Electricity Price Review

Most of the workstreams led by MBIE are now complete. The information below sets out our progress.

The EPR dashboard

The dashboard below outlines progress towards key workstreams led by the Ministry of Business, Innovation and Employment.

MBIE work streams

Strengthening the consumer voice

Establish the Consumer Advocacy Council

EPR found that smaller consumers struggle to make their voice heard and influence the electricity sector. The obstacles include the sector’s complexity, consumers’ lack of resources, and cultural differences and language barriers.

The Government established the Consumer Advocacy Council to be the trusted, credible, authoritative and independent advocate for residential and small business electricity consumers. Its role is to advocate on behalf of these consumers by providing evidenced-based advocacy on policy and regulatory consultations, and in decision-making processes. Funding was announced in August 2020 as part of a $17 million budget package for consumer advocacy and energy hardship.

The Council Chair was announced in July 2021 and other Council members were announced on 22 July 2022.

Chair of Consumer Advocacy Council announced(external link) — Beehive.govt.nz media release

Consumer Advocacy Council members appointed(external link) — Beehive.govt.nz media release

A Secretariat to support the Council was established in September 2021.

The Council’s Terms of Reference is below:

The Consumer Advocacy Council website has more information, including key achievements, published research, submissions and the Council’s work programme.

Consumer Advocacy Council website(external link)

Electricity Price Review – recommendation A1 [PDF, 854KB](external link)

Reducing energy hardship

Establish a cross-sector energy hardship group

The causes of energy hardship extend beyond the electricity sector, and the solutions require joint action. The Government established the independent Energy Hardship Expert Panel to recommend policy priorities and actions to alleviate energy hardship in New Zealand, and the Energy Hardship Reference Group to provide a forum to share information and encourage coordination across industry, NGOs and government agencies.

Members of the Energy Hardship Expert Panel were announced in September 2021. The Panel delivered its final recommendations to the Energy and Resources Minister in July 2023. The Panel’s findings and recommendations are informing MBIE’s engagement with the new Government.

Members of the Energy Hardship Reference Group were announced in December 2021 and were initially appointed for a 12-month term. Their terms were extended for a second year.

Energy hardship expert panel and reference group

Electricity Price Review – recommendation B1 [PDF, 854KB](external link)

Define energy hardship

After extensive research, data analysis and consultation, MBIE developed a definition of energy hardship and a framework that illustrates the inter-related factors affecting energy wellbeing and hardship. 

Following this, MBIE undertook further work to improve its proposed measures of energy hardship based on feedback received through the 2021 consultation. An initial set of measures was published in 2023. The measures can be used with the definition to help better understand experiences of energy hardship, develop or focus initiatives aimed at reducing energy hardship, and assess their effectiveness. MBIE’s energy hardship measures are based on currently available statistics and information.

Defining energy hardship

MBIE’s first report on energy hardship levels in New Zealand was published in 2023 and is available on the Report on Energy Hardship Measures webpage.

Report on energy hardship measures

Electricity Price Review – recommendation B2 [PDF, 854KB](external link)

Build a network of community-level support services

The Support for Energy Education in Communities (SEEC) Programme was established to help households in need by funding frontline community-level organisations to provide credible, independent, electricity-specific advice and support services to those experiencing energy hardship.

Nearly $5m of funding was allocated across 41 energy education projects nationwide, in the programme’s first 3 years. As of March 2024, about 19,700 households had been reached through these projects.

Funding is used to expand the capacity of existing energy hardship initiatives, pilot a new scheme, or deliver related training. The Programme also includes funding for the selected projects to further provide households with low-cost energy-saving equipment, such as LED lightbulbs.

Further annual funding rounds will continue to support community-based energy education projects.

The SEEC Programme webpages have more information about the projects that have received funding and upcoming funding rounds.

Support for Energy Education in Communities Programme

Electricity Price Review – recommendation B3 and B4 [PDF, 854 KB]

Prohibit prompt payment discounts

The EPR found that prompt payment discounts (PPDs) were excessively high, caused additional hardship for those who could least afford it, and contributed to customer confusion when comparing prices. The Review recommended the Government prohibit PPDs but allow reasonable late payment penalties that reflect the actual cost of recovering outstanding payments.

Before moving to prohibit PPDs, Cabinet agreed in 2019 that the Minister of Energy and Resources should first write to electricity retailers highlighting the unfairness of PPDs and inviting them to ensure that any PPD offered would be reasonable. If there was an unsatisfactory response from industry, proposals to regulate PPDs would be brought to Cabinet.

This approach seems to have been effective, with retailers appearing to be making encouraging progress towards removing PPDs voluntarily. Monitoring by MBIE in 2021 found all retailers were showing signs of removing PPDs from their power plans.

In 2023, the Minister signalled in her ‘Letter of Expectations’ to the Electricity Authority that it should continue to monitor retailers’ approaches to PPDs. This monitoring is underway. If the Electricity Authority considers there is insufficient progress by retailers in their efforts to continue to remove PPDs from their power plans, then it may consider addressing these concerns through the Electricity Industry Participation Code.

