Letters explaining electricity price hikes are proving confusing to customers.
Received a letter from your electricity provider recently? You probably expected it to tell you of an increase in your electricity price – but you may have been surprised by the amount of the increase.
Still smarting from the price hike you may have been confused by the explanation – if any.
Some of our members have had letters telling them to expect a percentage increase, based on their recent electricity usage. Some have received a letter with a table showing old and new prices for daily charges and variable rates, but no estimation of what their individual increase will be.
And the prices are being increased in different ways – retailers are increasing the daily charge for some plans and the variable rates for other plans.
We’ve looked at four electricity retailers in Wellington to see how they’re changing their prices – Contact, Genesis, Meridian and Nova. For those on low-user Anytime plans, the daily rates are unchanged but the variable rates are increasing by 7 to 8 percent. Those on standard Anytime plans are having the daily rate increase dramatically – between 80 and 109 percent – but the variable rates are decreasing between 8 and 10 percent.
What does this all mean? In our example a customer on a standard plan will have their monthly bill increase between 3 and 4 percent. But someone on a low-user plan will see their monthly bill increase 6 to 8 percent! Low user plans are for people who want to keep down their power costs. Yet they’re the ones who will take the biggest hit.
Electricity retailers are blaming the increases on higher transmission and distribution costs. They’re being charged more by the network companies – who are also being charged more by Transpower – and passing the costs on to users. For instance, Meridian’s new pricing information splits out the Wellington Electricity Lines network charge to show that while Meridian’s part of the daily charge is remaining the same, the network’s part is increasing by 500 percent for users on standard plans.
But some network companies are saying the retailers’ new prices are higher than what they’re passing on. Wellington Electricity Lines has said changes in its line charges should result in an increase of around 4 percent in the average customer’s bill. Yet Wellington Genesis customers have been told prices will rise 5.8 percent on average and Contact expects a regional increase of 7 percent.
Your electricity bill covers the generation, transmission, distribution, and retailing of power. It also includes a small levy to run the Electricity Authority, which governs and regulates the electricity industry. The Electricity Authority has said it will investigate the pricing claims being made by different parts of the electricity sector. It wants to improve “the quality and transparency of retail price and billing information available”.
Low-user plans were brought in to help minimise the effect of daily charges for people who wanted to keep down their power cost. Based on our limited analysis of Wellington power plans, electricity retailers now appear to be trying to get more profit out of these customers by increasing their variable rate.
Price disclosure from electricity retailers must improve. Your bill should break down the costs for transmission, distribution and retail. Any communications about price increases should be similarly broken down so you can see where the increases have come from.
Transparency and consistency of disclosure are coming in for other areas such as telco broadband plans. There’s no reason why it shouldn’t also happen in the electricity sector.
A charge made by the retailer of a set amount per day regardless of whether or not any electricity is used. The daily charge covers the fixed costs of supplying energy to your property. It is shown on your bill as “cents per day” or c/day.
Variable rate charge
A variable rate charge is based on your power usage. This power usage is shown as units or kilowatt hours (kWH) and the variable rate is shown as cents per unit or kilowatt hours (c/kWH).