Electricity bills are certain to rise next year as higher costs of generating and distributing power are passed to all consumers, including Grey Power members.
Members who use small amounts of power are probably already noticing big increases in their bills due to the gradual removal – strongly opposed by Grey Power – of regulations which restricted the fixed daily charge for low users to 30 cents a day.
The daily cap is now $1.20 and, in April, will rise again to $1.50 a day. Eventually the cap will be removed, meaning that in 2027 retailers will likely put all their residential customers – low users and high users – on a similar daily charge, typically about $2 to $2.50 a day.
In other words, what used to be a $45 a month fixed charge on your bill, will increase to about $70 a month. And, that’s not the final bill, which also includes the variable cost of power consumed, levies and GST.
Adding to the pain for Grey Power members living on fixed incomes, there are other significant bill pressures on the way. Wholesale power prices have been on an upward trajectory since 2018.
Retailers purchase electricity through the volatile wholesale market where spot prices can fluctuate from almost nothing to thousands of dollars for one megawatt hour, which is enough to power about 140 homes for a year.
To avoid buying on the spot market, retailers pre-purchase most of their power through “hedge” products, which are agreements to purchase a set amount of power at a set time in the future. Hedging reduces the retailers’ exposure to volatile spot prices.
The overall trend in wholesale electricity hedge prices has been upward. From levels of about seven cents per kilowatt hours in 2018, hedged wholesale power was 18 cents per kW hour in September 2024.
In real terms, this is a doubling in the cost of generation, an expense which is passed by retailers to their customers.
Meanwhile, the triple whammy for Grey Power members is lines charges. The Commerce Commission is in the final stages of deciding how much Transpower, and most of the 29 individual electricity distribution companies, can earn in revenues in the period from April 2025 to March 2030.
While the numbers vary from region to region, the overall picture points to a large increase. A draft decision released in June 2024 stated that the 16 largest lines companies would have allowable revenue allowances of $12 billion in nominal terms. This represents an increase of 50% in real terms compared to the current five-year regulatory period, which ends in March 2025.
While the medium and low voltage lines component is typically 26% of a consumer’s bill, the cost of the high-voltage national grid, Transpower, is about 11%.
The Commission is proposing to set Transpower’s maximum allowable revenues at a total of $5.8 billion for the next five years. This represents an increase of 43% compared to the previous five years.
In other words, the total revenues of the 16 largest lines companies and Transpower will be around $18 billion, compared to about $12 billion currently. The $6 billion difference must be recovered from consumers as there is no other current mechanism for lines companies to reclaim this money.
With power bill increases, Grey Power will continue to advocate strongly for members. Electricity is a basic human right.
It must remain affordable for our members, either through income support – such as an enhanced winter energy payment – improvements to the capricious wholesale electricity market, or incentives for regulated lines companies to invest more of their owners’ money in upgrades (through debt and capital) rather than send the bill straight to customers.
