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16 September 2021

The shocking difference in electricity prices across New Zealand

Areas with incomes lower than average are paying prices higher than average.

It costs more to boil a jug of water in Taumarunui than it does in Timaru. So, what's going on here?! It’s not different electricity. It's not better electricity. It’s not faster electricity. How can the price of something identical vary so much? 

Analysis by Consumer NZ has found the areas with incomes lower than average are paying prices higher than average. Larger towns and cities generally pay the least. Coupled with price rises over the past 20 years, the high electricity prices in lower-income areas are contributing to New Zealand’s increasing levels of energy hardship and inequality. 

The differences between regions can be considerable. The prices in Kerikeri (currently the highest in New Zealand) are about 40% higher than they are for a similar household down the road in Auckland where median incomes are about 25% higher. Prices in Masterton are 15% higher than they are just over the hill in Wellington. The price in Westport, which has lower-than-average incomes, is close to 40% higher than in Christchurch, which on average has higher incomes. 

See full-size image.

A big reason is the differences in the costs of delivering electricity

With a typical power bill, about 40% of what you pay are electricity lines charges. That’s the cost of the infrastructure required to get the electricity from the power station to your home. Regions with higher power prices tend to have a lower population density, or are far away from power stations, or have few large commercial and industrial electricity users. Or in some cases, all these things.

Basically, regions that need a lot of infrastructure to deliver electricity, but with fewer people and industry to spread the cost of that infrastructure over, pay the most.

Unfortunately, many of these regions also tend to have lower incomes. 

Some of this is also structural. We have 28 different electricity lines companies. Some of these networks are large and some are small. If you live in an area serviced by a small lines company, you are more likely to be paying more than in an area serviced by a larger lines company. This is because a large lines company will cover a bigger area that will likely include large population centres and industrial loads. More people and businesses to spread the lines costs results in lower overall prices. 

One of New Zealand’s smallest electricity lines company is Buller Electricity. Buller supplies roughly 4000 residential connections in and around Westport. Orion, the electricity lines company servicing Christchurch, has 180,000 connections. In Westport a unit of electricity costs about 40¢. In Christchurch it’s 29¢. 

Switching hesitancy also affects prices

Our analysis has also found that the places with the highest prices are also the areas where large numbers of consumers have either never changed electricity retailer or do so very seldomly. These regions are more likely to be dominated by a single electricity retailer. This lessens the competitive pressure keeping a lid on prices.

Households in Tauranga, for example, switch power companies roughly 30% less frequently than the national average. Trustpower dominates this area, with 60% of households signed up. The result? Power prices in Tauranga are about 11% higher than the national average – even though it has a large population to spread lines costs over and is relatively close to power stations.

What can be done to get cheaper electricity prices across New Zealand? 

Don’t be static when it comes to your electricity provider. If more consumers regularly compared and switched electricity retailers, not only would it save them money, it would also shock some retailers into taking action. More switching generates competitive pressure on retailers, pushing them to sharpen their pencils and offer cheaper prices in general.

If you’re looking for the best deal, check out our free Powerswitch service. All you have to do is grab a recent power bill, jump on to Powerswitch.org.nz, and you can get independent electricity and gas price comparisons in less than 5 minutes. It's more than likely there's a cheaper deal out there for you.

Our analysis of about 8000 Powerswitch results pages generated over winter last year indicated that the median savings in switching to the cheapest pricing plan were $380!

That’s a sizable chunk of money in anyone’s book.

Notes on the data we used for this article

Representative electricity prices for each location came from the Ministry of Business Innovation and Employment (MBIE) quarterly survey of domestic electricity prices. The MBIE survey finds a representative price for a typical New Zealand household for towns and cities across New Zealand. Income data was sourced from Stats NZ. Retailer switching and retailer market share data was sourced from the Electricity Authority and our own Powerswitch information. 

