Electricity is essential to modern life, more essential than it has ever been. Most of us do not realise how essential until our house suffers a power cut. Suddenly there is no light, no heat-pump, no stove, no computer, no television. Suddenly we are rummaging in the dark for a torch, candles, some firewood if we still have a fireplace, hoping there is gas in the barbecue and the phone is charged. If it is, we switch it off to conserve the battery. Suddenly we have lost just about all the usual things we do.
Thankfully, power cuts are rare these days and when they happen it is usually a local problem, easily isolated and quickly fixed. It takes a storm such as the one that hit Auckland in April to cause multiple problems at the same time and leave some areas waiting too long for their power to be restored. We demand better "future proofing" against storms of such ferocity because we have come to take for granted that the power is always on.
We have every right to take that for granted. When electricity ceased to be supplied by a government department and competing companies were set up to run the generating assets and local distribution, we were told to expect security of supply as well as competitive pricing. The security of supply has been good but competitive pricing has not meant lower costs. As every household knows, electricity is not cheap.
The monthly power bill is a major expense for all but the most affluent households. Findings from an Electricity Pricing Review for the Government, reported yesterday, show that for 175,000 households electricity costs exceed 10 per cent of their household income, which must also cover rent or mortgage payments. Poorer households such as the one we featured yesterday, sometimes resort to borrowing to pay the power bill.
If they were able to pay the monthly bill as soon as it is due they could have a discount of 10-20 per cent from some suppliers but budgeting is never easy for households with children and the unpredictable expenses that can arise. Early payment discounts are elusive for those who most need them and can be considered a benefit from them to the better-off, since the power companies will be recovering the cost in their charges to later payers.
The Government's review has suggested that while electricity pricing could be fairer and cheaper, the suppliers, including the company managing the national grid, are not making "excessive profits". What appears to be happening is that competitive pricing is working well for customers that are willing to shop around. That involves comparing complex schedules and choosing the one that best fits the household's pattern of use, or simply trusting those that offer you a better deal.
There is no shortage of competition. As every householder knows, cold calls from power dealers interrupt many an evening. But a well functioning market should not require this much effort from consumers. Normally the prices set by the most discerning customers are the prices everyone pays. To find the best electricity rates available to them, poor households probably need help from people they can trust.