Vulnerable disadvantaged by higher fixed electricity charges

electricity charges disadvantage vulnerable

Consumer NZ says that a change to household electricity charges may disadvantage vulnerable households hardest while higher users could benefit.

Energy Minister Megan Woods has accepted a 2019 recommendation by the Electricity Price Review to phase out the requirement for power companies to offer “low fixed charge” electricity tariffs.

Power companies will be able to levy several hundred million dollars a year more in fixed charges as a result of the change.

All household electricity bills include a daily fixed charge and a variable charge.

Fixed charges cover the cost of things like meter reading and lines company charges. The variable charge is the kilowatt-hour (kWh) unit cost of electricity a household consumes.

Households that use lower than average electricity are given the option by power companies of choosing to pay a low fixed daily charge of 30 cents per day but higher electricity prices.

Low fixed charge tariffs are designed to appeal to consumers who use less than the average amount of electricity.

They cap the fixed daily charge that those customers pay for power at 30c a day, excluding GST.

However, Woods has announced that the cap will rise by 30c each year from April 2022 through to April 2026. The caps will be removed altogether from April 2027.

Paul Fuge, manager of Consumer NZ’s price comparison site Powerswitch, said customers who did not opt for the low charge paid a fixed daily charge of about $3 to $4 a day but paid less per unit of electricity.

The low fixed charge (LFC) tariff option for domestic customers, introduced in 2004, reduced the fixed cost to 30 cents a day for low users of electricity.

Mr Fuge said about 40 percent of customers in lower-income households, such as pensioners who lived alone or with a partner, were on the LFC.

Fuge said there would be winners and losers from removing the LFC. Consumer NZ was concerned it could hit low-income households the hardest.

“The changes to electricity charges could disproportionately disadvantage the most vulnerable households.”

He said large households using a lot of power would benefit the most. Smaller homes that used small amounts of power would be the most affected.

“Some households will definitely see a benefit, and some will see the opposite.”



New Zealand Herald



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