Electricity low user plans to be phased out

Forums › Home Workshop DIY › Electricity low user plans to be phased out

Scott3

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#289628 18-Sep-2021 11:42

"About 60 percent of homes can expect lower power bills as the government announces a plan to phase out regulations on "low-use" electricity plans, Energy Minister Megan Woods says."

https://www.rnz.co.nz/news/political/451679/power-plan-regulations-change-aims-to-ensure-fairness

https://www.nzherald.co.nz/business/electricity-review-govt-to-phase-out-low-use-power-plans/IRE7ZVUAOACA3DLMDCVVHSV47U/

https://www.stuff.co.nz/business/126398542/lowuser-electricity-tariffs-will-be-phased-out-over-5-years

For those that arn't aware, Currently power companies are required to offer "Low user" plans with a very low (cira 30c/day) daily charge, and a higher kWh charge, such that those using below 8000 kWh annually in the north island, or 9000 kWh in the south island are better off - Primary residences only. This gets paid for for via higher charges applied to standard users, and as such standard users subsidies low users.

Historically this was put in place to help those near the poverty line, but it has been incredibly poorly targeted for that goal, and the market distortion has resulted in, for example an house poorly insulated house that the occupants need to heat for medical reasons, or a house an overcrowded house with 8 occupants subsidizing households with gas hot water, solar setups, and holiday homes declared is primary dwellings.

A review concluded that low user plans should be phased out, it is great to see the government following the guidance of the experts:

https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resources/energy-consultations-and-reviews/electricity-price/

"Phase out low fixed charge tariff regulations

The EPR found that the low fixed charge tariff regulations are poorly targeted and result in a number of unintended consequences. The EPR recommended that the regulations should be phased out because they worsen energy hardship for some households and promote inefficient choices for new technologies, such as rooftop solar and electric vehicles. They also increase pricing complexity and confusion, making it harder for consumers to shop around for the right electricity plan.

Government acknowledges the EPR’s findings on the regulations, but is mindful of the impacts a phase-out may have. MBIE engaged with industry and consumer groups to better understand the likely impacts, and design a phase-out mechanism that balances ensuring a just transition with taking meaningful steps to reduce the harm the regulations create.

In September 2021, Government agreed to phase-out the regulations and is working with electricity industry associations, retailers and other experts to develop a power credits scheme to support low-income households struggling with higher power bills while the regulations are being phased-out.

The required changes will now be made to the regulations. The phase-out of the low fixed charge regulations will commence from 1 April 2022."

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/

This is getting a lot hate on other forums, but I think am glad to see the government following the advise of the experts it commissioned. Key complaints seem to be:

Removal of the cross-subsidy makes solar and efficiency projects less attractive.
Concern about the impact on low income households with small numbers of people - including those that have previously invested in efficiency and/or solar as part of their retirement plan.
General anger at the price of power and profits made by the generators / retailers at the moment, and concern that this will further increase that.
Concern that this could encourage a lot of people to drop their grid connection, meaning the grid costs are shared around fewer users.
Upset that they personally will come of worse from this change.

Most of these complaints were predictable. Props to the current government to push forward regardless.

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#2780256 18-Sep-2021 15:02

Interesting... I'm a low user (live on my own) as would be many retirees for example.

Agree it simplifies pricing, although I would argue that there were bigger fish to fry in making electricity pricing easier to understand.

Not sure I agree with it being removed - it makes sense that people who use less should pay less. But as long as then rates we end up with are still fair it's probably no biggie.

PolicyGuy

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#2780272 18-Sep-2021 15:42

I'll declare my interest from the beginning: I'm a retiree and on a low-usage electricity tariff.
However, it's about time this market-distorting scheme was abolished, it was only ever a political sop to Grey Power ("ya gotta look after the poor ol' pensioners") and the Greens ("you're taking away all the incentives to save energy").

Hooray, well done Megan Woods!

The fact of the matter is, it costs pretty much exactly the same to deliver electricity to your house whether you use one unit (kWh) a day or one unit every four or five minutes, provided you're within the (typically 63A) current capacity of your 'pole fuse'. It costs just the same to manage your account, read your meter, send you a bill, collect your money, and maintain & service your network connection, no matter how much or little you use.

Even if you have solar and a battery and sell back a nett surplus every day, you still have the network connection and it still costs the same to maintain it.

Concern that this could encourage a lot of people to drop their grid connection, meaning the grid costs are shared around fewer users.

Yeah ... nah
Going fully off-grid costs thousands to many thousands of dollars, unless you're prepared to make very substantial changes and live a very low-energy lifestyle. The vast majority of people don't want to be bothered with that, they just want the easy luxurious modern lifestyle unimaginable to our grandparents.

old3eyes

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#2780307 18-Sep-2021 16:56

All you people here saying what a great idea realize that the power bills will go up about $45 / month and if you're on this plan and on a fixed income it's going to hurt??

Regards,

Old3eyes

RunningMan

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#2780309 18-Sep-2021 16:59

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

And the other 40%?

tdgeek

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#2780357 18-Sep-2021 17:25

PolicyGuy:

I'll declare my interest from the beginning: I'm a retiree and on a low-usage electricity tariff.
However, it's about time this market-distorting scheme was abolished, it was only ever a political sop to Grey Power ("ya gotta look after the poor ol' pensioners") and the Greens ("you're taking away all the incentives to save energy").

