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Government responds to Electricity Price Review final report

Home Insights Government responds to Electricity Price Review final report

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Contributed by: Craig Shrive and Felicity Ellis

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Published on: October 03, 2019

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Today the Government released the Electricity Price Review report and its response to the recommendations – which can be accessed here.

Following Labour and New Zealand First's coalition agreement commitment to conduct a full-scale inquiry into electricity prices, in April 2018 the Minister of Energy and Resources, Hon Megan Woods, commissioned an independent review into New Zealand's electricity market, to look into (among other things) the disparity in electricity price increase between residential and commercial customers. The final report of the Electricity Price Review (Report) was delivered to the Minister in May 2019. 

The Report found that electricity in New Zealand was reliable, affordable for many, and sustainable by world standards. However, it also noted that residential prices had risen 48% since 2000, which was faster than most other OECD countries, and more steeply than industrial and commercial prices. Reducing power bills was important for mitigating energy hardship, but it is also important to improve housing quality and how electricity is used (ie improving efficiency). 

The Government responded specifically to each of the 32 recommendations of the Report, in most respects agreeing to immediate or near term action. Action points of note include:

  • providing funding, and establishing a network of organisations to support customers facing energy hardship;
  • informing retailers of the Government's expectation that they will remove prompt payment discounts (and that any late payment fees should reflect the true cost of delay) or face regulatory intervention;
  • asking the Electricity Authority to work with Consumer NZ to merge their price comparison websites and develop a business case for a pilot scheme to help disengaged consumers switch retailers;
  • conveying its concerns about "saves" and "win-backs" to the Electricity Authority, and encourage that they are prohibited for a set period of time so that the impact on consumer switching can be properly evaluated;
  • encouraging the Electricity Authority and Gas Industry Company to review their information disclosure rules to improve availability of information on the wholesale markets;
  • supporting the Report's recommendation that the Electricity Authority require gentailers to report separately on the financial performance of their retail and generation operations using a common set of rules;
  • requesting that the Electricity Authority expedite its work to ensure distributors have access to smart meter data on reasonable terms;
  • developing proposals to phase-out the low fixed charge regulations;
  • encouraging agencies to facilitate more innovation in the energy sector, particularly new technologies and alternative business models that support a low-carbon future; and
  • drafting proposals to amend legislation to give the Electricity Authority more power to regulate network access in emerging markets.

The Government has indicated that many of the recommendations for immediate action fall to the Electricity Authority to address as the independent regulator, but that a legislative 'backstop' will be implemented to enable the Government to step in if the Authority does not take action within a specified timeframe.

In conclusion, rather than marking the end of the review process, the Government's announcements signal a fair amount of industry and regulatory reform work to come.

 

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