Electricity Price Review – recommendation B7 [PDF, 854KB](external link)

Arrangements for vulnerable and medically dependent consumers

The EPR recommended that the Government establish mandatory minimum standards that distributors, retailers and others must meet when providing electricity or related services to vulnerable and medically dependent consumers. The Review recommended the Electricity Authority should monitor and enforce the standards.

In response, the Electricity Authority developed the Consumer Care Guidelines that replaced the previous arrangements for vulnerable and medically dependent consumers.

The Guidelines aim to support electricity retailers to deliver a consistent and supportive minimum standard of care to all residential consumers, including those who are vulnerable or medically dependent.

The Guidelines took effect in July 2021, and were initially voluntary for electricity retailers to implement. Following a public consultation, the Authority announced in February 2024 that the Guidelines will be made mandatory, and are to be implemented from 1 January 2025. The Authority is currently updating the Guidelines to make them clearer, more workable and enforceable.

Of relevance to this workstream, the Electricity Industry Amendment Bill was passed in August 2022, enabling the Electricity Authority to make and enforce measures to protect the interests of small consumers. This includes being able to make aspects of the Guidelines mandatory.

More information about the Consumer Care Guidelines is available on the Electricity Authority’s website.

Consumer care guidelines(external link) — Electricity Authority

Electricity Price Review – recommendation B6 [PDF, 854KB](external link)

Improving transmission and distribution

Issue a GPS for transmission and distribution pricing

The EPR recommended Government Policy Statements (GPS) should be issued to the Electricity Authority to shape its preparation of new guidelines for setting transmission and distribution prices. This work was paused while the Authority completed its Transmission Pricing Methodology (TPM) work programme and developed its approach to reforming distribution pricing. The Authority decided on a new transmission pricing methodology (TPM) that was implemented by Transpower on 1 April 2023. The Authority has a work programme underway considering amendments to distribution pricing, which may propose regulation of connection costs. Distributors’ other (non-connection) charges are not regulated – distributors are expected to follow voluntary pricing guidelines.

Electricity Price Review – recommendation E1 and E2 [PDF, 854KB](external link)

New powers for the Commerce Commission to regulate distributors

The EPR considered that the Commerce Commission lacks sufficient powers to address certain future issues identified in the regulation of distributors. The EPR’s recommendation does not address any significant or pressing problems, but is aimed at making the regime more flexible for the future. Providing such flexibility needs to be balanced against the certainty that the current economic regulation regime provides.

Before progressing changes, further policy work is required, including the development of clear policy rationales and an assessment of alternatives to the EPR’s recommendation. The policy work also needs to be balanced against other priorities in the economic regulation policy area.

Electricity Price Review – recommendation E4 [PDF, 854KB](external link)

Improving the regulatory system

Amend the Electricity Industry Act

The Government made amendments to the Electricity Industry Act 2010 in August 2022 in response to the EPR findings and recommendations.

These include:

• provisions relating to advocacy for small electricity consumers, power to appoint an agency (for example, the Consumer Advocacy Council) to undertake this function and recover costs from industry participants.
• giving the Electricity Authority the additional statutory objective to protect the interests of small electricity consumers in their dealings with market participants, and associated functions and powers (see information on Consumer Care Guidelines in the ‘Arrangements for vulnerable and medically dependent consumers’ section).
• giving the Electricity Authority clearer powers to regulate network access agreements.
• giving the Electricity Authority more flexible powers to regulate distributors’ involvement in contestable electricity markets.
• clarifying the Electricity Authority’s information-gathering powers.

The Government also provided a regulatory backstop to ensure timely action by industry and the Electricity Authority on matters relating to specific EPR recommendations improving the wholesale and retail markets.

The Parliament website has more information on the Electricity Industry Amendment Bill, including the links to submissions and Select Committee’s report.

Electricity Industry Amendment Bill(external link) — New Zealand Parliament

Phase out low fixed charge tariff regulations

The EPR found that the low fixed charge tariff regulations were poorly targeted and result in a number of unintended consequences. The EPR recommended that the regulations should be phased out because they worsen energy hardship for some households and promote inefficient choices for new technologies, such as rooftop solar and electric vehicles. They also increased pricing complexity and confusion, making it harder for consumers to shop around for the right electricity plan.

The Government acknowledged the EPR’s findings on the regulations, but was mindful of the potential impacts of a phase-out. MBIE engaged with industry and consumer groups to better understand the likely impacts, and designed a phase-out mechanism that balances ensuring a just transition with taking meaningful steps to reduce the harm the regulations create.

In September 2021, the Government agreed to phase-out the regulations and announced it had secured industry commitment to develop and fund a power credits scheme to support low-income households struggling with higher power bills during the phase out.

In December 2021, amendments were made to the regulations to allow for the phase-out of the low fixed charge regulations. The phase-out began on 1 April 2022 and will continue over 5 years to April 2027, at which point the regulations will be repealed.

