Our wallets took another hit this month as power prices increased by roughly 5%, that, an added painful addition to the 12% increase we experienced in 2025. While most households faced increases between 4% and 12%, we should also spare a thought for Northland households, who are grappling with a 21% price hike while the rest of the country looks for someone to blame!
Naturally, consumers are asking; Why are we being subjected to these relentless price hikes, and who is responsible? Is there a single entity at fault, or is this a systemic failure?
New Zealand’s electricity pricing is currently undergoing a massive overhaul, ostensibly to fund the “modernisation” of the national grid. It might actually be more accurate to call it a desperate scramble to address years of deferred maintenance and overdue upgrades!
The government is phasing out Low User Charges by 2027, apparently because they unfairly penalised large, low-income families while subsidising wealthy, energy-efficient households. Simultaneously, retailers are introducing Time-of-Use pricing to manage peak demand and support the shift toward electric vehicles.
Electricity is not a luxury; it is an absolute essential. When power prices increase by 17% over a 12 month period, the whole country suffers, directly or indirectly. Our homes, industry, transport and even future productivity.
When power prices rise, the whole economy is affected!
Surely a government that is serious about the cost of living and creating a competitive productivity environment, would ensure renewable, where possible, clean power would result in lower living costs and drive a competitive strength?
With New Zealand having a natural energy advantage by generating around 82% of its electricity by renewables. Why don’t consumers see lower or more stable power prices as a result?
So, in New Zealand, if it is not our lack of resources, is it government strategy that is dooming us to failure?
Should we be calling to account the National and New Zealand First coalition government of 1996-1999 and Minister of Energy Max Bradford for our excessive energy costs?
Remember back in 1998 when, as Minister of Energy, Max Bradford promoted his “Brighter Future” energy reforms that saw local power boards dismantled. Power boards who operated as, non-profit, community-owned monopolies, owned the local lines and sold the power directly to you. Most importantly, their primary goal was not returning a profit and dividends to shareholders, but to provide a break-even service.
Well Max’s reforms mandated these boards to choose between being a lines company, owning the wires, or a retailer, selling the power. Most local boards were essentially “broken up,” and their retail customers were sold to large national companies.
Max has been pilloried for many years for his (in)famous quote – “Lower prices and a real choice of who supplies your electricity – that’s what the Coalition Government’s electricity reforms are all about.”
Amazingly, in 2013, Max was voted New Zealand’s best energy minister in recent years???
If it is not the Bradford Reforms of ‘98, should we be then looking at the formation of the “Gentailers” and their effect on prices?
Gentailers were born out of the partial privatisation of state-owned electricity companies conducted under John Key’s governments “Mixed Ownership Model” over 2013 – 2014. This privatisation created a major shift in not only power pricing but significantly and predictably, transferred gentailers focus away from the customer toward shareholder returns.
Gentailers, are companies like Meridian, Genesis, and Mercury and are entities that both make and sell power. Conceivably, more than the loss of the old power boards, it is the rise of the gentailers, that we should point to when rationalising increasing power prices. Independent retailers argue that because of these companies the market is “tilted” in their favour, making it harder for cheaper, smaller competitors to survive when wholesale prices spike.
Despite a 2013 referendum showing significant public opposition to the concept, the privatization proceeded.
For the benefit of merchant bankers?
The “why we should do this” “for mum and pop investors” spin and sales pitch from the Key government originally claimed revenue from the sales would be as high as $10 billion. The final figure fell manifestly short of where the government’s spin predicted.
The official target was subsequently reduced to $5 billion to $7 billion, the sales actually only raised about $4.7 billion in cash for the Crown!
Sale costs amounted to around $120 million.
And how much ended up in merchant bankers accounts?
Since 2014 over $13 billion in dividends have been paid to the government.
But now we begin to see where the consumers has been severely betrayed and sold out.
Despite earning over $13 billion in dividends the government and gentailers have spent less than $6 billion on infrastructure upgrades!
Clearly gentailers prioritised profit and dividends over security of supply! But they have also created a supply constriction that now inflates wholesale prices!
Intentionally or unintentionally?
What we are now being told is that urgent infrastructure upgrades are needed to replace aging 1960s-era assets. Assets have reached the end of their 50 – 80 year lifespans. For years, replacement was often delayed to keep costs low for consumers. For years, many networks kept prices low by delaying maintenance on assets built in the 1960s. Now that these assets are failing and need replacement at the same time, the bill for that deferred capital expenditure is arriving all at once.
Not only has this “just-in-time” approach has resulted in a perfect storm where multiple, very expensive, major investments are now required simultaneously but consumers are being forced to fund the essential upgrades!
