Power bills set to push Kiwi homes into the red

Media release
15 September 2010

Power bills set to push Kiwi homes into the red

The number of New Zealand households unable or unwilling to pay power bills on time is set to increase over the next six months according to debt recovery agency Baycorp.

Rising electricity prices, fuelled by ETS (Emissions Trading Scheme) levies and the increase in GST, are likely to result in people defaulting on their power bills in order to pay “more pressing” bills such as mortgages and groceries, the company says.

The average unpaid electricity bill stands at $615, about $100 more than a year ago. Nationally this amounts to nearly $15 million, of which about 20 percent is recovered within 12 months of the bill becoming overdue.

Figures published by the Ministry of Economic Development show domestic electricity prices last year (including GST) were more than a third higher (24.44 cents/kWh) than just five years previously (17.96 cents/kWh).

“Our concern is that this trend will continue as consumers struggle to find the green shoots of recovery,” said Geoff Harper, Baycorp’s Chief Executive Officer.

“The back end of Winter and the start of Spring are months where we see a lot of red ink on power bills. Combine this with ETS levies, GST rises, ongoing job losses and the fact that money is generally tight and recovery still feels a long way off, I’m afraid we’re going to see a massive spike in the number of people who just won’t be able to pay their bills.”

Shamubeel Eaqub, principal economist at NZIER, echoed the Baycorp warning in the organisation’s September 2010 Quarterly Predictions: “The economic recovery is fragile and will slow in coming months. Households remain cautious and are making do with less than before the recession. A slow recovery in jobs and wages, and debt repayment will dampen spending for some time.”

Single-income families, the elderly and young parents are most at risk of unmanageable utility debt, Baycorp says, along with rural communities.

Nearly 45 percent of all overdue bills are for less than $400. But nearly one in every four balloons to between $1,000 and $5,000 within a year. Harper is most concerned about this “slippery slope” effect.

“At $400 the debt is manageable for most people. But if it seems difficult to pay a bill at the end of month one, it’s nigh-on impossible by the end of month six. That’s how people get into real financial strife and then we have negative social and economic consequences.”

He is urging Kiwis struggling with power bills to call their providers before that situation arises.

ENDS

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