Response to the Electricity Price Review options paper

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Media response from the Electricity Networks Association to the Electricity Price Review options paper

20 February 2019

The Electricity Networks Association (ENA) welcomed the phasing out of the low fixed-charge regulations for residential electricity pricing as a favoured option in the Electricity Price Review options paper released today.

ENA chief executive Graeme Peters said it was heartening that the electricity price review panel agreed with the substantial arguments in favour of removing these distortionary regulations.

“Both electricity distributors and retailers – and political parties – now agree the low fixed-charge regulations are no longer fit-for-purpose.”

The options paper noted that the regulations “unintentionally shifted costs to households with low incomes and high electricity consumption” and that most submitters agreed that the regulations “were poorly targeted at only one type of household in need and pushed others into greater energy hardship”.

Encouragingly, Energy and Resources Minister Megan Woods already understands the problems created by the outdated low-fixed charge cross subsidy, Peter said.

“Without prejudging outcomes, the Minister told a business audience yesterday that there is a political will to modernise the regulations, and highlighted their unfairness.

“She knew first hand that some Wigram constituents in larger low-income households were not benefitting from the low fixed charge - they didn’t qualify for the subsidy threshold because they didn’t live in modern, insulated homes.”

Peters also welcomed the suggestion that consumers needed to have a greater voice in the electricity sector – perhaps by way of the government establishing a consumer advisory council – especially when advocating to regulators.

“While many of our members are owned by community trusts which allow for consumers to have a say in the operation of their local networks, there is still a need to ensure that consumers, especially vulnerable consumers, are represented as a key stakeholder in national-level industry discussions and regulatory policy setting.”

Peters said another positive suggestion favoured by the panel was for the establishment of a network of community-level support services to help consumers in energy hardship.

“There are already several very effective independent agencies in specific locations in New Zealand with expertise and experience in providing practical advice to consumers in energy hardship.

“They advise consumers on options for lowering electricity costs though more efficient use of appliances, energy conservation measures as well as ensuring consumers are on the optimal pricing plan.

“Building upon the work of existing agencies and creating a nationwide network that consumers in all parts of the country can access has a lot to commend it,” Graeme Peters said.

Peters was encouraged by the panel suggesting its proposals that were implemented should be reviewed in three years.

“Apart from the removal of the low-fixed charge regulations, the majority of the proposals add regulations or imposts. We need to be mindful that regulations add bureaucracy and cost – so reviewing their effectiveness is important.

“It’s had to know if there will be a net benefit from some of the proposals, so its sensible for a review period. If they add complexity and cost for no or little gain, the extra regulations should be removed or alternatives looked at,” Peters said.

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