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Electricity and gas

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What’s in your power bill?

With both electricity and gas, you are paying for two main things:

  • the energy you use
  • the cost of getting the energy to your house (transmission and distribution).

Just over a third of what you pay is for getting the energy to you — the rest is for what you use. A small part of what you pay also goes to fund the work of the regulators of the energy industry.

Electricity

  • Generation 30.5%
  • Transmission (Transpower) 9.9%
  • Distribution (network or lines company) 26.2%
  • Retail (the retailer’s operating cost and margin) 16.2%
  • GST 13%
  • Metering 3.4%
  • Market governance and services 0.8%

Source: Electricity Authority

Gas

  • Distribution (network company) 39%
  • Energy and transmission (retailer and network company)* 61%

The figures we have don’t separate out transmission charges from energy charges.

Breaking it down

There are a number of processes for providing power to your home — and ultimately you pay for these processes in your bill.

Your bill covers the generation, transmission, distribution, and retailing of power. It also includes a small levy that runs the Electricity Authority, which governs and regulates the electricity industry.

Credit: MBIE
Credit: MBIE

Generation

First, your power has to be generated. In New Zealand this is mostly from hydropower, geothermal power, and natural gas. There are 5 major generating companies in New Zealand: Contact Energy, Genesis Energy, Meridian Energy, Mighty River Power, and TrustPower.

Transmission

Transmission is the bulk movement of energy across the country.

Electricity transmission is from a power station (located anywhere from a gas-powered plant in Auckland to a hydro station in the South Island) to a distribution point (called a grid exit point or GXP) near your home. This is done over the national grid owned and operated by the state-owned entity Transpower.

Gas transmission is from the wells and processing stations in Taranaki, over 3500km of high-pressure pipelines to a delivery point (known as a gate station) near your home. The main transmission pipeline is operated by Vector.

Distribution

From there, your power is distributed. The distribution of the energy from the delivery or distribution point to your property is by local distribution companies — either lines or network companies or, in the case of gas, gas network companies.

Transmission and distribution charges for electricity are usually paid by your retailer and included as a part of what they charge you. In some cases retailers separate the different components in your bill so that you can see what you’re paying for each part. In a few areas the electricity network company invoices consumers directly for the costs of distribution.

The transmission and distribution charges for gas are included in the wholesale price when retailers purchase the gas. The proportion of your bill covering transmission and distribution is higher for gas than for electricity.

Energy charges

Your power is also retailed. Your retailer is the power company you deal with that sends you your bill.

Retailers buy the power produced by generating companies in a complicated system of trading. For electricity, this is called the New Zealand Electricity Market. It is at this level of electricity trading that you’ll hear terms like “wholesale market” and “spot pricing”. The wholesale price at which retailers buy electricity can have a big effect on the price you pay (and it should be noted that all the main generators are retailers as well).

Electricity generators sell the electricity on the wholesale market. This is bought by retailers who then sell it to you. While the price of electricity is set every half hour and varies with demand, most retailers sell it to you at a set price and usually arrange forward-purchasing contracts known as “hedges” with wholesalers.

There are some retailers that will sell you electricity using a spot-price contract — so what you pay varies with changes in the spot price. There is a price margin for the retailer, but because the retailer does not have to cover the variations in the spot price (you’re doing this), the margin is smaller than for a set contract price. So on average, buying on the spot price is cheaper but riskier than set-price contracts.

Gas-field owners pay a royalty to the government and then sell the gas to wholesalers who on-sell to retailers.

Industry regulation

The gas and electricity markets are levied to pay for the regulatory authorities that oversee them, and for the provision of consumer complaints services. The charges for regulating the energy industry are extremely low.

The Electricity Authority (previously the Electricity Commission) is an independent crown entity responsible for the efficient operation of the electricity market. Its objective is to promote competition, reliable supply and the efficient operation of the electricity industry for the long-term benefit of consumers.

The authority is funded by a levy on electricity generators, Transpower, lines companies, retailers and other major users. Consumers aren’t levied directly, but retailers are permitted to pass on the cost to customers. In these cases it appears as a separate item on your bill. This levy is small — around 75¢-$1 per year.

The Gas Industry Company (GIC) is an industry-owned company set up to co-regulate the industry with the government. The overall policy is to ensure that gas is delivered to existing and new customers in a safe, efficient, fair, reliable and environmentally sustainable manner.

The GIC is funded by levies and fees including a retail levy of $5.76 (excluding GST) a year for each household. This usually appears as a separate item on your bill.

