Government's proposed electricity changes could see low power users paying more

The Government's proposed changes to the electricity sector could leave low power users paying more.

Energy Minister Megan Woods announced the Government's response to the final Electricity Price Review on Thursday, which was launched as part of the coalition agreement with New Zealand First.

The review has made several suggestions, including ending prompt payment discounts, strengthening competition in the sector and setting minimum standards to protect people medically dependent on electricity.

Economist Christina Leung told The AM Show there's going to be quite a lot of change if all the proposals come in.

"The overall aim of the Government with these changes is to increase competition in the retail part of the electricity sector, so the raft of changes are expected to do that.

"With these changes overall, you would expect low electricity users to pay more for their power relative to currently, and in contrast high-electricity users paying less."

Leung said this could have some unintended effects.

"It does suggest less incentive to be more efficient with energy to the extent that, for example, the Government's trying to encourage greater use of electric vehicles, these are likely to increase power usage."         

The energy sector is in favour of the moving towards low power users paying a bit more though, with Energy Retailers Association CEO Cameron Burrows saying it will correct an old unfairness.

"There are regulations that mean if you use less than average your price is artificially constrained, but that's subsidised by people who use more than average," he told The AM Show

"I think it's a bit unfair that people who live in large poor quality housing who use a lot of heating - often poorer families - are subsidising people like me who can afford insulation, so I can afford to have a bit less energy because I've got a good quality house. Removing that subsidy I think is a really positive move."

Burrows is also okay with the suggestion retailers get rid of prompt payment discounts, although he still wants to be able to charge late payers more.

"A lot of people do actually like the prompt payment discounts and one of the things the Government's signalling is they want to move away from that and that's fine.

"But it's really important they've signalled that there can be a bit of a late payment fee because there is actually a cost to companies when people don't pay on time and then that debt has to be chased."

The review recommended the discounts, which have been accused of making power more expensive for those who can't pay on time, be removed within three months.

Woods said the Government welcomes the recommendation, but rather than immediately regulate retailers, she will write to the industry with the "expectation they make discounts available to all consumers".

"When Meridian did this, it handed $5 million back to consumers," the review panel said. "Should the companies not follow suit, we will regulate.

Auckland Action Against Poverty spokesperson Ricardo Menendez March told Newshub that's not good enough and the Government needs to step in.

"We would have liked to see, rather than hoping that power companies just act benevolently and do what is morally correct, that the Government clamps down on what has been a really rapid rise in power costs."


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