Phasing-out low fixed charges tariff regulations

Electricity Price Review – recommendation F4 [PDF, 854KB](external link)

Update the Electricity Authority’s compliance framework

The EPR recommended that Government should review the compliance framework in the Electricity Industry Act 2010 and related enforcement regulations to bring them up to date with best practice. Changes to primary legislation relating to the compliance framework were incorporated into the Electricity Industry Amendment Bill, which was passed in August 2022. The amendments:

• increase the maximum penalty for a code breach from $200,000 to $2 million;
• allow an additional $10,000 penalty for each day that a breach continues;
• give the rulings panel discretion to award costs whether or not it determines a breach has occurred; and
• clarify that code breaches resulting from a series of closely related events are treated as a single breach subject to a single penalty rather than separate breaches subject to multiple penalties.

Updating the Electricity Authority’s compliance framework also requires amendments to the Electricity Industry (Enforcement) Regulations 2010. Work is progressing on these regulatory changes and is expected to be completed in 2024.

Electricity Industry Amendment Bill(external link) — New Zealand Parliament

Further details can be found in the following documents:

Electricity Price Review recommendation F3 [PDF, 854 KB]

Preparing for a low-carbon future

Explore new institutional arrangements for energy policy and regulation

EPR recommended the Government explores new institutional arrangements in the energy sector. This reflects the importance of fit-for-purpose energy institutions in facilitating the transition to a low-carbon economy. The EPR did not identify any major concerns with the existing arrangements.

In response to this recommendation, changes have been made in the approach and focus of the Council of Energy Regulators to improve co-ordination and engagement amongst its 5 member agencies: the Commerce Commission, Energy Efficiency and Conservation Authority (EECA), Electricity Authority, Gas Industry Company and MBIE. The Ministry will continue to explore further opportunities to strengthen co-ordination amongst the Council’s member agencies as part of its on-going work and engagement.

Preparation of the Government’s Emissions Reduction Plan under the Climate Change Response Act provides opportunities, and strengthen the need, for greater coordination across government.

Electricity Price Review – recommendation G3 [PDF, 854KB](external link)

Improve building energy efficiency

In May 2021, MBIE publicly consulted on proposed Building Code changes that would make homes and buildings warmer, drier, healthier and more energy efficient. In November 2021, MBIE announced it is proceeding with changes to energy efficiency for housing and small buildings, energy efficiency for large buildings and energy efficiency for heating, ventilation and air conditioning (HVAC) systems in commercial buildings. Information on the changes for each building type is below. 

The Building Code section H1 Energy Efficiency was amended to include new provisions for the minimum insulation requirements for housing, small and large buildings, and for heating, ventilation and air conditioning (HVAC) systems in commercial buildings.

Energy efficiency for housing and small buildings

Focusing on the level of insulation in Acceptable Solution H1/AS1 and Verification Method H1/VM1. Note that the new edition of H1/AS1 contain provisions to extend the transition period for new insulation in housing into 2023.

Acceptable Solution H1/AS1 [PDF, 3.3MB](external link) — Building Performance 

Verification Method H1/VM1 [PDF, 2.8MB](external link) — Building Performance 

Energy efficiency for large buildings

Focusing on the level of insulation in Acceptable Solution H1/AS2 and Verification H1/VM2, the new versions are now being used to show compliance with the Building Code.

Acceptable Solution H1/AS2 [PDF, 2.4](external link) — Building Performance 

Verification H1/VM2 [PDF, 2.4MB](external link) — Building Performance 

Energy efficiency for heating, ventilation and air conditioning (HVAC) systems in commercial buildings

Introducing the Verification Method H1/VM3 for the energy efficiency of HVAC system now being used to show compliance with the Building Code. 

Verification Method H1/VM3 [PDF, 799MB] (external link)— Building Performance 

Building for Climate Change programme

In addition, the Government has established the Building for Climate Change programme to deliver a step-change in energy efficiency for new and existing buildings. The programme intends to reduce emissions from buildings during their construction and operation, and ensure New Zealand’s buildings are resilient enough to withstand changing climate conditions. The programme will play a key role in the Building and Construction sector’s contribution to the Emissions Reduction Plan.

Building for climate change(external link)

Background: Why the review was conducted

In April 2018, the Minister of Energy and Resources commissioned an independent review into New Zealand’s electricity market. This was because electricity prices, especially for residential consumers, increased faster than inflation for many years, putting pressure on household budgets. In comparison, prices faced by commercial and industrial customers remained relatively flat.

Such reviews are not new. Since the 1970s, New Zealand has reviewed its electricity sector roughly every decade – each time substantial changes have been made to improve or correct the sector’s performance. In the 1980s and 1990s, the sector was privatised to improve commercial performance, and a light-handed regulatory regime was developed. By the 2000s, concerns about industry performance and self-governance arrangements resulted in further improvements being made, including developing new regulations and improving market competition to restrain retail prices to efficient levels.

However, the 2018-19 review was unique as it addressed the need for electricity prices to be fair and affordable, not just efficient or competitive. Another novel element was the review’s focus on the consumers’ point of view and their say in the direction of the sector.

This review also considered how to future-proof the sector and its governance structures to help ensure the electricity sector functions well during New Zealand’s transition away from carbon-based fuels – a consideration that will become increasingly important as electricity meets more of New Zealand’s energy needs, and as new electric technologies are adopted.

Further background

More information on the review process