Officials are warning of a significant rise in electricity prices. This anticipated increase raises concerns about energy affordability and its implications for both households and businesses.
“Electricity prices are likely to rise significantly over the next two years. The relative stability of electricity prices during the past decade masks several underlying trends that will affect power bills,” the Ministry of Business, Innovation, and Employment (MBIE) said.
A number of generator retailers, commonly referred to as ‘gentailers,’ have recently indicated that household electricity prices will see slight increases in the upcoming months. However, more substantial hikes are anticipated in 2025, coinciding with the reset of regulated allowable revenue for Transpower and various electricity networks.
The regulation of electricity distribution businesses (EDBs) and Transpower in New Zealand is a critical aspect of ensuring fair pricing and quality service for consumers. This regulation is primarily overseen by the Commerce Commission.
EDBs and Transpower are classified as natural monopolies, meaning that it is economically impractical to have multiple companies providing the same service. This situation necessitates the Commerce Commission to prevent these monopolies from charging excessive prices or providing substandard service. The Commerce Commission does this by establishing a price-quality path that sets limits on the maximum revenue EDBs can earn.
The price-quality path is set every five years, and the current one is expected to expire on March 31, 2025. A new decision will be released in November 2024 for implementation starting April 1, 2025.
Some distributors are concerned that the commission’s focus on shielding consumers from price hikes during the upcoming price-path reset could limit necessary investments for electrification and supply resilience. Consequently, the regulator is suggesting new restrictions that would raise household electricity bills by approximately $15 per month, equating to $180 annually. The commission’s website provides a regional analysis, indicating that customers of certain electricity distribution businesses (EDBs) might experience monthly increases of $20, or $240 per year.
Officials from the Ministry of Business, Innovation, and Employment (MBIE) have stated that investments in network infrastructure will play a crucial role in upcoming changes to electricity bills. Given that much of New Zealand’s electricity infrastructure dates back to the 1950s, significant upgrades may be necessary to address challenges posed by extreme weather, seismic activity, and cyber threats. Furthermore, as both households and businesses increasingly electrify their transport and heating systems, additional investments will be vital to improve grid capacity and connectivity.
Several weeks ago, some companies announced closures, citing high energy costs as a contributing factor. Oji Fibre Solutions (OjiFS) said it’s closing its paper recycling mill in Penrose, Auckland. Winstone Pulp International has confirmed the closure of its two sites—the Tangiwai Sawmill and Karioi Pulpmill—resulting in the loss of 230 jobs.