Kiwis hoping for relief in their power bills after the Government’s energy announcement are likely to be disappointed, one expert says.
Economic Growth Minister Nicola Willis and Energy Minister Simon Watts this morning announced the Government’s plans after a months-long review of the electricity market, amid rising anxiety by New Zealanders about power prices.
The Government rejected major recommendations for the Crown to readjust its involvement in the energy sector, including to focus on thermal generation and divest shareholdings in the gentailers.
Instead, it would write to gentailers assuring them capital is available for investment, start a procurement process for a new liquefied gas facility and ask for more information.
Watts said households would see lower power costs, with some changes having “an immediate effect”.
But while some of the Government’s plans were good, Octopus Energy chief customer officer Margaret Cooney said she didn’t think households and businesses should expect major changes in energy prices.
“It’s sensible to have a stopgap like LNG [Liquefied Natural Gas], but I don’t think New Zealand households and businesses are going to see a material change in price and that should be a real concern”, Cooney told Ryan Bridge on Herald NOW.
“We know that there just has not been enough investment in new generation to bring prices down for New Zealand households and businesses.”
The true test of the reforms was whether they would accelerate new generation and spur competition, Cooney said.
“Unfortunately, all we’ve got in the plan to date is the existing measures that were already proposed by the Electricity Authority, and they’re under consultation ... the key really is now that the Electricity Authority is doing its work – in terms of making sure that those competition settings work really well and support entry into the market – because ultimately, it’s the entry that will drive down the price of electricity for consumers.
“We’ve already seen that the gentailers [generator-retailers] will only invest at a certain rate and are not incentivised to reduce high prices.”
The Electricity Authority had already announced moves to level the playing field between the four big generator-retailers and independent participants in the electricity market, and it was great the Government supported that, Cooney said.
“But there were other things that the Government could have done to really accelerate the rate at which we’re building new generation ... the volume of new generation committed is insufficient to meet the growing demand.”
Labour’s energy spokeswoman Megan Woods described today’s announcement as “tinkering around the edges with the status quo”.
“Not really ... doing the things that will deliver lower-cost energy to New Zealand households and businesses and protect Kiwi jobs,” Woods told Herald NOW.
Splitting the gentailers wouldn’t address the issues, which was making sure the country was bringing on new generation, she said, and finding affordable ways to store energy.
“One of the recommendations in the report around having a centralised Crown entity around the firming and storage, I think that’s a really interesting idea,” Woods said.
“The fact that it’s been rejected just really shows the coalition failure – they couldn’t find a set of measures that the three parties could agree on, so instead New Zealand households and businesses are going to be saddled with higher power bills.”
However, speaking at the announcement, Watts said households and businesses had been “paying the price” because of Labour policies.
Asked if Kiwi households would see lower power costs from the Government’s announcement, he said “some of the changes will have an immediate effect”.
The major issue is the $30-$50 volatility price that’s in place, Watts said.
“Our objective is to take the volatility off the table.”
Kiwi households and businesses don’t have abundant and affordable energy prices, but the Government’s announcement would have downward pressure for New Zealand consumers, he said.
“Some of those [actions] will have an immediate effect.”