The Electricity Authority Te Mana Hiko has today opened consultation on its levy-funded appropriations for 2025/26.

The Authority is seeking feedback on three options for its operating funding - no increase which reduces third-party service levels and its work (Option 1), a small increase to maintain service levels and focus on core work only (Option 2), and an increase to maintain service levels and deliver high impact work (Option 3).

Electricity Authority Chief Executive Sarah Gillies says the Authority is seeking support for Option 3, which would enable it to maintain third-party service levels and deliver high impact work faster.

"New Zealand’s electricity system is becoming increasingly complex with new connections and market entrants, more variable renewable generation and more bi-directional power flows. Our contracted third parties who operate the electricity markets are facing significant increases in the volume and complexity of their activities. They need to do more and require more funding to do so.

"About seventy percent of the Authority’s operating funding is made up of third-party service provider costs which increase each year. If there is no change to our funding, we have to absorb these costs. This essentially means less funding for our core work.

"The Authority has, over the past year, undertaken much needed reprioritisation of our work programme and made some significant changes in how we deliver to consumers. We have achieved significant internal savings and focused on working smarter.

"While we haven’t got it all right yet, we will continue to identify when and where trade-offs are necessary, make the tough but necessary decisions, and be proactive about ensuring market rules enable better outcomes for Aotearoa New Zealand.

Option 3 means a small increase to electricity bills - an increase of $0.12 per month for an average household and $0.77 per month for an average business. This would bring the total levy proportion of electricity bills to about $2.06 per month and $12.14 per month respectively.

"We are seeking an increase to maintain third-party service levels and deliver high priority work on competition and security of supply - to achieve better outcomes for consumers. We are acutely aware of the struggles New Zealanders face in the current economic environment. However, a small increase to bills will directly benefit consumers by ensuring the electricity system is affordable, efficient, secure and resilient over the long term.

The consultation will run until 5pm, Friday 13 December. Submissions will inform the Authority’s funding advice to the Minister for Energy.

The Minister makes the final decision which will be announced on Budget Day 2025.

NOTES:

The Crown funds the Electricity Authority through appropriations of public money. The cost of this funding, up to the level of actual expenditure incurred, is recovered through a levy on electricity industry participants.

Levies are charged to industry participants in accordance with the Electricity Industry (Levy of Industry Participants) Regulations 2010.

Each year, in accordance with section 129 of the Electricity Industry Act 2010, the Authority consults on its levy appropriations, seeking to capture views from industry participants and consumers liable to pay the levy.

The Authority prepares an appropriations request for the Minister for Energy, outlining the costs of performing our functions and exercising its powers and duties under the Electricity Industry Act.

In 2024/25, the Authority requested an additional $14.2 million: $7.6 million for service provider costs and $6.6 million for the Authority’s operating costs. It received additional funding of $11.7m for the Electricity Industry Governance and Market Operations appropriation 2024/25, taking the Authority’s total funding to $112.5 million for 2024/25.

This increase enabled an accelerated work programme in response to industry feedback. A number of the deliverables from this work will create an enduring uplift in the Authority’s operating cost base: Consumer Care Obligations (estimated at $600-700k); Intermittent Generation Forecasting service (estimated at $300k); Power Innovation Pathway (estimated at $250-$750k, volume dependent); and Open Data / Retail Data (estimated at $200-250k).

The cost of standing up the Energy Competition Task Force and review into the Northland transmission tower were not built into the Authority’s appropriation budget for the 2024/25 financial year and had to be absorbed.

With no funding increase, the Authority has to absorb the increased costs of third-party service providers and this decreases funding available for the Authority’s operations.

About 70% of the third Electricity Industry Governance and Market Operations appropriation is used to fund the third-party service providers who the Authority contracts to operate the electricity system and markets. Part 3 of the Electricity Participation Code 2010 states the Authority must use external providers for Market Operation Services. These contracts have annual inflation-linked cost increases, which creates a downward pressure on the Authority’s work programme for other regulatory functions.

Last year the Authority achieved significant internal savings and focused on working smarter to increase productivity. The Authority continues to undertake activities to improve its organisational efficiency to drive greater value from the funds it receives.

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