Electricity low user plans to be phased out

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#2780551 19-Sep-2021 10:14

In the meantime 577, 908 tonnes of coal has been imported from Indonesia over the last three months for electricity generation just to keep the lights burning and unless more generation comes on stream where is all the extra electricity coming from unless you rely on the aluminium smelter in the deep south closing down in 2024. I note Labour/Greens are silent on the record amounts of coal being burnt.

gzt

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#2780553 19-Sep-2021 10:20

There are advanced plans for transmission upgrades in progress in advance of the smelter closure. Please discuss that elsewhere and stay on topic:

Electricity low user plans to be phased out.

gzt

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#2780556 19-Sep-2021 10:30

tdgeek: Its about equity. Some here on other threads pay $1-80 per day. I pay 32c. They are network charges, so in effect I dont contribute to network maintenance and expansion.

Powershop when it first started offered plans with zero line charges. Per unit price only. Was that a low user plan under the legislation or something different?

spid

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#2780558 19-Sep-2021 10:42

The current situation gives a relatively linear unit cost (based on Meridian Auckland pricing) of between 32c @ 4000kwh per year and 28c @ 12000kwh per year. With the only caveat that once-a-year consumers need to check to make sure they are on the correct plan. At no point does a user using less pay less per kwh than the user using more. Because of the way the tariffs are structure between 7000kwh and 9000kwh hours a consumer on the wrong plan is only going to be out by $90 at most. In the past Mercury did this annually for its residential customers giving them a refund and switching them if they were on the wrong tariff. Perhaps that would be a better solution to this problem?

Most of the arguments presented are counter intuitive. Users on the low user tariff are incentivised more to buy efficient appliances as the benefit is greater. Conversely higher users are likely to get more benefit and therefore the extra cost is amortised faster due to the increased savings. Under the new scheme the low user is penalised and will see a far more marginal change for any savings they make. This is similar to the situation at the moment with Watercare, approximately 70% of my water account is standing charge and therefore any moves to increase efficiency make absolutely no difference.

The argument that I should pay more because I use less of a service simply to have it available doesn't make sense. I may only fly once or twice a year, but the cost of providing that seat on that plane at that time is the same irrespective and therefore I would pay the same for that seat as someone who flew more often. Obviously, there are far more variables and therefore that seat is priced according to demand which at peak times is greater. Ditto a single person pays the same per seat as the family of 10. Consumers who use more electricity put more stress on the network than those who don't and those who use more per person require a greater grid capacity do the same. The investment in capacity is to serve those consumers who use more, not those who are trying to be efficient in the energy they use. Why should the one-person household be forced to subsidise those who choose to live three families to a house (and no this isn't just poor people in South Auckland but many immigrants who have above average incomes).

The argument that this is confusing for low-income households again doesn't make sense. If these customers cannot simply understand that if they use significantly more than 8000kwh per year they should be on a high use plan then how are they going to cope with time of use pricing which is where the market will be heading. We've had smart meters in place for over around 10 years now and the only companies who have really made use of them are EK and Flick. The usage information provided is only there because they are forced to via legislation. If not for that then consumers would still be in the dark.

The only beneficiary of this change will be the electricity companies who will increase the guaranteed minimum income they receive becase every line connected will have to pay a minimum amount of approx $700 per year rather than the approx $120 they do now. All of the smaller households will people who live alone are likely to pay upwards of $500 per year more for the same electricity today. Those who use less and can time shift it keep the cost of providing down by reducing peak demand, and avoid the marginal cost of have to size infrastructure in that way.

I don't see this as a necessary change and will further cement the inefficient practices that are currently happening in the industry. I would prefer to have see line charges being abolished or at least reduced in urban areas. All industries outside the utility industry pay for their infrastructure and set pricing based on the cost to deliver an item or service Demand for electricity is relatively inelastic and therefore overall consumption each year relatively predictable.

Scott3

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#2780592 19-Sep-2021 12:33

RunningMan:

Scott3:[snip]"About 60 percent of homes can expect lower power bills

And the other 40%?

