New Zealand’s lowest income earners pay highest electricity prices, data shows

New Zealand’s lowest-income people pay the country’s highest electricity prices – while cities with the highest average incomes have the cheapest power.

A survey of household electricity prices released by MBIE, based on data provided by Powerswitch, found the Northland budget adviser deemed the disparity “wrong” and “unfair”.

The data shows that consumers in the Far North, for example, pay 45.59 cents per kilowatt-hour for electricity in Kerikeri, the most expensive in New Zealand.

Consumers in the Buller region, which includes Westport, paid 44.05 cents, while the rest of the top five regions included Clutha (43.60), Grey (41.97) and Central Hawke’s Bay (41.42).

Wellington residents, on the other hand, pay just 31.17 cents, followed by Christchurch, which comes in second at 31.27 cents.

Data on New Zealand’s median household income shows the areas with the most expensive electricity bills are also the areas with the lowest incomes overall.

Data for 2023 shows the West Coast (including Buller and Grey districts) has the lowest median household income in the country at $81,500 per year, while Northland (including the Far North) has the second-lowest median household income at $88,900.

Wellington, which has the cheapest electricity in the country, also has the highest median household income at $141,300 a year.

High electricity prices in the Far North are putting a strain on rural Kerikeri retirees like John Logie and Lynn Bellinger, who have to pinch pennies to pay rent and other bills.

Bellinger said they were especially careful with their electricity usage but still paid about $300 a month.

“We have no dishwasher, no dryer, we wash our clothes in cold water. There is no heater at all, we only have a fireplace. No electric blankets, we use candles at night, no headlights. Why is our electricity bill so expensive?”

The couple said the prices were unreasonable and they felt they were being punished for living in the Far North.

“There are a lot of people out there who are in a worse situation than us,” Logie said.

Further south in Whangarei, electricity prices are lower but the socio-economic issues are similar.

Dianne Harris, budget advice co-ordinator at the Whangarei Care Centre, said she dealt with people struggling with their power bills almost every day.

“Their electricity bills are extremely high. I had a customer the other day whose electricity bill was $658. My goodness! How could it be that high without the power company’s intervention?”

Harris said she is particularly concerned about seniors.

“One lady said she doesn’t turn on the heat. I asked her, ‘So what do you do?’ She said, ‘Well, it’s too expensive, I can’t afford it. So I use a rug and socks and go to bed with a hot water bottle.'”

Harris said some customers would find it easier to manage their bills if the utility agreed to “smooth out” their bills by calculating average electricity usage and charging the same amount each month.

However, this relies on direct debits and the customer always having enough money in their account.

But why do electricity prices vary so much across the country? Surely it’s the same whether you’re in Kaitaia or Karori?

Line charges make up about 40 per cent of a typical electricity bill, according to Powerswitch, an independent service run by Consumers New Zealand. These charges cover the cost of poles, transmission lines and other infrastructure needed to carry electricity across the country.

Powerswitch manager Paul Fuge said areas with greater distances and lower population density, that is, areas that are further from the power supply or have fewer large industrial users, have higher electricity costs.

Areas lacking large cities also tend to pay more because there are fewer customers to share the cost of electricity infrastructure.

“When all of these factors come together, you end up with a perfect storm and a pretty high price tag,” Fuge said.

Being closer to a power source generally means lower prices, Fuger said.

It’s unclear why electricity prices haven’t fallen in the Far North, despite the region becoming a net electricity exporter thanks to the new geothermal power station at Ngāwhā near Kaikohe and New Zealand’s largest solar farm outside Kaitaia.

“One of the factors that contribute to high electricity prices is the distance from the power plants. So if you increase the amount of electricity generated locally, you would expect the price to fall. Interestingly, this has not happened in the far north, and I don’t know why.”

Fuge urged people who felt they were paying too much to visit Powerswitch.org.nz, a website that allowed them to compare prices charged by electricity retailers in their area.

He said the average household can save more than $500 per year by switching power companies.

Fuger said areas with lower conversion rates tend to pay higher electricity bills.

“That’s because those existing retailers have become pretty lazy, for lack of a better word, because people haven’t changed. So there hasn’t been a lot of competitive pressure in those areas.”

Another thing people can do to reduce their electricity bills – especially in the Far North, provided they can afford the initial outlay – is to install rooftop solar panels.

“What we’re seeing now is that the price of solar is falling at the same time as electricity prices are rising, so it’s becoming more and more competitive.”

Meanwhile, Diane Harris said it was unfair for the lowest-income New Zealanders to bear the most expensive electricity bills.

“They are paying higher electricity prices than the rest of the country and that’s not right. We see the difficulties they are going through, especially with electricity. It’s not a good thing.”

* The electricity price data quoted here is from the Ministry of Business, Innovation and Employment, based on Powerswitch data for May 2024. Median income data is also from MBIE. A new domestic electricity price survey is due to be released on September 12.