Electricity Price Review Recommendations
Almost one year later, the independent electricity review endorsed by the Labour, NZ First and Green parties has issued their recommendations about New Zealand’s electricity industry.
The review panel, comprised of both consumer and industry representatives, was asked to evaluate whether the current electricity market is delivering fair pricing to consumers and whether the existing structure will be able to handle new technologies.
The almost 40-page long document supports eliminating low-fixed charges and prompt payment discounts in addition to improving the disclosure of the retail/power generation company profit split.
The Electricity Review panel’s recently released review outlines 41 options from seven themes:
- Strengthening the consumer voice
- Reducing energy hardship
- Increasing retail competition
- Reinforcing wholesale market competition
- Improving transmission and distribution
- Improving the regulatory system
- Preparing for a low-carbon future
Panel’s Ideas to Improve New Zealand’s Electricity Sector
The panel’s interim report issued in September resulted in no evidence that electricity retailers and network companies were making excessive profits.
However, the report did cite concern regarding the development of a “two-tier” retail market which hurts citizens who do not have the means or ability to find the best energy price.
Energy Hardship Identified as a Matter of Priority
The panel endorses a cross-party working group dedicated to energy hardship that would clearly define energy hardship and its drivers.
In addition, the group would establish community-level support services that would offer advice on budgeting, energy efficiency and switching so that electricity prices are more affordable for all.
The group suggests banning prompt payment discounts which they believe also negatively affect low-income consumers. A cap would be added at the retailer’s actual cost or saving for late-payment fees and discounts for bundled services and direct debits.
Win-backs are also suggested to be banned even though both the Electricity Authority and many retailers believe that individual customers have benefited from the resulting lower prices. The panel believes that this practice could also be contributing to the “two-tier” nature of the market.
The panel wants to make mandatory voluntary market-making services that major generators provide for the ASX futures market. This would help existing arrangements become more stable.
In addition, the panel wants to see better disclosure of information that could affect wholesale prices and more enforcement by the Electricity Authority regarding existing disclosure rules. The panel suggests that the Electricity Authority is provided with the ability to monitor wholesale prices against actual costs in the sector.
A government policy statement on distribution pricing is recommended to help reduce the impact on households.
The Electricity Review’s Unsupported Recommendations
It does not support caps on retail prices, separating generation and retailing activities, the forced amalgamation of distribution companies or a regulated decrease in the asset values of the network companies and national grid operator Transpower.
The full document can be viewed online by going here.