Kerikeri retirees John and Lyn Logie, of Kerikeri, study their latest power bill.
Photo: RNZ / Peter de Graaf
The New Zealanders with the lowest incomes pay the nation’s highest power prices – and the city with the highest average income has the cheapest electricity.
That disparity – described as “wrong” and “unfair” by a Northland budget advisor – is revealed in a survey of domestic power prices released by MBIE and based on data from Powerswitch.
It shows that consumers in the Far North, using Kerikeri as an example, pay 45.59 cents per kilowatt-hour for the priciest power in Aotearoa.
Consumers in the Buller District, which includes Westport, pay 44.05 cents, while the rest of the top five is rounded out by Clutha District (43.60 cents), Grey District (41.97 cents) and Central Hawke’s Bay (41.42 cents).
At the other end of the scale, Wellington residents pay just 31.17 cents, followed by Christchurch, the second-cheapest location, on 31.27 cents.
Figures for New Zealand’s median household income show the areas with the most expensive power are, on the whole, also the areas with the lowest incomes.
Figures for 2023 show the West Coast (which includes the Buller and Grey districts) has the nation’s lowest median household income with $81,500 per year, with Northland (including the Far North) second-lowest on $88,900.
Wellington, which has the nation’s cheapest power, has the highest median household income, $141,300 a year.
The Far North’s high power prices put a squeeze on retirees like John and Lyn Logie, in rural Kerikeri, who have to budget carefully to cover their rent and other bills.
Lyn Logie said they were especially careful with power but still ended up paying around $300 a month.
“We have no dishwasher, no drier, we wash our clothes in cold water. No heaters at all, we’ve got a log fire. No electric blanket and we use candles at night, no great big lights. Why is it that our power’s so expensive?”
The couple said the prices were disproportionate, and they felt they were being penalised for living in the Far North.
“And there’s a lot of people much worse off than us,” John Logie said.
Further south in Whangārei, power prices are lower but the socio-economic issues are similar.
Dianne Harris, budget advice coordinator for Whangārei Care Centre, said she dealt with people struggling to pay for power on an almost daily basis.
“Their power bills can be extremely high. I had a client just the other day who came in, and their power bill was up to $658. Oh my goodness! How can it get that far, without some intervention from the power company?”
Harris said she was particularly concerned for the elderly.
“I had a lady who said she doesn’t put her heaters on. I asked, ‘What do you do?’ She said, ‘Well, it’s just too expensive, I can’t afford it. So I use my rugs and my socks and get into bed with my hot water bottle’.”
Harris said some clients found it easier to manage their bills if the power company agreed to “smooth out” their bills by calculating their average use and charging the same amount every month.
That, however, relied on direct debit and the client always having enough money in their account.
But why do power prices vary so much around the country? Surely electricity is the same, whether you’re in Kaitāia or Karori?
According to Powerswitch, an independent service run by Consumer NZ, about 40 percent of a typical power bill consists of line charges. Those charges cover the cost of pylons, power lines and other infrastructure needed to carry electricity around the country.
Powerswitch manager Paul Fuge said regions with large distances and low population densities, which were far from power sources, or had few big industrial users, paid more for their power.
Regions that lacked a large city also tended to pay more because there were fewer customers to share the cost of power infrastructure.
“When all those things combine you can end up with a perfect storm and some quite high prices,” Fuge said.
Fuge said proximity to power sources usually meant lower prices.
It was not clear why prices had not dropped in the Far North, despite the district becoming a net power exporter thanks to a new geothermal power station at Ngāwhā, near Kaikohe, and New Zealand’s largest solar farm, just outside Kaitāia.
“One of the factors [behind high prices] is distance from generation sources. So if you put in more generation locally, you’d expect prices to reduce. It’s interesting that hasn’t happened yet in the Far North and I’m not sure why.”
Fuge urged people who felt they were paying too much to visit Powerswitch.org.nz, which allowed them to compare prices charged by power retailers in their area.
The average saving per household that switched power companies was just over $500 per year, he said.
Fuge said areas with low switching rates tended to pay more for their power.
“That’s because those incumbent retailers get quite lazy, for want of a better word, because people aren’t changing. And so there’s not as much competitive pressure in those areas.”
Another thing people could do to reduce their power bills – especially in the Far North, as long as they could afford the initial outlay – was to install rooftop solar panels.
“What we’re seeing now is the price of solar has dropped at the same time as the price of electricity has increased, so it’s becoming more and more competitive.”
In the meantime, Dianne Harris said it was unfair that the New Zealanders with the lowest incomes were burdened with the most expensive power.
“It’s wrong that they’re paying higher power prices than other parts of the country. We’re seeing the struggles they go through, particularly with their power. It’s not good.”
* The figures for power prices quoted here are sourced from the Ministry of Business, Innovation and Employment and based on data from Powerswitch for May 2024. The figures for median incomes also come from MBIE. A new survey of domestic power prices is due to be released on 12 September.