Electricity sector issues hit hard at all levels – Editorial

Is the electricity sector broken? Photo / NZME

Editorial

THE FACTS

• An open letter urged Prime Minister Christopher Luxon to reform the “broken” energy sector.
• Electricity prices have increased 6.2%.
• Energy Minister Simon Watts acknowledges market issues but says it is competitive enough for affordable prices.

The battle over New Zealand’s energy sector may be heating up this winter but, at the same time, fewer households are in a position to heat their homes.

An open letter published in Sunday’s newspapers called on Prime Minister Christopher Luxon to fix the “broken” sector.

A href="https://www.nzherald.co.nz/nz/auckland/energy-crisis-calls-for-urgent-reform-as-new-zealand-faces-soaring-costs-supply-problems/SZWIHETRGZEHLHZ6EIKDYEZ4UQ/" target="_self" rel="" title="https://www.nzherald.co.nz/nz/auckland/energy-crisis-calls-for-urgent-reform-as-new-zealand-faces-soaring-costs-supply-problems/SZWIHETRGZEHLHZ6EIKDYEZ4UQ/">collection of business and consumer organisations, including the Auckland Chamber of Commerce, the Employers and Manufacturers Association and Consumer NZ, as well as four independent power retailers, signed the letter, which detailed what they say is the need for urgent reform.

“Our dysfunctional electricity market is holding back New Zealand’s productivity, restricting our international competitiveness, and driving up the cost of living,” the letter said. “The status quo cannot be allowed to continue.”

There’s no doubt that issues in the sector are hitting consumers directly.

Data from last month shows electricity prices have jumped 6.2% since last year.

Consumer NZ chief executive Jon Duffy told Newstalk ZB this week that a significant and growing number of people were contemplating whether they could afford to put the heater on.

“Sometimes ... it comes down to choosing to put food on the table in a given week or pay the power bill,” he said.

In some of our smallest towns, the impact is felt in other ways. Mills that can’t afford power bills have closed and jobs have been lost.

Energy Minister Simon Watts has admitted the electricity market is “not functioning as well as it could” but said Kiwis should have confidence that the market was competitive enough to deliver affordable prices.

That confidence is clearly lacking, given the open letter’s call for urgent reform. And these calls aren’t new. The letter asks for a “reshaping” of the energy market and protections for businesses and consumers.

It says that, when a handful of companies control both generation and retail supply, the competitive pressures that should attract new investors and drive innovation, efficiency and fair pricing are severely diminished.

Luxon, when asked if the Government would break up these gentailers, said the biggest issue was supply and not having enough gas after the Labour Government banned new oil and gas exploration.

He said repealing the ban was the single biggest thing the Government could do to help. On top of that, it was focused on fast-tracking renewable energy projects and replacing the Resource Management Act.

It’s true that the Government launched a review of the electricity market last year to ensure the right regulatory settings were in place to keep prices down and the lights on.

Watts said this week that it would make announcements on that review “in due course”.

It’s understandable that there may be no quick fix, but perhaps we could see a little more energy in the Government response, which so far may have been cold comfort to Kiwis struggling to pay their power bills.

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