More heat in power struggle as prices go up

Last updated 05:00 01/04/2012

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Electricity prices go up today. Charles Anderson reports on why, and how many struggle to cope.

Kiwis face power bills up to 10 per cent higher from today, but more increases could be on the way – news that leaves battling consumers "sick to the stomach".

State-owned grid operator Transpower is embarking on a massive network upgrade, but distribution companies face their own issues with maintaining their lines.

Struggling families are running out of ways to make savings – and even middle income earners are looking for budgeting help with power.

The situation has prompted an electricity lobby group to warn that the dynamic of rising prices and static incomes is unsustainable.

Power providers across the board have announced increases because Transpower, which owns the grid, has passed on the costs of upgrading its infrastructure. These projects are expected to continue for the next three years.

But consumer advocates and industry insiders say the distribution companies that supply retailers have their own problems with maintaining their lines.

"The issue with Transpower is only part of the network story," said Molly Melhuish of the Domestic Energy Users' Network.

"Most lines companies are not as well maintained, therefore they will need local upgrades as well."

That cost would then be passed on to consumers, many of whom were already struggling to pay their bills.

A Sunday Star-Times survey found that the increases would affect almost every respondent's household budget, and a majority said they would have to make sacrifices.

Gloria Ruru from Nelson said that the family's monthly power bill was now up to $500. That, on top of a mortgage, was starting to strain the budget.

"It's a huge chunk."

Her daughter has an obsessive compulsive disorder around cleaning and it was difficult to monitor how much hot water she would use because Ruru and her husband Harvey worked fulltime.

Ruru said the family had cut back on food and going out and had tried to limit how much heating they used.

"I don't know how other people manage if they don't have good incomes."

Today's price rises in the main regions are expected to be about 5 per cent. Residents of the Far North are likely to face the biggest increase, 10 per cent, or an extra $150 or more a year for heavy users.

Most survey respondents said they would have to cut back on holidays, entertainment and luxury food items in order to pay the bills.

"Groceries will have to be carved back because there's no money in my budget now for things like clothing or holidays. Everything else is as pared back as it can be," said one single mother on an average wage. She and her children slept in the same room to minimise heating.

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"I feel really sick to the stomach about this."

Powershop chief executive Ari Sargent compared Transpower's most recent project to upgrading State Highway 1, which had not had significant work since the 1960s.

"I suspect some of the distribution companies are in a similar state. They haven't had any major upgrades."

Federation of Family Budgeting Services Raewyn Fox said she had seen an increasing number of people from middle incomes coming in for advice on how to manage their power bills. Those on lower incomes were terrified of falling further behind in their bills and their power being disconnected.

"Power prices are such a barrier anyway and any increase makes it unbearable."

A pensioner said he and his wife could not think what else they could give up out of their bills.

"It's a struggle every fortnight just to live."

Residential electricity prices rose by 48 per cent in real terms between 2000 and 2011. Research from the University of Otago's Housing and Health Research Programme found that the number of New Zealanders experiencing "fuel poverty" rose from around 10 per cent in 2003 to 25 per cent by 2008.

In contrast, median hourly earnings for those in paid employment last year showed the lowest annual growth rate since 2000.

Sargent said that although some power companies had absorbed the cost increase, that would only be temporary.

"Ultimately all retailers face those costs ... they are unavoidable."

Elizabeth Anglesey, the communications manager for King Country network operator the Lines Company, said there had already been contention in a policy to charge to customers with holiday houses even if they were not at home.

"We recognised if we didn't do something different we wouldn't have an infrastructure."

Canterbury based network operator Orion already had issues with repairing its system after the Christchurch earthquake.

The company was facing $70 million of direct earthquake costs for repairs while its revenues had shrunk 10 per cent with the closure of the central business district.

Consumer New Zealand chief executive Sue Chetwin said many New Zealanders had been complacent about their choice of power supplier, but they were starting to realise that there was usually a cheaper option available.

Almost 500,000 Kiwis have visited the Electricity Authority website, whatsmynumber.co.nz, to see if they were paying more for power than they should. The total potential savings were more than $70m.

Nearly 36,000 customers changed their electricity provider in February, often to smaller firms, the highest number for the month since the Electricity Authority began recording the data 12 years ago.

"Some households can save in the hundreds," Chetwin said.

She would like to see more competition in the marketplace to help keep prices down.

Consumer NZ also runs a website, powerswitch.org.nz, which lets customers see if they are getting the cheapest deal, and when power companies last put their prices up.

A 2009 ministerial review into power prices estimated that residential consumers could save on average $100 a year by switching to the cheapest available retailer. It also noted that "consumer switching puts real pressure on retailers to improve their offerings".

But Melhuish said the whole system was becoming unacceptable.

"Nobody can guess, when a balloon breaks, which bit is going to go. There are increasing power prices and no increasing income. I don't think it's stable."

- Sunday Star Times

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