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Member comments

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Philip H.
09 Oct 2021
Daily Charge Rip off

Some years ago I had advice from my retailer that the lines company was doubling the daily charge, and they needed to pass this on. So the retail daily charge rose from $1.10 to $2.20 accordingly. I did some digging and found my lines company tariffs on line. They had indeed doubled their daily charge - from 17c to 34c!! In an instant my power bill rose $33 per month while their costs rose a whopping $5 per month!! Trouble is ALL the retailers did the same thing, so I couldn't even switch companies.

Stephen F.
02 Oct 2021
Cold calling

I was cold called by Slingshot this week offering a 10% discount on my power and internet, and offer too good to pass up.

Luckily I could remember my daily and unit charges - when I asked what that meant they were offering in terms of actual prices (they did not supply this until directly asked), it turned out my existing deal was still 30% cheaper (with Flick).

All it has made me do is consider changing internet providers. But I wonder how many people such companies fool?

MH
27 Oct 2021
I like Flick

I am a domestic user and I go on their 'Wholesale' option, I save money because I use electricity when it is mostly cheapest, i. e. set my W'M and Dishwasher timers for overnight use when electricity is cheapest (look on the website 'EM6' can help work this out). Flick send a 'warning' on their App when there are very high 'spot prices' so avoid use then, those high 'spot prices' are not very often anyway. I get emailed a weekly invoice, I pay weekly by Direct Debit, can keep an eye on power use and costs this way very easily. Can look on Flick Invoice for individualised costs of the invoice, or there was a pie chart I saw recently. This works for me, maybe not everybody's cup of tea though.

Bruce M.
01 Oct 2021
Prices...oh yea ?

Here again i see nothing about what someone pays per Kwh...!
and the supply charge....its the numbers we want to see in comparisons...
Not words outrageous or rip offs...
Dont forget power companies too pay 6 weeks holiday a year to employees....

Trevor W.
26 Sep 2021
Powerswitch a Solution?

Frankly, it is outrageous that people have to use Powerswitch to hunt down the best price for them for a service which is dominated by Government built and controlled companies.

Andrew R.
25 Sep 2021
Changing power companies shifting deck chairs on Titanic

What is really needed is to end the price gouging by gentailers that came from the Bradford changes to the electricity market.

Correcting this requires some significant changes - eg change to Commerce Act so effects on consumers is the prime consideration in control on monopoly pricing, re-nationalising our gentailers, and making it easier for small scale generation and sale eg require power companies to pay a better price for surplus household sloar pv power.

Donna T.
25 Sep 2021
Heads I win, tails you lose.

Have you ever noticed that power companies always ask for a copy of a recent power bill to quote a price as an alternative to your existing supplier? Inevitably they are able to offer a better deal than you have (marginally) once they have seen what you are paying. I suspect they are prepared to go under their accepted returns for a short period before invoking their clause of reserving the right to increase prices as and when necessary.
We live in Kerikeri and are paying 45c/kWh while my kids pay 25c/kwh in Auckland, yet we are just over the hill from the Ngawha power station so surely there should be economies for lines charges for us?
We also have solar, are careful users of electricity not just because of cost but because otherwise is wasteful. Surplus power generated from solar is exported back to the grid and we are paid 8.5c/kWh (up from 7c recently). The irony is that exported power goes directly to the nearest demand, probably immediate neighbours - and I will bet they pay full lines charges.
As for daily fixed charges, why are they even there? Why does a Govt of the left who traditionally looks after the less well off, as they all should, deem it necessary to increase this random cost by 500% over the next 5 years? The less well off already suffering energy poverty will be further down the hole which is just plain unfair. I urge you all to write to Megan Woods to express your displeasure at such an action.
It is time the Govt went back to the future and nationalised the electricity industry so there is fairness for all, not a wealth source for investors in yet another example of the well off improving their lot.
The moment a battery bank becomes viable economically we will look to go off grid. This is the main item holding solar uptake back.

Steven P.
25 Sep 2021
Low User Power Tariff to be abolished

Labour has announced the removal of the low user power tariff over the next 5 years.

Doesn't sound like much, but, for a low power user, their power bill will rise by approx. $ 9 per month year on year, until the daily charge for a connection rises from $ 0.30 per day to $ 1.80 per day, adding $ 45 per month to low power users.

