This is not the usual sort of thing I would write about but I feel compelled to nonetheless.
It's probably no secret amongst citizens of western countries that since the Covid-19 pandemic, costs of living have been rampantly increasing. I am no economist and I'm not here to analyze who is to blame, but according to the internet it is either the Boomers, the ultra rich or the Government.
And so, after years of inflation I am relatively numb to everything seeming like it costs more than the last time, however long that time frame may have been. There was a point where the supermarket honestly felt like it was increasing prices weekly and it was depressing.
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| Hydropower in New Zealand |
Power is getting too expensive
Yet right under our very noses, the power companies, enabled by the Government have decided to inadvertently hurt both the environment and our wallets over the basic necessity that is power.
This all came around from coming back from holiday and seeing my power bills. I was away the second half of March and the first half of April. To my surprise, despite negligible usage, my bill was not significantly cheaper. At all. So I started looking into it and was shocked by what I found.
I had grown accustomed to my power bill going up steadily over the last few years, despite there being only two of us and being quite power conscious both in usage and with the appliances we buy. 5-15 years ago, my power bills were consistently around $100 per month and they seemed to stay like that for the longest time before steadily increasing in the last 5-6 years. Now they are often close to double what they were. That is a hell of a lot of inflation.
Fixed Line Charges
Let's ignore inflation though and focus on the main cause: Fixed line charges.
Here is the headline: If I turned off my Gas and Electricity for an entire month, so 0 usage, I would still pay $91 per month. That is insane. If I double my usage, my bill increases by only around 30%.
Thanks to Fixed line charges.
A fixed line charge is an amount you get charged per day by your power company to have a connection. We used to have regulations that capped the fixed charge at a low maximum amount, but it is being phased out over a 5 year period starting back in 2022.
- Prior to April 2022 - the maximum daily charge was $0.30, so $9 per month
- As of April 2025 - the maximum daily charge is $1.50, so $45 per month
The limit has been increased by $0.30 every year, and by April 2027 there will no limit whatsoever, and power companies can charge whatever they like just for you to have a connection to the grid. If you have gas as well, then you pay a fixed line charge for that too!
The official government page on the phase out of the Fixed line charges is here.
The whole thing seems to have backfired on the government as despite the correct intentions they cannot control how the power companies would structure their pricing, and as expected the power companies made a lot of money, for instance the big four power companies (Mercury, Contact, Meridian, Genesis) DOUBLED their NET profits last year, from $500-something million to $1.1 billion.
Bear in mind that New Zealand's energy is 88% sourced from renewal sources which is essentially free, with costs coming from maintenance and improvements of the infrastructure. When I was young I was naive enough to believe that the push for renewable energy would mean free (or just about) power for all. Instead we are paying more than ever. The renewable energy in New Zealand is not ideal either because 57% of our energy comes from Hydro, and Hydro is very susceptible to the weather. When it rains too much, water goes to waste. When it doesn't rain enough there isn't enough water to refill dams and we end up importing and burning coal. Should have just built a nuclear plant or two.
Bill examples
Below are some examples of some bills where you can see the impact daily charges have as they have increased over the last few years.
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| Example power bill from 2022/23, When fixed line charges were $0.60 per day. |
Lets break down the above bill, this was early on in raising the maximum fixed line charge. I'm going to ignore the gas part of it because the majority of households do not have gas, and the regulatory changes to fixed line charges are related to electricity.
- Total usage cost: $68.78 (78% of bill)
- Total fixed line cost: $18.60 (22% of bill)
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| Example bill from Feb 2025, before the next $0.30 fixed daily charge increase in April |
Above is a more recent bill. I did not use my most recent bill as I was away half the month, but worth noting that in April, the Fixed daily charge increased to $1.50.
Lets break down this bill:
- Total usage cost: $59.27 (63% of bill)
- Total fixed line cost: $33.60 (37% of bill)
- Daily Fixed line Charge - $0.60
- Daily usage cost per KWH - $2.21
- Daily Fixed line Charge - $1.20
- Daily usage cost per KWH - $2.11
Is gas a poor option?
Yes and No. Cooking with gas is just better. Showering with gas continuous hot water is even better. I love that I never run out of hot water. But, when you look at the bill examples, you can see how much those daily charges for both gas and electricity add up before you even use any energy ($3.30 per day currently)
Gas is a lot cheaper per KWH than electricity, 3 times cheaper in fact. I know its strictly not apples for apples as the gas KWH usage would not necessarily be the same as electrical appliances doing the same job, but let's imagine they do. Here are how the bills compare if the Gas usage was instead electricity, and compared to the true bill cost including gas, to see if electricity only is cheaper:
2023
- Total usage cost: $129.94 (87% of bill)
- Total fixed line cost: $18.60 (13% of bill)
- Savings if electricity only: $2.97 more expensive
2025
- Total usage cost: $100.66 (63% of bill)
- Total fixed line cost: $33.60 (37% of bill)
- Savings if electricity only: $26.23 cheaper
As we can see, gas is no longer a good option because the fixed line charges of gas and electricity are now near parity and make up a significant part of the bill, and you are now penalized less for using more electricity as a result.
If we were electricity only I may not have felt compelled to write this as the current differences to bills will go under the radar for many, but with gas too, ouch. So unless you want or need gas, electricity only looks to be the way forward in the current landscape.
The impact of the changes to Fixed line charges
Low fixed charges meant if you were conservative with your energy usage, you could save a lot of money as your bill is largely made up of your usage by KWH. On the flip side, a household that uses a lot of power would hurt quite substantially, particularly low income ones and that was one of the drivers behind removing the cap.
So it is seen as fairer. People who use less power are now subsidizing those who use more. I personally don't think that is fair at all. Where is my incentive to use less power if it does not cost much more at all to use a whole lot more? I could leave heaters on, lights on, use the drier more for very little extra cost.
And that moves onto the environmental aspect. There is no reason to use less power. There is very little reason to look into alternatives such as solar, because even with our grid comprising of renewable sources, there is still a lot going on there that impacts the environment.
Let's have a simple look at the different solar options and if they make sense:
- Basic solar system - Not connected to grid, will only generate power during sun hours. With a much smaller portion of your bill now being usage it makes no sense financially as you'll still pay the hefty fixed line charges.
- Solar system connected to grid - Like the above but excess power generated can be sold back to the grid. The power companies in New Zealand pay you very little, Contact for instance will pay you just 8c per KWH, whilst charging you THREE TIMES that when you are buying power off them. You are still paying fixed line charges too. Makes very little sense financially.
- Solar system off grid with battery setup - The only way you can get free of the fixed line charges. Quite an initial investment and anecdotally I've read that a lot of the stuff needs to be replaced in a short enough time frame for you to question the investment (batteries and inverters 10-15 years and 20-30 years for the panels) Only really an option if you don't have access to mains power or reliable mains power.
Where to now?
I would not be at all surprised if the power companies really hike the Daily fixed charges once there are no restrictions. They do not want anyone to be self sufficient or even supplement with solar as it will hurt their profits, and so every time the charges go up, Solar becomes less viable.
Perhaps we will see energy plans changing drastically, maybe to fixed price plans much like you pay for internet. Afterall, everything is going subscription based nowadays ('you will own nothing and be happy') as companies want to have that guaranteed income.
The one thing that is certain, Power Companies will continue to post record profits every year.
