Why are Kiwis paying additional NZ$200 annually for their electricity?

Highlights 

  • New Zealand households might be paying additional NZ$200 each year for their power bill.
  • Meridian Energy’s CEO stated that nearly all the consumers were on fixed-term plans.

As per the latest reports, it has been highlighted that on an average New Zealand households might be paying additional NZ$200 each year for their power bill due to huge subsidy given to the aluminium smelter located in Southland.

Source: © Zalakdagli Megapixl.com

Image description – NZ electricity generating companies

Electricity Authority’s review on wholesale market competition

Earlier this year, Electricity Authority notified that it would be reviewing competition in the wholesale electricity market (June 2019-June 2021).

Few interpretations from the review are as follows:

  • Electricity generators’ few prices are not able to indicate underlying supply and demand situations.
  • Further, there were data suggesting a rise in incentive and ability for electricity generators to form their offers into the market, which would keep the bills high.
  • Also, NZAS (New Zealand Aluminium Smelter) was given a lesser electricity price to help it to remain in place, that could have led in other customers paying extra related bill.

Electricity Authority is worried that electricity generating companies in reality was subsidising the smelter by NZ$500 million, followed by elevated prices for other customers, which is adding to around NZ$200 to each Kiwi home annually.   

Related article; Ambiguity looms over fate of 1000 workers and local ecosystem on Tiwai Point closure

How did Meridian Energy react to Electricity Authority’s review?

NZ’s prominent power generator Meridian Energy Limited (NZX:MEL) is of the view that Electricity Authority speculation on the scenario where NZAS shutting down, would be followed by the prices to be comparatively lesser for few clients is flawed.

Neal Barclay MEL’s CEO stated that nearly all the consumers were on fixed-term plans that protected them from the wholesale market’s unpredictability. Further, the Company is aware of the retailers competing on price were making sure that clients do not feel the heat of volatility.

Bottom Line

The broad evaluation of the wholesale market condition indicates the Electricity Authority’s laying emphasis on programme of work on the wholesale market.  Electricity Authority is looking forward to receiving response form the shareholders on the review work, and their point of view on the actions developing out of it.

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