Household consumer concerns confirmed

International review of NZ energy policies confirms household consumer concerns

The International Energy Agency’s 2017 review of New Zealand’s energy policies confirms that household electricity prices have risen much faster than in other IEA countries. By 2014, prices were well above IEA average, while industrial prices are consistently below the IEA average. Effectively, household consumers are subsidising industry.

The review acknowledges that consumer engagement with energy regulation “is critical to building transparent and competitive retail markets”. It notes the representation of household consumers on the Electricity Authority’s Retail Advisory Group - but is apparently unaware that this group has been disbanded, and replaced by the Innovation and Participation Advisory Group (which has no direct consumer representation).

IEA member governments, including Australia, have expanded the consumer protection work of their regulatory authorities. The IEA notes that the Authority’s many new electricity rules, with a focus on wholesale electricity markets, will have a major impact on consumers, meaning that this group should have an increased voice. They cite the consumer participation models of Australia, the EU and the UK as examples of how to promote “competitive, energy-efficient and fair markets for consumers.”

The reviewers state: "Going forward, the government should strengthen consumer engagement with an independent forum and a dedicated consumer authority”. In fact, with the recent loss of the Retail Advisory Group the representation of New Zealand’s small consumers is being weakened, not strengthened.

The Review notes the continuing market dominance of the five major “gentailers” (retailer-generators), and raises concerns about the impact of this on “competitive price formation and behavior”, and on security of supply. The big five have locked up about 90% of the financial (hedge) market, allowing very large wholesale price spikes to occur.

The review barely covers the parlous state of New Zealand’s household energy efficiency, but does note that only a third of the houses that would benefit from additional insulation have been insulated to date. Also, our building code is below the standards required in most other IEA countries with comparable climates.

Space heating and water heating represent over half the total energy consumption in the residential sector. Wood heating in houses reduces fossil fuel generation and peak loads, yet is falling partly because some local authorities ban or seriously constrain wood combustion. Yet wood heating is growing in Europe, the US and recently Japan, without compromising air quality. New Zealand could benefit from the experiences, standards and testing methods used in these countries, and the coming review of the Environmental Air Standard will provide an important opportunity to realise such benefit.

The Review is available at:

https://www.iea.org/publications/freepublications/publication/EnergyPoliciesofIEACountriesNewZealand2017.pdf

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