Single buyer proposal would go a long way to overcome fuel poverty

The future shape of the electricity industry will affect more than just the bottom line, write and

disease, both common in New Zealand.

Cold houses contribute to cardiovascular problems and the risk of falls, especially for older people. Cold houses also increase mental health problems and family tension, particularly when families are able to use only some rooms in the house because the others are too cold. Those in fuel poverty tend to cope by a mixture of rationing their electricity consumption, sometimes to extremes; or restricting other necessities such as groceries; or going into debt. Some households get disconnected from electricity or other services.

The problems of fuel poverty are especially visible among the 3 per cent of households that use prepayment meters to pay for electricity. These meters, which require electricity to be bought in advance of use, automatically disconnect the household electricity supply when the credit runs out.

Our surveys of households with prepayment meters have found that these houses are often cold, with many people shivering indoors, and more than half of these households buy less food in order to afford electricity.

The current electricity market is largely unregulated. Residential electricity prices, but not industrial prices, have risen rapidly since the market model’s introduction in the 1990s, whatever government has been in power. Residential price rises have particularly affected those households with the bottom 10 per cent of incomes, who in 2010 spent almost 14 per cent of their budget on energy. Those households with the highest 10 per cent of incomes paid only 3 per cent of their budget on energy.

Our current market model of electricity is not concerned with fairness. It does not protect those without purchasing power at the bottom end of the retail market.

To fully address the causes of fuel poverty will take bold policies across several policy areas. Critically, re-regulation of the electricity market, as suggested by Labour and the Greens, will rein in a key driver of fuel poverty and should improve the health of New Zealanders.

Kimberley O’Sullivan is a researcher and Philippa Howden-Chapman is the director of He Kainga Oranga/Housing and Health Research Programme at the University of Otago, Wellington.