CPAG says report is promising but exploitative electricity pricing must go

Child Poverty Action Group (CPAG) says that the report from the Electricity Price Review taskforce is a valuable and comprehensive document and many of its recommendations are appropriate. 

“But the super profits enjoyed by the ‘gentailers’ show that much more can be done to ensure cost and payment structures do not unfairly disadvantage low-income households,” says Dr Claire Dale, CPAG’s spokesperson on Household Debt and Expenditure.

The Review found that more than 100,000 households are unable to afford to heat their homes effectively. Independent research has shown that residential power prices have jumped 79% since 1990, after accounting for inflation. In addition, high-users pay more for their electricity, even though they’re more likely to be low-income. Low-usage people are usually smaller families, with higher incomes, insulated homes and may have an additional source of energy, like solar panels. 

Dr Dale says that phasing out low fixed-charge tariff regulations would allow companies to charge low-users more equitably. 

“Rather than the current situation where high users subsidise the low-users: the low-usage $0.30 charge meets only 5% of network costs, while the average residential household pays $2.00 and meets 33% of network costs.”

CPAG is pleased by the report’s focus on reducing energy hardship and ensuring that consumers concerns are heard and acted upon, and we commend the Minister’s decision to proceed with introducing a Consumer Advocacy Council.

“We are particularly pleased by the promise to extend the Warmer Kiwi Homes Programme to low-income households who are renting,” says Dale. “Low-income families in private rentals are often struggling to meet their day-to-day costs and living in houses that are both difficult to heat and expensive to heat. These families are not eligible for subsidies such as the Winter Energy Payment, so we welcome the Government’s promise to help fund energy efficient appliances and support them to have warmer, drier homes.

“This ‘energy promise’ must work alongside the Healthy Homes legislation. It supports the need for a comprehensive Warrant of Fitness on all rental properties to ensure that housing is fit for purpose and can in fact be heated efficiently. 

CPAG is also pleased that the Government has taken on board the problematic prompt payment discounts that do not provide any payment flexibility for low-income households. However If prompt payments are to be barred then it’s important to have a guarantee the savings be incorporated back into normal energy prices.

CPAG is concerned however, by the provision for “reasonable late payment fees” in the Government’s response.

“The accumulation of penalties unfairly disadvantages those least able to afford their power and results in debt and bad credit for low-income families,” says Dale. “The risks of disconnection and high reconnection rates must be addressed. While the Minister states that there will be an attempt to address such issues within a proposal for regulating minimum standards in 2020, there is no suggestion at this stage of how.

“Providers of essential needs should not be able to impose penalties and this capacity should be revoked.”

CPAG is also concerned that the Government’s response is not specific enough about the need to reduce and regulate power rates for pre-paid connections.

“Low-income households are more likely to use these services to avoid falling behind in their payments and risking disconnection. This means that to work within their budgets, they can’t afford to keep their children warm in winter. “Heating and cooking facilities are often the first things to be limited when parents are trying to save their power consumption.”

While this may fall outside of the Minister’s scope and into that of the Electricity Authority, there may need to be legislation that forces the Electricity Authority to address the issue. 

“We are pleased to see that the Minister is considering legislation, but we would like to see more acknowledgement of these costs and a plan to reduce them outlined as part of the approach to legislating and reducing energy hardship.”

Alongside regulating and improving costs so that low-income families are able to better afford their electricity, CPAG says that moves must be made to ensure that when a service is essential, the needs of the consumer must be prioritised. Social responsibility must be at the fore of all policy guiding corporates who provide essential services.

Read CPAG's full submission on the Electricity Price Review (October 2018).