Gas and electricity retailers are also levied to pay for Utilities Disputes (formerly known as The Office of the Electricity and Gas Complaints Commissioner) which is free to consumers. All retailers are required to participate in this service.

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Plan types explained

Plans offered by energy retailers come under three broad types of electricity pricing tariff.

Uncontrolled

This is where electricity is supplied to your whole house 24 hours a day and is all metered at the same rate.

Controlled

You have a general electricity supply to your house but there are also separately wired appliances, normally the hot water cylinder, which the electricity retailer or lines company (depending on where you live) can switch off for short periods at times of high demand for electricity. This is known as "ripple control". There are different ways that controlled rates can be metered, and you may have one or multiple meters, but you always get a small reduction in the amount you pay to compensate you for allowing the controlled appliances to be switched off (regardless of whether it is actually ever switched off or not).

Time of use

These rates all, to some degree, allow for the amount you pay for your electricity to change depending on when you use it. There are a lot of different types of time of use rates, but generally they will either give you cheaper rates for your whole house between certain off-peak and night times, or cheaper rates at night time for separately wired appliances, usually a hot water cylinder or night store heater.

Any or all of these three types of tariff can be combined. For example you might have day/night time of use metering but also have a hot water cylinder on a controlled connection.

Depending on the exact type of tariff you are on, you could have one, two or more traditional electricity meters, or you may just have one smart meter that can handle multiple tariffs and time of use metering.

Tariff names

Type Common names
One meter controlled tariffs Single Meter Managed, Combined, Composite, All Inclusive, All Day Economy, Economy 24
Two meter controlled tariffs Controlled, Controlled xx hours, Economy, Interrupted, Off peak, Kiwi Power, Night Boost, Night Plus, Night Only, Night Owl, Night xx
Time of use  Day/Night, Peak/Off Peak, Triple Saver

Pre-paid accounts

The electricity company installs a meter at your home that controls your power supply. You pay for your electricity in advance, usually either on a smart card or with a PIN number which charges up a meter. Pre-paid options can include a power management system which allows you to monitor how much power you are using.

Legal contracts

The contract between you and your electricity retailer sets out your legal relationship.

A contract is an exchange of promises. In this contract, the retailer promises to sell you electricity. The customer promises to pay for the electricity they use.

The contract should clearly set out the level of service you can expect to receive from the retailer. It should also make clear both parties' responsibilities and rights, the process for settling disputes, liability if something goes wrong, and so on. You can get a copy of any retailer's current standard terms from its website.

The following is taken from the Electricity Authority's model contract and sets out the type of issues that should be covered in any contract.

Us (as retailer)You (as Consumer)
Distribution: We will arrange for electricity to be distributed to your Point of Connection.Address: You will give us the correct address of where you want power delivered to.
Meter: We will provide you with an approved meter.No tampering: You will not tamper with the meter.
Meter reading: We will accurately record how much power you use.Access: You will give us reasonable access to your premises at reasonable times.
Vulnerable consumers: We will meet the requirements of the "Guidelines on arrangements to assist low income and vulnerable consumers".Vulnerable consumers: You will advise us if disconnection presents a clear threat to the health or well-being of you or a member of your household.
Prices: We will give you at least 30 days’ notice before increasing our prices. Making payments and other obligations: You are responsible for paying for the services in this contract and for making sure your contractual obligations are met.
Invoices: We will send you accurate invoices.Payment: You will pay our invoices on time.
Standards: We aim to meet certain minimum performance standards.Standards: You will seek to ensure your wiring and equipment complies with the relevant legislative and regulatory requirements and the relevant network distribution code.
Complaints resolution: We will provide a free and fair dispute resolution process. Safety & special needs: You will inform us of any hazards or special needs you may have.
Switching: We will transfer you to another retailer if you wish. Moving: You will give us [ ] days’ notice if you are moving premises.
Interruptions: Your supply may be interrupted for a variety of reasons. Surges: You should protect any sensitive equipment, like computers and TVs, against surges and fluctuations.

You are responsible for all the equipment (such as wiring) between your premises and your connection to the network.

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Vulnerable consumers

The Electricity Authority has developed and published a guideline on arrangements to assist vulnerable domestic consumers. The guideline covers alternative payment options, credit control, bonds and standards for disconnections following non-payment.

We've summarised the key elements of the guideline below.

Please note: Although the Electricity Authority’s guideline was created with the help of major power companies, it is only voluntary. Power companies are not legally obliged to meet the guideline.

