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.
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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