Don't forget in each kW of electric delivered you pay a lines charge as well anyway.

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

I have a large number of concerns over the removal of the low user power tariff.
• Environment
• Increase in cost
• Climate change
• Inflation
• Widening the gap between the rich and poor
• Anti solar
• $5m assistance fund

** Background **
The low user power tariff was introduced in 2004 as a way to encourage NZs to save electricity and provide a financial incentive to do so. It is very cleverly design so that at 8000 kW usage per year in the North Island, the low user tariff and the high user plan must both equal the same amount. Thus it is impossible for the electricity supply company to over charge on the kWh rate on the low user tariff rate.
The low user daily charge of $0.30 per day vs $1.80 per day for high user plans makes a very big difference to the power bill for small power users.

** Environment **
By abolishing this low user rate, there is little incentive to save electricity.
The 2020/2021 winter just finishing saw NZ burn more fossil fuel coal than ever https://www.stuff.co.nz/environment/climate-news/300330306/new-zealands-use-of-coal-for-electricity-generation-surges
We are driving NZ towards electric cars and increasing our demand for electricity.

** Increase in Cost **
Especially for low income households such as pensioners, small city apartments and more.

Example:
Our son Max, lives in an Auckland inner city apartment, 30 sqm.
His power bills are between $ 45-55 per month.
If on the high user power tariff, $0.30 per day becomes $1.80 = $54 vs $9 – plus kWh used. Since the total kW used per month is quite small, the power bill will increase by $ 9 per month per year over the next 5 years as the low user tariff is abolished.

** Climate Change **
One of the simplest and biggest changes everyone can make towards reducing our footprint and decreasing climate change is to just use less.
The low user tariff encourages saving electricity and rewards those that do so.

** Inflation **
Such a big jump over the next 5 years will see electricity for many tens of thousands of NZ’s increase way above the rate of inflation.

** Widening the Gap between the rich and poor **
Many of these people do not have an easy way to increase their income to match increasing costs (pensioners, low income households) and the burden will dis-proportionally affect these people.

** Anti Solar **
Just as we need to increase our uptake of renewal resources, such as solar, the government is removing the only financial incentive that exists in NZ for anyone to put in solar.
Many countries have substantial subsidies offered to encourage the installation of solar in the form of direct grants or feed in tariffs which ensure you paid a reasonable rate for excess solar production exported to the grid.
The only financial incentive in NZ today is actually the low user tariff. If you put in enough solar and reduce your grid consumption below 8000 kW per year in Auckland then you become eligible for the low user tariff.
Removing this will harm solar uptake in NZ, just when we need it the most.
I started with 8 x 270 Watt panels, then I increased this to 14 x 270 Watt panels to stay under the 8000 kW threshold and switch to the low user tariff rate.

** $5m Assistance Fund **
The claimed $5m fund to be setup by the electricity companies to assist those worst affected as noted in the stuff article referenced doesn’t address these key issues I have outlined above – Environment, Climate change, Inflation, Widening the gap between the rich and poor and Anti solar.

It's a drop in the bucket compared to the big windfall electricity companies stand to gain, charging a much higher daily charge for nothing and gaining $ 45 per month (1.8-0.3 x 30 days) - per customer.
This will add many millions to electricity company profits for what gain for NZers?

Chris O.
25 Sep 2021
Solar Intertied

Unfortunately most of the power companies don't seem to have a very clear policy on what they pay for surplus solar power. We have 3.8kw of panels and often have more than we need, but seem able to get only a pittance for it. At least we now have an electric car, and mostly top that up with sunshine! But I have had difficulty sorting an alternative power supplier due to lack of info in that regard. Cheers!

Owen W.
24 Sep 2021
Powerswitch not a reliable guide sometimes

If you can move a lot of your power use to a cheaper time, Powerswitch may be misleading. For example, we moved up to 30% of our power use to a zero rated time with ElectricKiwi, and possibly even more with the new Contact deal.