Guideline on arrangements to assist low-income and vulnerable consumers

The Electricity Authority defines a low-income consumer as someone for whom "it is genuinely difficult for the domestic consumer to pay his or her electricity bills because of severe financial insecurity, whether temporary or permanent.”

Vulnerable consumers are consumers for whom, “if for reasons of age, health or disability, disconnection of electricity presents a clear threat to their or a member of their household’s health or wellbeing”.

No verified vulnerable consumer should be disconnected for an unpaid bill — unless a power retailer has exhausted all reasonable attempts to contact the consumer and organise another method of repaying outstanding debt.

If you think you should be classed as a ‘vulnerable consumer’, you should contact your power retailer immediately.

The revised guideline states that a power company must ascertain whether or not you are a vulnerable consumer if you face disconnection for the first time.

A vulnerable consumer who is dependent on electricity for critical medical support is called a ‘medically-dependent vulnerable consumer’.

If you think you should be classed as a ‘medically-dependent vulnerable consumer’, then you need to contact your power retailer immediately. The retailer will most likely request proof of your medical dependency — usually a letter signed by your GP or some other form of verification from a recognised source.

The revised guideline states that a power company must ascertain whether or not you are a medically dependent vulnerable consumer if you face disconnection for the first time.

Provided you talk to your power retailer, several options are available. Firstly the power retailer will look at different ways of repaying outstanding bills so that you are not faced with one large payment.

If you still can't make ends meet, your power company should direct you to some form of financial assistance/budgeting advice from government or social services.

The power company should look at alternative pricing plans — such as pre-payment meters or automatic payments — to prevent unmanageable debt in the future.

Every power company has a different disconnection cycle but as a general rule of thumb disconnection will occur if a bill is not paid within 4-6 weeks after it is mailed. Before disconnection, your power company will send out several reminders that a bill is due and, eventually, call you before disconnecting your power.

Be aware: power retailers often charge a large disconnection fee, so avoid being cut off if at all possible.

Once you have been disconnected, you will need to contact your power retailer and arrange for a contractor to come around to your house and reconnect the power. But first of all, you will have to clear all your existing power debt or organise a form of staggered repayment.

Be aware: power retailers often charge a hefty reconnection fee, so avoid being cut off if at all possible.

FAQs about electricity

The Electricity Authority levy contains two portions, a per kWh charge for the purchase of electricity on the wholesale market (purchaser levy) and a flat annual charge for each customer supplied by the retailer (retailer levy). The levy is a charge against the retailer not a charge against you the consumer and is collected by the retailer on behalf of the EA. The EA does not stipulate if, or how, retailers should recover this cost from their customers and different retailers have different approaches. The ones we are aware of are:

  • Retailers either absorb the cost or build the recovery into their tariffs so the consumer does not 'see' the levy as a charge
  • Retailers charge for the levy and adjust the amount to ensure they recover the full amount after prompt payment discounts
  • Retailers charge the levy and do not offer the prompt payment discount on it

Other things that retailers may or may not do that affect the size of the charges:

  • Add the fixed retailer levy to the per kWh levy to recover the fixed levy over a set number of kWh used (if retailers set their recovery point at different levels of use then the size of the levy would vary)
  • Add an administrative charge to cover the cost of the recovery process
  • Add the levy to other 'administrative' charges and charge the consumer for them all as a single item

All of these contribute to different retailers charging different amounts. But an average household using 8,000 kWh per annum will expect to pay about $16 in levies and the difference between retailers would be no more than $1-2 per annum.

Electricity prices change due to a number of reasons, including the overall competitiveness of the retail market, demand and supply levels, the cost of new generation, natural gas prices, and infrastructure costs of delivering power to your door. The following have influenced prices over recent years:

  • Strong demand for electricity has outstripped electricity generation capacity, much of which was built in the 1960s and 1970s. This growth has required new power stations to be built, and these are more expensive than existing power stations.
  • Around a quarter of the country’s electricity is generated using natural gas, and the cost of gas has increased sharply as the giant Maui gas field is replaced with smaller fields.

The best ways to keep downward pressure on prices are to seek out and switch to the provider that offers you the best value for money, and by using energy efficiently.

Ownership of the meter box is quite complicated. There are four possibilities:

  • You may have bought your own meter.
  • The meter was sold by the line company to the existing energy retailer. If you switch retailers, your original supplier may continue to own the meter, or it may sell it to your new supplier.
  • The meter is owned by the line company.
  • The meter is owned by an independent meter company.