They will pay the same or more.

Removing this historic market distortion, is a near zero sum game, so it is about allocating costs fairly, rather than making overall reductions in power cost.

Note that power companies could continue to offer low daily charge plans if they wanted, but assuming they don't and daily charges go from 30c to $2.15, a household that had power connected, but everything turned off for the entire year would pay $675 more a year.

WyleECoyoteNZ

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#2780593 19-Sep-2021 12:38

This just increase's the cost of living in this country *sigh*

We're a family of 4 on a Low User plan, last year 6650 kWh, I'd put his mainly down to Gas hot water and elements.

A quick calculation, that would see my last bill go from $178 (614 kWh) to $232 ($54 increase) at a Daily charge of $1.80 (up from 30 cents)

rugrat

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#2780595 19-Sep-2021 12:55

It’s going to make gas less desirable. Encourages people to use more electricity.
More electricity use puts upward pressure on price.

Be interesting to see where prices settle, but it’s not guaranteed to be neutral over all.

I currently use 80% power off peak, which is current method of keeping bill down.

For people going from 30 cents to $2, ouch, power would have to come down many cents a unit to cover that.

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richms

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#2780596 19-Sep-2021 13:03

This is a good thing IMO, if someone is unable to afford to pay the new higher costs, then their welfare should be in a payment from the MSD in some form, not in forcing retailers to cross subsidise them.

Richard rich.ms

toejam316

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#2780599 19-Sep-2021 13:21

richms:

This is a good thing IMO, if someone is unable to afford to pay the new higher costs, then their welfare should be in a payment from the MSD in some form, not in forcing retailers to cross subsidise them.

I think this might just be the first sensible response. As it stands, we're subsidizing a lot as a country, in the wrong ways. I'd much rather the government take direct action to provide additional resources like the Winter Energy Payment to aid with the real cost of the transmission network for end users who are vulnerable. It sets a precedent for things like implementing CGT while still providing help to those who might be negatively impacted by that (pensioners with no additional income, low income households, etc.), rather than throwing the change into the too hard basket.

Now when are we getting regulation on Landlords like we have on the National Grid?

Anything I say is the ramblings of an ill informed, opinionated so-and-so, and not representative of any of my past, present or future employers, and is also probably best disregarded.

nickb800

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#2780679 19-Sep-2021 15:36

They will pay the same or more.

Removing this historic market distortion, is a near zero sum game, so it is about allocating costs fairly, rather than making overall reductions in power cost.

Note that power companies could continue to offer low daily charge plans if they wanted, but assuming they don't and daily charges go from 30c to $2.15, a household that had power connected, but everything turned off for the entire year would pay $675 more a year.

That's a theoretical worst case. Currently in my area, daily charges on non-low user plans vary from $1-$2, so I can't see how the market will universally shift to $2+. Any household using >1 units per year will benefit from a cheaper per unit prices, and this is likely to be a saving in the hundreds of dollars for most permanently occupied houses.

nic.wise

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#2780684 19-Sep-2021 15:53

Another low user here. We are on the cusp of the 8000kwh per year thing, during winter anyway. So my $9/month fixed cost is now $40. Aside from our spa, which I have on at off peak times, the heat pump is our only substantial use (gas hot water and cooking).

last time I checked, I think our summer bill goes from around $120 to around 180, and winter from 280 to about 300. Sadly we can’t get solar and batteries due to trees we can’t cut and a roof which slopes down north to south not the other way.

not huge, and we can more than afford it, but I’d rather not pay it. It’s going to hurt the Bach owners on the island tho, I doubt may of them are on regular rates. Might be time for an EV, tho there are free charging points around the island, so I’d not be paying for that EITHER.

