Is your power bill ‘average’?

By Susan Edmunds of RNZ

Have you ever wondered whether your power bill is “average”?

Power bills have gone up for many households this month as new line charges and other price changes filtered through.

But what you pay also depends, in part, on where you live.

To work out what’s “normal”, RNZ looked at an example of households of four people, with full insulation, using electricity to heat hot water, and a heat pump. Our exercise assumed someone was home during the day, and the household did not get bundled deals.

The main driver of the difference in power bills is the cost of getting power to houses. Photo / RNZ

Powerswitch data indicated this household could pay anything from $225 for a month of power in April in Wellington City to $325 in Buller.

The main driver of the difference in power bills is the cost of getting power to properties.

Areas such as Kerikeri, Balclutha and Gisborne tend to have higher bills overall, driven in part by the higher lines components.

Ministry of Business, Innovation and Employment (Mbie) data for the three months to February shows Kerikeri had an average retail electricity cost of 45.42 cents a kWh.

That is compared to 34.23c on Auckland’s North Shore, and 32.05c in Wellington City.

Powerswitch general manager Paul Fuge said the cost of getting power to people’s homes made up about 40% of a typical bill.

In Kerikeri, for example, the lines company component is 19.4c a kWh and “energy and other” 26c. On the North Shore, it is 11.9c and 22.3c respectively.

In Balclutha, the lines component is 18.9c a kWh and energy 25.6c, in Gisborne, the split is 15.9c and 24.78c. Westport had the highest energy component, at 27.7c, with line charges of 17.7c.

Cromwell had the highest lines component, according to Mbie , at 20.5c per kWh.

Fuge said regions that needed a lot of infrastructure to deliver power but had fewer people and businesses to spread the cost would end up paying the most in line charges.

But they were often also the areas with lower income, he said.

Electricity Authority manager of retail and consumer policy Daniel Griffiths agreed the biggest driver of regional differences in average power price was the cost of delivering the power.

“Lines companies, of which there are 29 across the country, are responsible for getting power from the big pylons that run up and down the country to your door. That cost is what makes up the difference in the prices they charge consumers.”

He said a power bill would usually be 32% the cost of generated electricity, 13% electricity companies’ costs, a quarter the distribution charge, 10% for pylons and then GST and other components.

“There is some difference in the power bit, but the much larger variation comes from the regional differences in getting power to the door through the regional lines company area.”

He said the Electricity Authority was looking closely at the costs people were facing.

“We are aware that recent decisions by the Commerce Commission about the maximum amount of revenue electricity distribution companies can charge are likely to be hitting consumers.”

From April 1, the Commerce Commission has allowed Transpower and local lines companies to raise prices by a maximum of nearly $6b to upgrade the transmission infrastructure, which will add between $10 and $25 a month to the average power bill.

“Most consumers face charges that went up on April 1,” Griffiths said.

“We’re using our tools to really understand how consumers are seeing these price increases hitting their wallets.”

He said the authority was keen to ensure consumers were kept at the heart of the system and were getting a good deal.

“We are using our monitoring powers, making our expectations clear to the sector about how consumers should be treated and the supports retailers should be providing to consumers to help avoid price shock.”

Fuge said a Consumer NZ survey showed 2% of people reported having monthly power bills of less than $50.

Fifty per cent of households had power bills of between $101 and $200. One per cent paid more than $400 a month.

Fuge said household size, the type of house and appliances used would affect how big a bill people had.

“Monthly bills will also change seasonally, generally higher in the colder months — but this is changing with air conditioning becoming more prevalent in hotter areas. ”

He said April was a common time for power bills to increase because of how Transpower charges were passed on.

“Transpower charges local lines companies, who then pass on both Transpower’s costs and their own to retailers. Retailers, in turn, pass these costs on to consumers as part of their power bills.

“From memory, Transpower must notify lines companies of any price changes by December 31 each year, providing three months’ notice. This means the new charges take effect from April 1. Over time, April 1 has become the standard date for price changes across the sector.

Lines companies typically align their price changes to April 1, and retailers often follow suit with their retail pricing to avoid customers receiving multiple price change notifications."

But he said when power companies passed on their increases in a single adjustment, it could make it harder for households to understand what was driving the rise.

- RNZ