$110 available from power companies as low-user charge goes up again

The $5 million Power Credits Scheme was set up by the industry to help power users who are struggling as the low-user charge is phased out. Under the phase out, which started in 2022, the fixed cost that low users pay to be connected to the grid will rise every April for 5 years. The maximum annual fixed charge will go from $110 to $660 by 2026 to make it in line with what standard users pay.

Under the Power Credits Scheme, a $110 credit can be given each year to households whose power is supplied by Contact, Meridian, Mercury, Genesis, Nova, Wise, Globug, Powershop, Frank or Toast Electric, if they’re in hardship as a result of the phase-out. An extra $110 is available annually to households that seek professional budgeting advice.

With the third annual increase kicking in this month, $1.4 million of the $5 million has been given out to date.

The scheme is run by the Electricity Retailers’ Association of New Zealand (ERANZ) and its chief executive Bridget Abernethy said they were satisfied with how much of the $5 million fund had been spent so far.

Abernethy said households have to show signs of energy hardship to get a payment. Each retailer will have its own way of deciding what energy hardship looks like.

She said any households facing difficulty should contact their retailer to see what support is available.

Those on a low-user plan had paid a lower fixed charge since 2004 because of a regulation aimed at encouraging households to use less power. A government-commissioned review recommended scrapping this low fixed charge because it wasn’t fair to standard users, many of whom were low-income households that used a lot of power because they were large families or were heating houses with poor insulation.

“Removal of this regulation aims to make the system fairer and more equitable, but the transition may cause pressure in some households. This scheme is designed to ease that pressure, particularly at a time when cost-of-living pressures are high,” Abernethy said.

Power companies are not expected to increase their profit from phasing out the low fixed charge. Abernethy said when the 5-year phase-out is complete, it’s estimated the variable charge – what you pay for the power you actually use – will be 36% lower than it would have been if the low fixed charge wasn't scrapped, helping offset the impact of the change.

Paul Fuge, manager of Consumer NZ’s Powerswitch service, said retailers should be offsetting a household's increased fixed charges with a decrease in their variable charge. “But we have looked at lots of price increase notifications and in some cases both the fixed and variable charges are increasing. Of course, it’s possible that the variable rate is not increasing by as much as it otherwise would have, but it’s hard for us to tell if there is any ratbaggery going on,” Fuge said.