If you are unsure who owns your meter, ask your energy retailer.

Whoever owns the meter is responsible for maintaining and repairing it. However, you must take all reasonable steps to ensure the meter is not interfered with or damaged.

If you believe the meter is not accurately measuring your electricity consumption, complain to your retailer. You usually must pay to have the meter tested (around $50), but if it turns out the meter is not up to standard, you should get the money back.

The line company owns the lines along the street (whether strung on poles or underground). At your property, there is a "point of connection" which is where your cable joins the line company's cables, usually at the boundary of your property. You own the cable from the point of connection to the meter box, and are responsible for keeping this line properly maintained and safe.

If a tree on your property is encroaching on power lines, don't try to tackle it yourself. Contact the lines company; it will check the tree and issue a "cut and trim" notice if necessary. It's then your responsibility to ensure that the tree is cut or trimmed.

The lines company will pay for the first cut and trim; after that you have to pay. Bear in mind that the company's priority is to remove trees or branches presenting hazards so, if you want a trim that is sympathetic to a particular species, you may have to make special arrangements.

If the lines company doesn't own the power lines - if, for example, they're on farmland or in a private access way – then it's the landowner's responsibility to ensure trees are kept clear of the lines.

Work on trees near power lines should always be carried out by a properly equipped and qualified arborist.

If your line develops a fault or is damaged, you can ask the line company (either directly or via your energy company) to fix it, but the line company may charge you. You don't have to use the line company – you can get an electrical contractor to do the job. Check in the Yellow Pages.

Your lines may be covered by your house insurance. Check with your insurer.

Utilities Disputes (formerly known as The Office of the Electricity and Gas Complaints Commissioner) is a free service that deals with complaints from consumers about electricity and gas retailers and distributors. Before it will consider your complaint, you must complain to the company concerned first. If your complaint is still not resolved, you can ask Utilities Disputes to consider your complaint.

To make sure there is no confusion about the nature of your complaint, we suggest you write to the company and head up your letter "formal complaint". The company generally has 20 working days to try to resolve your complaint.

You can ask Utilities Disputes to consider your complaint if:

  • You and the company have not resolved the complaint within 20 working days, and the company has not written to you with good reasons why it will take more time
  • You and the company have not resolved the complaint after 40 working days.

FAQs about green energy

Electricity in New Zealand is generated from a variety of sources, both renewable and non-renewable. Renewable or “green” sources are generally considered to be things that can be naturally replenished, while non-renewable sources tend to be fossil fuels such as gas or coal.

Around 73% of New Zealand’s electricity is generated from renewable sources. The remaining 27% is generated from non-renewable sources such as gas and coal. The government’s energy policy aims for 90% of electricity generation to come from renewable sources by 2025.

In New Zealand, current renewable energy sources include:

  • Hydro energy uses water passing through turbines at large hydro stations such as Manapouri and Clyde. Hydro power makes up around 60% of New Zealand’s electricity.

  • Geothermal energy uses the earth’s heat and steam such as at stations in the Taupo volcanic area. Geothermal power makes up around 10% of New Zealand’s electricity.

  • Wind energy converts wind into electricity through large wind turbines. Wind power makes up around 3% of New Zealand’s electricity.

  • Solar energy converts the sun’s radiation into power through photovoltaic (solar) panels. Solar power makes up only around 0.1% of New Zealand’s electricity.

  • Marine energy converts waves and tidal motion into electricity through turbines in the ocean. This is a new and developing technology that is still at a design and testing stage. However, the potential exists for significant electricity generation.

If you get your power from an electricity retailer, the simple answer is no.

While most of New Zealand’s power is generated by hydro power stations, these can be affected by low levels of rainfall and melting snow. Less water means less power is produced, so the shortfall is often made up by using an alternative non-renewable source such as coal or gas. Even if a generating company claims to produce 100% of its electricity from renewable sources, it does not mean that the retail electricity to your home came from 100% renewable sources. All of the generating companies feed the power they produce (from renewable and non-renewable sources) into the national grid. So the power in the national grid is a combination of both types – and it becomes impossible to say that your particular power is from either a renewable or non-renewable source alone.

The only way to ensure all your electricity is from a renewable source is to create your own power – such as from your own solar panels, mini hydro station or wind turbines.

The Energy Efficiency and Conservation Authority (EECA) provides information on renewable energy resources in New Zealand.

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