Electricity Price and Plan Review

Updated 14 March 2019

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There is a lot of confusion and misunderstanding about electricity prices in New Zealand. A number of comparison websites exist, but even with the same address and usage details, you can end up getting different results. Power companies don’t make understanding their prices easy either. We know that daily rates and unit charges vary between cities and regions, but understanding what power company is the cheapest for you can be complex.
 
Our view:

• New Zealand households are paying a ‘loyalty penalty’ by staying with their existing power company.
  
• As the media has reported, there is a two-tier pricing system operating in New Zealand – those who compare, switch and save, and those who stay loyal and overpay. It’s unfair, and a lack of government regulation or oversight means price rises outpace inflation and are some of the highest in the developed world.
  
• We have also received complaints from New Zealanders who have overpaid, found a better offer and notified their long-standing retailer they will switch, only to be offered huge ongoing discounts to keep them as a customer.

 
Our view is simple – don’t be loyal, don’t be lazy – compare and switch you can save money. It’s likely you will, and the MoneyHub team is currently working on some tools to make saving money on your power bill even easier.
 
To help understand exactly how power companies charge, which ones are the cheapest and how you can save move by switching, we have published this guide to cover everything you need to know.
 
This guide covers:
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Switching – Why, How and What to Know

It is very likely that you currently pay too much with your provider, and switching is the best bet to save money. Best of all, switching is easy and painless – you will NOT be left without power. We estimate that anyone switching can save at least $200 to even $500 per year, depending on who their existing provider is. 

Know this: How Energy Companies Charge You

1. Daily Charge: Many retailers charge a daily fee to be a customer.
2. Unit Charge (kWh): This is the cost per kWh used. For example, a 1,000-watt fan heater needs 1,000 watts (1 kW) of power to make it work, and uses 1 kWh of energy in an hour. If you turned on this heater for an hour, you would be charged the kWh fee. And even if you are not using an appliance, you can still be charged. For example, if you leave a TV or computer on standby, it is still using power and creating a kWh cost on your energy bill.
3. Electricity Authority (EA) Levy: The EA charges a small fee per kWh consumed to fund its role in regulating the electricity market.
4. Network and grid charges: Networks, (such as Vector, North Power and Wellington Electricity), are the companies that bring electricity from the national grid to your home. Their fees for doing this are factored into what you pay for electricity to your retailer (i.e. Meridien Energy or Contact Energy). According to a recent study, network charges account for more than 25% of average residential power bills. Furthermore, this rises to about 37% when the costs of national grid operator Transpower are included. Transpower brings electricity from the generators, such as hydro and geothermal power plants, to New Zealand’s cities and towns. Network and grid charges, which now account for around one-third of an average power bill, are usually charged by flat per-kilowatt-hour. You do not see the network and grid charges broken down beyond fixed dollar amounts on your electric bill, which makes knowing when it’s cheapest to use electricity almost impossible. 

Price Rises are NOT Always Due to Retailer Increases
​It’s important to know that every year on or around April 1, lines companies all over New Zealand review their prices. This means that even if your electricity retailer doesn’t increase its own prices, a rise in the lines company fees will mean your power prices may rise. 

​Compare to find YOUR cheapest electricity price

The cheapest energy plan for you depends on where you live and your usage. Our research below provides a sample for two typical households (four people - standard use, and two people - low use) for New Zealand’s major cities. 

Electricity Price Comparison

Our examples:

Cheapest Power Company in Auckland

Cheapest Power Company in Hamilton

Cheapest Power Company in Palmerston North

Cheapest Power Company in Wellington

Cheapest Power Company in Christchurch

Cheapest Power Company in Dunedin

• Prices correct as of 10 April 2019. Based on calculations for an example annual usage for a four person property (9,000 kWH) and a two person property (6,000 kWh).
• All plans assume monthly direct debit payment and/or early repayment discount.

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10 Must-Know Facts about Electricity, Plans, Prices and Switching

Electricity Prices are Going Up, and Everyday New Zealanders are Struggling and Stressed

Despite a lack of competition in the market, there appears to be no way back from annual power price increases. A lack of government oversight doesn’t help either – we believe consumers need to, now more than ever, compare and switch to avoid overpaying.
 
A government report in late 2018 showed that everyday New Zealand consumers faced significant increases in power costs since 1990, with (inflation-adjusted) residential prices rising 79 per cent, while commercial prices had dropped 24 per cent. Currently, there is something of a two-tier residential electricity market – those who compare and switch save money, those who remain loyal end up paying higher prices. We believe access to affordable power is a basic consumer right – right now the electricity system is not close to offering affordable power. Most affected are low-income consumers and the elderly, which is unfair. In a report from Consumer NZ in late 2018, 20% of consumers had trouble paying for their power bill in the past year, 14 per cent were charged overdue fees and 13 per cent had to borrow to pay it.
 
