NZ Power plan won't fix energy hardship - report

JAMES WEIR
Last updated 16:00 10/02/2014

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The Labour/Greens "NZ Power" proposal would not work as well as the present electricity market system and would not fix "energy hardship" problems, a report commissioned by Business New Zealand says.

The report by Sapere Research Group examines how effectively the electricity market is working.

"The electricity market is now more competitive than at any time in the past," it says.

Retail electricity price increases in the past decade "have not been well explained or justified" and were not "transparent enough", it says.

Too little had been done to address "energy hardship" or "fuel poverty" for some power consumers living in homes that were "too cold and too damp", it says.

But most consumers were benefitting from the ability to switch power retailers to get cheaper prices.

"Consumers' perception is that prices in the past have been too high," the report says.

However, Sapere said competition was "increasing".

"That implies that if the current levels of competition had existed in the past, prices could have been lower," the report says.

Price rises could have been better explained to consumers, though rises had slowed significantly since 2010. Household power prices rose fast between 2001 and 2007, well ahead of general inflation, while commercial and industrial prices remained relatively flat.

The report looked at the performance of the energy market since 2010 against goals including secure supply of power, efficient operation and market transactions and investment in assets, as well as social and environmental requirements.

The report says security of supply improved under the market and investment in generation, transmission and distribution assets was keeping ahead of demand without government subsidy or direction.

The NZ Power proposal by Labour and the Greens would be "less able" than the current market to deliver against the five key goals, the report says.

NZ Power "would not resolve transparency or energy hardship problems", it says.

Business NZ said the current electricity market framework should be kept as "superior" to the alternative, across a range of desirable policy aims.

The NZ Power proposal would bring in government control through central planning and a single buyer of wholesale electricity and the single supplier to electricity retailers.

Sapere said NZ Power would put "at risk" the gains made since the electricity market was set up, and "would not be able to deliver on the commitment to reduce prices".

"There is a very real risk that the proposals would result in higher electricity prices and less secure electricity by undoing the achievements that have been made and repeating past mistakes," Sapere's report says.

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Nevertheless, the report also says there should be better price transparency. New rules for information disclosure around price setting should be looked at.

The size and nature of "energy hardship" should be looked at too, as efforts by the electricity market would help those affected "only marginally".

The Government should look at ways to help those in energy hardship in a systematic way. Moves could include forcing landlords who get state money for providing social housing to submit their houses to a "warrant of fitness".

The poorly targeted "low fixed user charge" for some power users, should be replaced with something better. For example, there could be an "electricity supplement" similar to the accommodation supplement.

Health and welfare initiatives that could help those in energy hardship should be examined.

- Fairfax Media

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