Dr O'Sullivan said Government policies needed to change to prevent poverty by ensuring the necessities of life were affordable.
"I think we run the risk of having a significant low income sector of our country living in poverty and a lot of our children are going to come out affected by that."
A lot of money was spent on treating poverty-related diseases, which should instead be spent preventing it, said Dr O'Sullivan.
The Ministry survey found Far North consumers pay some of the highest power prices in New Zealand.
Contact Energy customers now pay 36.5c/kWh for power, 20 per cent more than the same company's customers in Whangarei and more than anyone in New Zealand, bar some consumers in Buller and Otago.
The Far North also saw the nation's biggest price hikes, with Meridian's charges rising 25 per cent in the year to May 15. Top Energy line charges, which are paid by all Far North power users, rose 24.5 per cent.
For an average family using 8000kWh per year, the cost will be $800 more than last year.
Dr O'Sullivan said his work regularly took him into the homes of people hard hit by the economic downturn.
Many homes were cold and damp but some wouldn't turn on their heaters because of the high cost of power.
Others switched off their hot water cylinders, or used LPG heaters which were cheaper to run but created a lot of moisture and worsened respiratory conditions.
Children in cold, damp homes were also at risk of chest and ear infections.
"A lot of high-needs people live in leaky, draughty homes. With the sale of state-owned energy companies, this is an example of how things are potentially going to get worse as power costs are dictated by commercial goals," he said.
New Zealand would pay long-term for unregulated power prices with higher hospital admissions and more people on welfare because they were too sick to work, Dr O'Sullivan said.
An inquiry was overdue into surging power prices in low socio-economic communities, which were "gouging the poor", said Tai Tokerau MP Hone Harawira.
"I know of families switching to candles which is a worry, oldies switching off their hot water because they can't afford hot water cylinders and kids being asked to stay in school and complete their homework because parents can't afford to keep their lights on at home."
Mr Harawira hoped to meet Far North Mayor Wayne Brown to discuss the price hikes, assess whether they were justified and see if there was anything they could do.
He also feared part-privatisation would be hard on the poor, who could be forced to choose between electricity and food.
The only positive for Northland was its milder weather than other parts of the country.
Mid North Age Concern manager June Duxfield wants a ceiling on power prices.
"A cap on the level the elderly and pensioners have to pay might be a way to go," she said.
Energy Minister Phil Heatley said the main reason for rising prices was the huge investment by Transpower and line companies into national and local grids.
"To slow price increases down, the Government introduced reforms in 2009 to improve choice for consumers, and opportunities are working well for those who give them a go," he said.
Northland MP Mike Sabin blamed power prices on the high proportion of domestic consumers compared to commercial and industrial users.
"The net result of this is that there are higher risks and lower returns for the electricity retailers, which is unfortunately reflected in their prices," he said.
