No 'silver bullet' for cutting high power bills - Energy Minister
"It's critical we get this right," Simeon Brown says, as he seeks advice from gentailers and the Electricity Authority.
Energy Minister Simeon Brown has stated there is no silver bullet for reducing high power bills in New Zealand. The Ministry of Business, Innovation and Employment (MBIE) has released a discussion document to explore if legislative changes are needed to make the energy sector more efficient and affordable. Brown has been seeking advice from retailers and the Electricity Authority regarding ways to tackle the increasing power bills.
He emphasized that focusing solely on wholesale prices misses the biggest driver of rising bills - line companies. Network charges, which include costs for substations, poles, and wires, constitute a quarter of household bills and account for two-thirds of recent price increases. Brown stated that wholesale prices, once reduced, are expected to be passed on to customers by the big companies.
He suggested that a price-quality pass for all line companies could ensure customers receive a fair deal and put downward pressure on consumers' costs.
However, the Commerce Commission lacks the powers to regulate the natural monopolies that line companies represent. Brown called for ring-fencing money from power bills, similar to how water companies use funds to ensure they are reinvested into infrastructure. He stressed that distribution companies need to engage in the affordability conversation.
There are 28 Electricity Distribution Businesses (EDBs) in New Zealand, responsible for maintaining local infrastructure like power lines, poles, and substations. Some EDBs are subject to price-quality regulation, where the Commerce Commission sets their maximum revenue and minimum service standards. The last set of regulated revenues was in 2024, during a period of high interest rates following record inflation.
The minister highlighted that consumers are currently paying for the excess due to those high interest rates, as well as the costs of preparing networks for greater electrification and the increased demand expected in the future.
Brown emphasized that an affordable electricity system is a priority for the government. The discussion document released by MBIE proposes options to strengthen the performance of EDBs, enabling them to provide reliable and affordable services while supporting increased electrification and innovation. The government aims to take further action in three key areas: cost of electricity, potential for rising bills, and the need for more change to make the system affordable for households and businesses.
Commerce and Consumer Affairs Minister Cameron Brewer noted that the scale of investment required for New Zealand's energy transition raises questions about the sustainability of current arrangements in delivering the best outcomes for consumers in the future. Submissions can be made through the MBIE website where the discussion document is available.
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