
The December report calculates average prices rose 2 per cent in the past 12 months after plunging to a 15 year low in 2016.
MBIE’s manager of energy and building, James Hogan, says aggressive discounting and incentive schemes being touted by power suppliers has driven the downward pressure on prices.
As a rainy Sunday exercise, I decided to see how much of a mauling power prices have had on my back pocket over the past decade, where I’ve owned the same property, with the same household composition.
While sifting through the bank statements, I was distracted in horror at just how much my rates bill had exploded.
It has nearly doubled in a decade, increasing by 83 per cent since 2007 – a dismal indictment on the Christchurch City Council’s raging profligacy.
According to the Reserve Bank’s inflation calculator, average overall inflation has seen consumer prices rise by 18.94 per cent in the past decade. The greedy, grasping hands of the city council have probably supersized your rates bill by over four times the rate of inflation, too.
No wonder local government is such a tractor beam for people with a penchant for spending other people’s money, on their endless pet follies and fancies.
After a stiff drink and a liedown, I pleasantly discovered the power bills hadn’t followed a similar hemorrhaging trajectory. My annual power bill from 2007, compared with 2017, had merely increased by 19 per cent, which absolutely mirrors a decade of consumer inflation.
During that time, I switched suppliers seven times, eagerly hunting down sharper tariffs.
Last year, a record 440,000 households switched suppliers. Consumer New Zealand’s PowerSwitch calculator has been my trusty portal. I do wish there was more transparency with our power bills, though. No-one would have a clue what proportion of their bill is siphoned off on generation, transmission and distribution by looking at your invoice.
Your power supplier only pockets about 20 per cent of the bill: roughly 30 per cent is the wholesale generation price, while about 25 per cent is devoured by your local lines company.
Megan Woods has signalled that the review will consider whether New Zealand really needs
29 lines companies. Meanwhile, the Government will pay all beneficiary-dependent households and superannuitants a
$700 winter energy handout this year.
It’s a benevolent gesture, a boost for healthier homes, but do well-off pensioners really need it?
It’s also timely that the ‘‘low fixed charge’’ pricing option will be assessed, amid concerns that it’s being milked by households via cutting-edge energy-efficient appliances and solar panel installation.
As new technologies evolve, how will the costs of national transmission be shared fairly?
That is arguably the biggest issue the review will have to tackle.