Nic Wise - fastchicken.co.nz

nickb800

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#2780689 19-Sep-2021 15:56

spid:

The argument that I should pay more because I use less of a service simply to have it available doesn't make sense. I may only fly once or twice a year, but the cost of providing that seat on that plane at that time is the same irrespective and therefore I would pay the same for that seat as someone who flew more often. Obviously, there are far more variables and therefore that seat is priced according to demand which at peak times is greater. Ditto a single person pays the same per seat as the family of 10. Consumers who use more electricity put more stress on the network than those who don't and those who use more per person require a greater grid capacity do the same. The investment in capacity is to serve those consumers who use more, not those who are trying to be efficient in the energy they use. Why should the one-person household be forced to subsidise those who choose to live three families to a house (and no this isn't just poor people in South Auckland but many immigrants who have above average incomes).

This ignores the many fixed costs associated with electricity distribution & retail - sending out paper bills, answering the phone, advertising to attract customers, reading the meter (physically or remotely), keeping the meter certified, trimming trees that overhang power lines, replacing rotten power poles, etc. Electricity consumption has no bearing on these costs.

Higher electricity consumption at peak times drives a need for investment in more capacity, but this is only a portion of the distribution & retail cost. Low users with a peaky consumption pattern could well drive need for more capacity just as much as high users with a flatter consumption pattern. If you fly once a year, airnz has no obligation to hold a seat for you at Christmas time. But if you use little electricity through the year, your lines company is still obligated to ensure you can pull (typically) 63 amps at 6pm on a cold July night

Flick's low user pricing schedule - which includes a per day and per unit charge for metering - goes to show that 30 cents simply doesn't cover the fixed costs of supply. I don't know what the actual cost is - probably not $2 as some daily charges are - but it's certainly higher than 30 cents.

Thinking laterally, I wonder if it will become more common to have limited capacity connections (i.e. 32A circuit breaker rather than 63A pole fuse) to provide a lower (still higher than 30 cents) daily charge for truly low users e.g. small houses/households

Scott3

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#2780693 19-Sep-2021 16:05

spid:

...

The argument that I should pay more because I use less of a service simply to have it available doesn't make sense. I may only fly once or twice a year, but the cost of providing that seat on that plane at that time is the same irrespective and therefore I would pay the same for that seat as someone who flew more often. Obviously, there are far more variables and therefore that seat is priced according to demand which at peak times is greater. Ditto a single person pays the same per seat as the family of 10. Consumers who use more electricity put more stress on the network than those who don't and those who use more per person require a greater grid capacity do the same. The investment in capacity is to serve those consumers who use more, not those who are trying to be efficient in the energy they use. Why should the one-person household be forced to subsidise those who choose to live three families to a house (and no this isn't just poor people in South Auckland but many immigrants who have above average incomes).

...

I don't think your comparisons are relevant.

With electricity, if you are connected to the grid, capacity is provisioned for you, and there is an exception that power will be available whenever you want (baring limited outages, where it is expected people are working with urgency to return your supply). In an airline, if the plane is sold out, sorry...

Should note in the large commercial / med-large industrial space, capacity charges make up a big chunk of power costs. If you ask for 1,500kVA connection to be supplied to your site, you will are paying monthly charges to deliver that power weather you use it or not, as that capacity (with some diversity factor) is allowed for in sizing everything up stream. This is on top of the cost of buying / renting your on site transformer, cos the power is probiably going to be. It is rumored that the Vector arena (now spark areana) got its name because somebody messed up, and got the electrical capacity they ordered way to big and/or way to early, and naming rights were negotiated for vector to forgive a fairly crippling bill.

The cost of providing lines & the transmission gird is largely based on capacity to serve the highest demand (for your local area) each year. For residential area's, that would be dinner time on the coldest night of the year. How much power you use the rest of the year isn't material to the cost structure of the local lines / transmission lines.... There will be excess capacity as it is sized for the worst case.

A user drawing 2kW 24/7 to run their whatever (Giant tropical fish tank heater?) will cost exactly the same to provide for as a user that uses bairly any power, but plugs in a 2kW heater on the coldest night of the year, so kWh charging is a poor way to bill the cost of being connected to the grid.