An article in Stuff.co.nz reported that in 2016, 25,317 people had their power disconnected because of unpaid bills, up from 19,106 (or 33%) in 2015.
 
Our view is that the electricity market needs to be regulated – the costs of generating power and distributing it are not increasing at the same rate of the power price hikes. Until there is government policy, we strongly suggest comparing and switching to save money. The BIG savings ONLY come from switching. 

​Power switching and comparison sites don't always display all plans by default

We believe that while a number of power comparison websites exist, there are limitations. Some comparison websites, by default, only show you plans you can switch to via them – this means they are paid commission. This, unfortunately, removes some results, or in other cases highlights the ‘sponsored’ power companies at the top of the results. Our results show ALL power companies in the order of total annual cost.
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Our Tip: If you do use an electricity comparison website, be sure to select the option to show ‘all available plans’, if this option does exist, before making any decision. It is also important to cross-check the quotes you get with the power companies directly to ensure accuracy.

Most Electricity Retailers offer a number of plans, which can be very confusing

​It’s important to know that each electricity retailer has a range of plans which have their own pricing, early payment discount, sign-up credits and ongoing discounts. You may switch to the ‘cheapest’ retailer, but unless you are on the right plan, you may overpay. Only three factors really matter:

1. The daily charge
2. The kWh unit charge
3. The discount amount (if offered)

MoneyHub reader John writes:
I did a price comparison and found that switching would save us around $450 a year, primarily due to the lower kWh charge. I contacted my existing power company who did everything they could not to lose me. I copy this, word for word, on what I was offered:

• To change your pricing to a Low User Plan. This would save you $16.37 on your last account with the new rates of 27.14 cents per kWh for your All Inclusive Meter and a Daily Fixed Charge of 35.29 cents per day.
• A Friends Extra 5% discount off the unit price per month.
• A $100 credit on your account for a 12-month term. If you decided to switch providers, we will ask you to return the $100 plus $55 for reticulated gas (if applicable).

I was very annoyed that all of these discounts were suddenly available, and challenged them why I wasn’t moved to a ‘Low User Plan’ in the first place. The answer was that my monthly bills would have suggested I switch, but there was no mention of this at all. When I told them, their employee said it was something ‘they could improve’ on the bills. It was all very fishy, and I am pleased to have switched to a company which is cheaper, although I am wondering what offers I would receive if I threaten to leave them!

Most Electricity Retailers offer 'early payment discounts' which can bring down the cost of power considerably

Power companies like to be paid on time, and offer a range of incentives for ‘early payment’. The practice has been criticised as contributing to unfairly penalising ‘poor’ customers while households with spare money can take advantage of the discount.

Table: Early Payment Discount
Retailer – Plan - % Discount 

Electricity companies often do Credit Checks

Most electricity companies will perform a credit check – this is to protect them from customers who run up a bill and fail to pay. If you are concerned about your credit history and want to make sure everything is in order, our guide to credit scores and credit checks has everything you need to know.
 
Important – payment history data from electrical bills are shared with crediting agencies by electricity retailers so it’s essential not to neglect these bills. A missed or late electrical bill could affect a mortgage application or personal loan application later on.
 
Energy supplier credit checks
SUPPLIER             CREDIT CHECK

Save Money by using less electricity

You can switch retailers and save money, and then save even more money by changing your behaviour with some simple easy-to-do thing.

1. Turn down the heat and put on a jersey
2. Turn off the lights when you leave a room
3. Use energy-saving low-watt light bulbs
4. Don’t leave electrical goods on standby – this includes turning off computers and home entertainment at the wall after use.

​Do a meter reading BEFORE you sign up for a new deal

If you’ve moved into a new property or are just switching existing providers, it’s easy to get an electricity reading.
  
MoneyHub user Matt writes:
I connected our student flat without doing an initial meter reading. We got some ‘adjustment’ a couple of months later for $300. I didn’t understand as it was summer in Dunedin and if anything our power had been low. The electricity company told me when they did a reading they charged us for everything since the last person to live in the flat’s bill. I told them that has nothing to do with us and it’s unfair given we had just moved but, but the law was on their side. We had to pay. The lesson is to ALWAYS get an initial reading done when you sign up for a power contract. This means you start effectively at zero and only pay for what you use, and not a previous tenant’s power.  

​If you don’t have a smart meter, do a meter reading every time you get a bill

Electricity company estimates are often completely inaccurate. Reading your meter isn’t difficult or scary – it’s just one number after all, the kWh consumption. By not regularly reading your meter, you are either being:

1. Underbilled (which means you’re using more electricity than the electricity company believes you are using, and will have an adjustment to pay later on) or
2. Overbilled (which means you are using less electricity than the company’s estimate, meaning you are overpaying and could save money every month as a result).

 
Smart meters can help stop this as they send meter readings automatically to your supplier, so you only pay for what you use. 

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How to complain about your electricity company?

Do you have an experience with an electricity company you would like to share?