Price hike: Power bills set to rise by $15 a month after Commerce Commission ruling

The Commerce Commission is proposing increasing household power bills by an average of $15 a month from April next year to strengthen Aotearoa's national electricity grid. 

The Commerce Commission on Wednesday announced draft decisions to allow increased revenue limits for national grid owner Transpower and local lines companies to help pay for investment in the country's electricity network.

It said increased investment was needed to provide a reliable network with future needs in mind.

Commissioner Vhari McWha was conscious of increasing Kiwis' power bills, but said delaying investment will lead to even higher prices down the track.

"Maintenance and improvements to the electricity network now will help keep the lights on in the future," McWha said. 

"To help, we are proposing that some revenue is recovered more slowly to soften initial price rises for consumers." 

If it goes ahead, the decision will mean Kiwi households pay an average of $15 extra per month for the first year of the regulatory period - from April 1, 2025. For each of the following four years, bills will increase by an average of $5 a month.

Transmission by Transpower and distribution by lines companies make up 37.5 percent of an electricity bill.

The Commission said if it hadn't proposed to slow down the revenue recovery from Transpower and lines companies, consumers could be looking at a $25 a month price hike.

"As an essential service for all Kiwis, the affordability of electricity is important. 

"We're conscious that for consumers to get the electricity network they need, more investment is required. That's why we're proposing to increase the amount of revenue Transpower and local lines companies can earn.

"However, we haven't allowed for all of the expenditure that they forecast. We've taken the additional step of spreading the recovery of revenue by Transpower and local lines companies over a longer period to soften the impact of initial price increases on consumers," McWha said. 

Not every region will see an increase of $15 a month. Areas covered by five lines companies will see higher rises of $20 a month. These include the far north with Top Energy, the east coast which is covered by Firstlight, Otago which is covered by OtagoNet, Alpine Energy which is in the middle of the south island and the Lines Company which covers the King Country region.

The Commerce Commission said the proposed increase reflects the higher costs companies are facing, including the cost of borrowing, cost of materials and inflationary pressures since the last revenue review in 2019. 

It also recognises that assets built last century - many in the 1960s and 1970s - need to be maintained and replaced. 

Electricity networks also need to grow and adapt to meet population growth and new demands, such as the increasing electrification of transport and industrial process heat.

A spokesperson for Transpower said it will take some time to review the decision.

"We are pleased the Commission has recognised our commitment to ensuring New Zealanders have a safe and reliable electricity grid now and into the future."

The Commission is seeking feedback on its draft decisions with the final decision made in November.