4 Oct 2019

Power price drop a huge benefit for low income families

10:29 am on 4 October 2019

The prospect of a cheaper power bill is music to the ears of low income families counting each and every dollar.

A Person's Hand Inserting Coin In Piggy Bank On Radiator

Photo: 123RF

The manager of Supergrans, Chris Martin, said the families the charitable trust works with make decisions every day about whether they can afford milk or bread or petrol to take their kids to school.

The government's promising the public lower power prices following a large scale review of the electricity sector and for some it can't come soon enough.

There are 20 proposals in the Electricity Price Review that have got the green light, among them a temporary ban on companies making last-minute offers to try win back customers switching to rivals.

A pilot scheme will be set up to help people shop around for better deals.

In addition, prompt payment discounts will be ditched under the new rules meaning all consumers will pay the same cheaper, albeit, actual cost.

Consumer NZ head of research Jessica Wilson said for some families that could mean an extra $10 to $40 dollars a month in their pockets.

"These prompt payment discounts in our view are effectively a late payment fee in disguise, so people who don't pay by that so called prompt payment date get an extra 10, 15, 20 percent added on to their bill, so it's a percent charge it doesn't reflect really the cost to the company of a late payment," she said.

Ms Martin said power is a big chunk of a household's expenses and it's made more expensive for some low income and vulnerable families living in poor housing with little to no insulation.

"We have families who have to choose between buying milk and bread, they can't get their children to school if it's costing them money, because they just don't have the money,'' she said.

"A dollar is a lot of money for some of these families, so between $10 and $40 dollars is a huge amount of money if it is going to stay in their pocket.''

She said the families they work with generally benefit from the lower prompt payment discount because they get help with putting money aside.

"But it is correct those [who] are leaving things to the last minute, because they are living chaotic and moment by moment lifestyles for whatever reason will be further disadvantaged for the fact that they're not paying on time, so they're not getting a prompt discount and they will be getting penalties," she said.

Supergrans helps out Lynnette Wyllie, who puts money aside each week from her WINZ benefit for power in her Housing NZ home.

That means she benefits from the prompt payment discount.

She said before she got on top of her budgeting she got behind on her electricity bill because it had increased so much.

She was threatened with it being cut off and Ms Wyllie said she has friends still living like that.

She said an extra $10 alone would be huge for some families.

"It's definitely significant, it's money you could be putting on the table for food, or clothes for the children, or putting it in something else,'' she said.

While Consumer NZ is backing the recommendations calling them good news, Ms Wilson said there could be more action on other things.

"Some of the changes such as setting up a consumer advocacy council, which is a move that we really support, there is no hard and fast timelines around that.

"We think that's needed because that advisory council could have a really significant role in making sure that consumers are adequately represented in decision making processes and ensuring the price we pay for power is fair," she said.

Power companies for the most part accept the government's plan, which Energy Minister Megan Woods expects will level the playing field for smaller electricity retailers and their customers flicking switches on.

Dr Geoff Bertram, from Victoria University's institute for Governance and Policy Studies, told Morning Report the plan will, in many cases simply shift the bill from one consumer to another.

He said large families with a lower income will be the only ones to benefit from the changes but smaller low-income families will pay more.

"It's not a win at all for consumers."

There is tonnes of evidence that these companies are making excess profits, he said.

"We're talking hundreds of millions, or possibly billions in excess over what the industry would actually have to recover from users of industry to provide the service and to pay for investment."

Energy Minister Megan Woods told Morning Report she needs to see more information to ensure power companies aren't making excessive profits.

The review found larger power companies aren't making excessive profits, but she wants transparency to ensure they don't, she said.

"It is being shrouded in quite a lot of secrecy, there hasn't been that line of sight."

She said the government can look at profits but the review found that it wasn't able to look at how the profits work and how they're split across retail and generation business.

She can't guarantee families with fixed incomes that use low rates of power won't face higher power bills in a few years' time, she said.

"We need to make sure that we are addressing some of the issues around energy hardship while simultaneously incentivising the kinds of behaviours that we're going to see."