Photo: RNZ / Russell Palmer
Households are being warned to expect higher power prices this year, as pressure goes on bills in three key ways.
Wholesale prices
Wholesale prices were a pressure point for the sector in 2024, and there is evidence more trouble may be ahead.
The electricity futures market was showing an average wholesale electricity price at Ōtāhuhu this year of 25c per kWh, a 25 percent increase from last year's 20c, Infometrics chief forecaster Gareth Kiernan said.
"Prior to 2019, the record high average price [from 1997 onwards] was 11.4c per kWh in 2008 - over the 10 years between 2009 and 2018, prices averaged 7.3c/kWh.
"Since then we've had 12.6c/kWh in 2019, 11.3c/kWh in 2020, 17.4c/kWh in 2021, 12.3c/kWh in 2022, 12.9c/kWh in 2023, and 20.0c/kWh in 2024.
"Although there are other factors that influence retail electricity prices, such as lines company charges and the daily fixed rate, it's notable that electricity prices in the CPI only rose a total of 3.6 percent between the end of 2018 and the end of 2022.
"There has been some acceleration in retail price growth over the last two years, with increases of 4.9 percent and 4.6 percent in 2023 and 2024 respectively, but the data suggests that there is still some catch-up price increases to come for households."
Electricity Authority estimates showed generation costs made up 32 percent of household power bills, he said.
"So even if all other costs feeding into retail prices had remained unchanged between 2018 and 2024, the 76 percent increase in wholesale prices would need a 24 percent increase in retail prices to cover it - the retail price increase over the same period has been 14 percent."
In September, power prices as measured by the consumer price index were up 5.9 percent year-on-year. Excluding the increase in GST in 2010/2011, that was the highest rate of growth since early 2009, he said.
"I see a real risk of double-digit electricity price increases this year, which would be the first time since 2003/04, when the winter power shortage led to the government's construction of the Whirinaki Power Station."
The price of long-dated futures had doubled over five years, Octopus Energy chief operating officer Margaret Cooney said.
"The government needs to get competition working effectively so that new firms can enter the market and build out the much needed new generation."
Low-user scheme
From 1 April, the next step in the phase-out of the low-user electricity tariffs takes effect.
This increases the maximum daily charge that power companies can apply, to $1.50 a day. Before 1 April 2022, it was 30c a day.
The low-user option allowed people to pay a lower fixed daily fee in return for higher prices for their power consumption. But it is being phased out due to concerns it was poorly targeted and helping some wealthier low-use households at the expense of high-user, lower-income households, such as big families.
Powerswitch general manager Paul Fuge said the change this year would mean a $105.50 increase in the fixed component of a bill over the year.
The increase should be offset by a drop in the variable price for power consumed, the Electricity Retailers Association (ERANZ) said.
Lines charges
The lines component of power prices will also increase by about $10 to $25 a month, a roughly 8 percent to 11 percent lift.
The Commerce Commission ruled in November that Transpower and the electricity distribution businesses could increase the revenue they collect.
"The reasons for the regulated increase included higher interest rates, inflation and the costs involved with investment," ERANZ said.
The final prices from the networks were still being revealed, Cooney said, "but it seems there are a few retailers that have already given notice".
Electricity generators and retailers also faced cost increases driven by similar factors, ERANZ said.
"This means it is likely that the cost of electricity itself will increase in consumers' bills in 2025, but we cannot know how much these increases will be until all generators and retailers announce their new pricing. These announcements will be made between now and April."
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