Hooray, well done Megan Woods!

The fact of the matter is, it costs pretty much exactly the same to deliver electricity to your house whether you use one unit (kWh) a day or one unit every four or five minutes, provided you're within the (typically 63A) current capacity of your 'pole fuse'. It costs just the same to manage your account, read your meter, send you a bill, collect your money, and maintain & service your network connection, no matter how much or little you use.

Even if you have solar and a battery and sell back a nett surplus every day, you still have the network connection and it still costs the same to maintain it.

Concern that this could encourage a lot of people to drop their grid connection, meaning the grid costs are shared around fewer users.

Yeah ... nah
Going fully off-grid costs thousands to many thousands of dollars, unless you're prepared to make very substantial changes and live a very low-energy lifestyle. The vast majority of people don't want to be bothered with that, they just want the easy luxurious modern lifestyle unimaginable to our grandparents.

We aren't retirees, but while our house is large, we use gas for the hob and solar for hot water, so we are on the low user plan. Steve @sbiddle has long campaigned for this, and while I have no idea of the impact here, its the way to go.

I will miss the 32c per day, but retailers will kick in with plans I assume. Up to us to time shift our usage to be better off/the same/or close

tdgeek

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#2780359 18-Sep-2021 17:27

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. User Pays?

alasta

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#2780363 18-Sep-2021 17:30

I live alone in a well insulted house, I'm not home often, and I use gas for my cooking, heating and hot water.

It sounds like this change has the potential to really kick me in the nuts.

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SirHumphreyAppleby

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#2780364 18-Sep-2021 17:30

Great news. As a high user with solar putting us in the low use category, this will save us money.

tdgeek

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#2780369 18-Sep-2021 17:37

SirHumphreyAppleby:

Great news. As a high user with solar putting us in the low use category, this will save us money.

How do you figure that? Not criticising as no one knows what the power plans will be. We would be high user too, but gas hob and solar HW take care of that so we are on Low User as well.

Volt

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#2780370 18-Sep-2021 17:39

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. User Pays?

No different to the RUC for a light vehicle being low compared to that of a truck

SirHumphreyAppleby

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#2780380 18-Sep-2021 17:56

tdgeek:

How do you figure that? Not criticising as no one knows what the power plans will be. We would be high user too, but gas hob and solar HW take care of that so we are on Low User as well.

To a certain extent the plans are irrelevant if we're all on a level playing field. It's going to depend on how much power you use and when, but for us being on the low use rate would increase our overall costs. When you consider how we would like to use power, the incentives to moving to heat pumps and electric vehicles are reduced as they become around 50% more expensive to run on the low use plan. The problem as I see it is lack of choice - I don't want to trade low power prices for a low daily rate because it limits the power we can use and when.

The complaints mentioned in the first post seem to relate to commercial incentives for solar generation. I can see why that may be an issue, but as an actual solar user, we should save money.

Ge0rge

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#2780428 18-Sep-2021 18:02

Volt:
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. User Pays?

No different to the RUC for a light vehicle being low compared to that of a truck

Pretty sure you don't want to be billed for the power you could use, as opposed to the power you do use.

rugrat

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#2780429 18-Sep-2021 18:06

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. User Pays?

I think this is regional differences. I’m on standard around 87 cents a day, see North Island can be up to $2 and more a day.

Think these differences will remain, as cost of transmission from South to North adds cost and North doesn’t have as many hydro dams, so cost of production higher.

If I go to $2 a month supply charge my winter power bills are between $100-150, it would mean in summer the supply charge would be well over half my bill.

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.

PolicyGuy

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#2780445 18-Sep-2021 18:54

old3eyes:

All you people here saying what a great idea realize that the power bills will go up about $45 / month and if you're on this plan and on a fixed income it's going to hurt??

Yes, it's probably going to cost me a few dollars a month extra.

Yes, it's the economically rational and the right thing to do

NZ governments shouldn't distort the electricity "market" to achieve social benefits.
Either have an electricity market and use other mechanisms to achieve social benefits
or
stop pretending there is a "market" for electricity, nationalise all the generators, lines companies & retailers and re-invent a New Zealand Electricity Department.

If the government is really concerned about the impact on those on small and fixed incomes, it can add $5 a fortnight to the Pension, the Main Benefit and the Accommodation Supplement.
I wouldn't say "no" ;)

jonathan18

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#2780510 19-Sep-2021 07:17

old3eyes:

All you people here saying what a great idea realize that the power bills will go up about $45 / month and if you're on this plan and on a fixed income it's going to hurt??

I'm not trying to belittle what will be a blow to many, but I'd have thought the degree of hurt depends directly on one's usage relative to the thresholds.

I understood that for a household such as ours where annual usage is around the relevant threshold (for us, 8000 units a year), the impact on our annual costs will not be huge, though the distribution of costs over the year will change. For a true low user the impact could well be substantial. It would be interesting to see a distribution of power usage by household to get a better idea of the potential hurt.

I also thought there were restrictions on the usage of the low user plan; not that long ago I looked into switching my mother's place after she moved out onto a low user plan and read that it couldn't be used for unoccupied houses, holiday homes etc. If there are such houses on a low user plan I assume this would be against the intent if not conditions of the plans, and if so I'm not too worried about those affected in this group.

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