Modernising these decades-old systems is a massive financial undertaking that directly impacts consumer bills.
But should customers/consumers be expected to fund capital expenditure by way of increased costs?
Should investors/shareholders take lower dividends to fund the upgrades?
Would a shared cost model would be more acceptable and reasonable?
Or is the real reason because we have a situation where “natural monopolies” hold sway?
A natural monopoly occurs when it is much more efficient for one single company to supply a product or service than for multiple competing companies to do so. The concept of a natural monopoly is the foundation of energy regulation. Put simply, it means that it is far more efficient and cheaper to have one company own all the power lines in a neighbourhood than to have multiple companies building competing sets of wires down the same street.
In a conventional, competitive market, a business might use capital expenditure from its own profits or possibly debt to fund growth, growth that the business hopes to win more customers with. Because you cannot choose which set of power lines connects to your house, our electricity networks operate under a different, user-pays, government regulated model. Electricity networks = natural monopolies!
This is not unusual and happens in industries with massive infrastructure costs.
Take our water and sewage infrastructure; You only want one set of pipes connected to your toilet.
And railways; Building two sets of tracks between the same two cities is never going to be profitable!
Obviously, for our electricity grids; It would be chaotic to have five different sets of power poles on your street!
After roughly a decade of receiving billions in dividends, the government is now actively injecting capital back into these companies to accelerate energy security projects.
The government finally ended its “collect-the-dividend” inertia in February, committing $198 million to Genesis Energy’s capital raise. But don’t celebrate just yet; The old habit of passivity hasn’t been fully scrapped. While this investment targets renewable growth and grid resilience to prevent “dry-year” blackouts, it focuses on long-term infrastructure rather than lowering your household power bill today.
“Renewable generation and building capacity, such as batteries and flexible backup power, to reduce dry-year risks.” Yeah right! That is unlikely to lower your monthly power bill anytime soon!
Yes absolutely, there has been a systemic failure in our electricity infrastructure. However, the fingerprints of the National Party, theself anointed, economic geniuses are all over these so called reforms. From Bradfords 1998 ‘Brighter Future’ deregulation to the 2014 John Key gentailer reforms, they have consistently engineered a market that prioritises the holy grail of corporate dividends while leaving New Zealand consumers out in the cold!
Oh, and the “Failures becoming Outages” thing.
That shift was driven by a need for softer, more prudent and less blame loaded language in the commercialised, profit driven energy market. Corporate communication, written by spin doctors employing sophisticated narrative management strategies, knowing full well the power of words, established “power outage” as the industry-standard terminology across all New Zealand media channels.
Pee Kay writes he is from a generation where common sense, standards, integrity and honesty are fundamental attributes. This article was first published HERE
The government is phasing out Low User Charges by 2027, apparently because they unfairly penalised large, low-income families while subsidising wealthy, energy-efficient households. Simultaneously, retailers are introducing Time-of-Use pricing to manage peak demand and support the shift toward electric vehicles.
Electricity is not a luxury; it is an absolute essential. When power prices increase by 17% over a 12 month period, the whole country suffers, directly or indirectly. Our homes, industry, transport and even future productivity.
When power prices rise, the whole economy is affected!
Surely a government that is serious about the cost of living and creating a competitive productivity environment, would ensure renewable, where possible, clean power would result in lower living costs and drive a competitive strength?
With New Zealand having a natural energy advantage by generating around 82% of its electricity by renewables. Why don’t consumers see lower or more stable power prices as a result?
So, in New Zealand, if it is not our lack of resources, is it government strategy that is dooming us to failure?
Should we be calling to account the National and New Zealand First coalition government of 1996-1999 and Minister of Energy Max Bradford for our excessive energy costs?
Remember back in 1998 when, as Minister of Energy, Max Bradford promoted his “Brighter Future” energy reforms that saw local power boards dismantled. Power boards who operated as, non-profit, community-owned monopolies, owned the local lines and sold the power directly to you. Most importantly, their primary goal was not returning a profit and dividends to shareholders, but to provide a break-even service.
Well Max’s reforms mandated these boards to choose between being a lines company, owning the wires, or a retailer, selling the power. Most local boards were essentially “broken up,” and their retail customers were sold to large national companies.
Max has been pilloried for many years for his (in)famous quote – “Lower prices and a real choice of who supplies your electricity – that’s what the Coalition Government’s electricity reforms are all about.”
Amazingly, in 2013, Max was voted New Zealand’s best energy minister in recent years???
If it is not the Bradford Reforms of ‘98, should we be then looking at the formation of the “Gentailers” and their effect on prices?
