Phase-out of low-user tariffs set to continue
Power companies will be entitled to hike tElhe daily charge for the majority of their customers by a further 34½ cents per day from the start of next month, Energy Minister Simeon Brown has confirmed.
About 59% of household are on so-called “low users plans” that electricity firms have to offer as an option to customers and which have a daily charge that is currently capped by the Government at $1.03½ per day.
Electricity retailers will be allowed to raise that charge to $1.38 any time from April 1.
Former energy minister Megan Woods decided in 2021 to completely phase-out the requirement for power companies to offer low-user tariffs over five years, subject to a “mid-term review” of that policy.
That was after she accepted arguments that the requirement to offer the tariffs resulted in larger families who used more than the average amount of electricity paying more than their fair share of the fixed costs of electricity distribution infrastructure. However, the phase-out has proved unpopular with people who benefit from the tariff plan, including people living alone and households that use gas for water heating or who generate their own solar power.
A Stuff reader poll in 2021 suggested about three-quarters of respondents were opposed to the phase-out.
Some consumers have complained they have seen their power bills rise steeply and unexpectedly after coming off fixed-term plans and having multiple annual increases in their daily charge kick in at once.
The Ministry of Business, Innovation and Employment (MBIE) had originally expected to provide its advice by the end of December on whether or not to continue with the phase-out.
But generation, infrastructure and policy manager, Tamara Linnhoff, said that review was put on hold when the new government was formed.
“The energy minister has asked for MBIE to provide advice on the scope and timing of the mid-point review of this phase-out,” she said.
Brown said he had received advice from MBIE, which he was now considering, on whether or not a review was needed.
The April increase just coming had been confirmed prior to him becoming minister, he said.
Brown said there was “a question-mark over whether there will be a review prior to next year’s increase”, which would take the allowed daily charge to $1.72½.
Deborah Hart, chairperson of the Consumer Advocacy Group, said in October that MBIE needed to provide “robust evidence” that consumers were benefitting, if it was to proceed with the phase-out.
The council was established by the former government to advocate for the interests of consumers and small businesses in the electricity market.