These days people with solar panels often use nothing (or feed back) during the day, but on that coldest winter evening, they will be using power off the grid for heat (even if they have a battery pack it will likely be flat by peak time on the coldest day of the year). 30c/day does not reflect the cost of providing this service.

Your assumptions around cross-subsidies are the wrong way around. Current regulations mean that standard user's cross-subsidies low users. Removing these regulations will remove the cross subsidy.

Technically measuring what people use when the grid is most strained, and charging that all year would be the most efficient way to do it. The lines company in the central north island has had a crack at this. Sadly didn't go very well. The big issues was that customer's didn't like their connection fees to be based on a handful of hours some time in the past, especially when they had recently brought the property (so it was based on the last owner), if they had let it out to holiday makers that night and they had gone nuts with power consumption and they didn't like that it created a massive incentive to monitor and try and guess when these period's would be, and to turn off the main switch over them. I doubt any other lines companies will want to follow TLC.

spid:

...

I don't see this as a necessary change and will further cement the inefficient practices that are currently happening in the industry. I would prefer to have see line charges being abolished or at least reduced in urban areas. All industries outside the utility industry pay for their infrastructure and set pricing based on the cost to deliver an item or service Demand for electricity is relatively inelastic and therefore overall consumption each year relatively predictable.

Problems with the regulations are listed here:

https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resources/energy-consultations-and-reviews/electricity-price/phasing-out-low-fixed-charge-tariff-regulations/

Short term demand for electricity is fairly inelastic, but long term, not so much.

For somebody on a low user plan with a marginal power cost of 30c/kWh, getting LPG hot water (works out to about 20c /kWh of heat with typical efficiency) makes a lot of sense. Without low user regulations they would be paying something like 18c/kWh, removing the attraction of LPG hot water.

A key bit from the MBIE website on enviromental efforts:

"The way we think about electricity use and its impact on the environment has changed significantly since the regulations were designed. In 2004, it was assumed that conserving electricity resulted in environmental benefits.

But it’s now well understood that New Zealand’s largely renewable electricity system will play an important role in helping reduce our carbon emissions and meet our climate change goals. The government and many in the private sector are working hard to replace fossil-fuelled technologies with electric alternatives.

With this in mind, New Zealanders should be encouraged to use more electricity, not less, if it means switching to more eco-friendly electric technologies such as heat pumps and EVs."

Scott3

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#2780697 19-Sep-2021 16:14

nic.wise:

Another low user here. We are on the cusp of the 8000kwh per year thing, during winter anyway. So my $9/month fixed cost is now $40. Aside from our spa, which I have on at off peak times, the heat pump is our only substantial use (gas hot water and cooking).

last time I checked, I think our summer bill goes from around $120 to around 180, and winter from 280 to about 300. Sadly we can’t get solar and batteries due to trees we can’t cut and a roof which slopes down north to south not the other way.

not huge, and we can more than afford it, but I’d rather not pay it. It’s going to hurt the Bach owners on the island tho, I doubt may of them are on regular rates. Might be time for an EV, tho there are free charging points around the island, so I’d not be paying for that EITHER.

If you are on the cusp, of 8000kWh/y the impact on your should be very minor. More in summer, less in winter.

Low user rates are only meant to be available for primary homes (it was put in place to target low income houses with low power use, but it turns out that power use is a poor indicator of socio-economic status, especially with the availability of solar PV systems). Bach's aren't ment to be on low user plans (unless they are being used as primary homes), but I suggest many people will have falsely declared one adult lives primary at the bach even if that is not the case.

Assume you are on waiheke? $2.849 for 91 at BP... And a cable feeding power from the mainland, so farily normal power prices. Plus the longest return trip possible being under 50km... I can see why it is Nissan leaf central.

Handle9

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#2780705 19-Sep-2021 16:26

rugrat:

Aurora Energy in Dunedin around 2018 has had to deal with 1000’s of rotting power poles so that may have pushed the supply charge up there.

That's what happens when you use a power company to pay for a rugby stadium.

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