Gentailers were born out of the partial privatisation of state-owned electricity companies conducted under John Key’s governments “Mixed Ownership Model” over 2013 – 2014. This privatisation created a major shift in not only power pricing but significantly and predictably, transferred gentailers focus away from the customer toward shareholder returns.
Gentailers, are companies like Meridian, Genesis, and Mercury and are entities that both make and sell power. Conceivably, more than the loss of the old power boards, it is the rise of the gentailers, that we should point to when rationalising increasing power prices. Independent retailers argue that because of these companies the market is “tilted” in their favour, making it harder for cheaper, smaller competitors to survive when wholesale prices spike.
Despite a 2013 referendum showing significant public opposition to the concept, the privatization proceeded.
For the benefit of merchant bankers?
The “why we should do this” “for mum and pop investors” spin and sales pitch from the Key government originally claimed revenue from the sales would be as high as $10 billion. The final figure fell manifestly short of where the government’s spin predicted.
The official target was subsequently reduced to $5 billion to $7 billion, the sales actually only raised about $4.7 billion in cash for the Crown!
Sale costs amounted to around $120 million.
And how much ended up in merchant bankers accounts?
Since 2014 over $13 billion in dividends have been paid to the government.
But now we begin to see where the consumers has been severely betrayed and sold out.
Despite earning over $13 billion in dividends the government and gentailers have spent less than $6 billion on infrastructure upgrades!
Clearly gentailers prioritised profit and dividends over security of supply! But they have also created a supply constriction that now inflates wholesale prices!
Intentionally or unintentionally?
What we are now being told is that urgent infrastructure upgrades are needed to replace aging 1960s-era assets. Assets have reached the end of their 50 – 80 year lifespans. For years, replacement was often delayed to keep costs low for consumers. For years, many networks kept prices low by delaying maintenance on assets built in the 1960s. Now that these assets are failing and need replacement at the same time, the bill for that deferred capital expenditure is arriving all at once.
Not only has this “just-in-time” approach has resulted in a perfect storm where multiple, very expensive, major investments are now required simultaneously but consumers are being forced to fund the essential upgrades!
Modernising these decades-old systems is a massive financial undertaking that directly impacts consumer bills.
But should customers/consumers be expected to fund capital expenditure by way of increased costs?
Should investors/shareholders take lower dividends to fund the upgrades?
Would a shared cost model would be more acceptable and reasonable?
Or is the real reason because we have a situation where “natural monopolies” hold sway?
A natural monopoly occurs when it is much more efficient for one single company to supply a product or service than for multiple competing companies to do so. The concept of a natural monopoly is the foundation of energy regulation. Put simply, it means that it is far more efficient and cheaper to have one company own all the power lines in a neighbourhood than to have multiple companies building competing sets of wires down the same street.
In a conventional, competitive market, a business might use capital expenditure from its own profits or possibly debt to fund growth, growth that the business hopes to win more customers with. Because you cannot choose which set of power lines connects to your house, our electricity networks operate under a different, user-pays, government regulated model. Electricity networks = natural monopolies!
This is not unusual and happens in industries with massive infrastructure costs.
Take our water and sewage infrastructure; You only want one set of pipes connected to your toilet.
And railways; Building two sets of tracks between the same two cities is never going to be profitable!
Obviously, for our electricity grids; It would be chaotic to have five different sets of power poles on your street!
After roughly a decade of receiving billions in dividends, the government is now actively injecting capital back into these companies to accelerate energy security projects.
The government finally ended its “collect-the-dividend” inertia in February, committing $198 million to Genesis Energy’s capital raise. But don’t celebrate just yet; The old habit of passivity hasn’t been fully scrapped. While this investment targets renewable growth and grid resilience to prevent “dry-year” blackouts, it focuses on long-term infrastructure rather than lowering your household power bill today.
“Renewable generation and building capacity, such as batteries and flexible backup power, to reduce dry-year risks.” Yeah right! That is unlikely to lower your monthly power bill anytime soon!
Yes absolutely, there has been a systemic failure in our electricity infrastructure. However, the fingerprints of the National Party, theself anointed, economic geniuses are all over these so called reforms. From Bradfords 1998 ‘Brighter Future’ deregulation to the 2014 John Key gentailer reforms, they have consistently engineered a market that prioritises the holy grail of corporate dividends while leaving New Zealand consumers out in the cold!
Oh, and the “Failures becoming Outages” thing.
That shift was driven by a need for softer, more prudent and less blame loaded language in the commercialised, profit driven energy market. Corporate communication, written by spin doctors employing sophisticated narrative management strategies, knowing full well the power of words, established “power outage” as the industry-standard terminology across all New Zealand media channels.
Pee Kay writes he is from a generation where common sense, standards, integrity and honesty are fundamental attributes. This article was first published HERE
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