7. Affordability and Wellbeing
Summary
- Affordable, energy-efficient, low emissions technologies will be critical to improving New Zealand's security of supply and reducing greenhouse gas emissions.
- The government does not set prices for energy. Competitive markets are used to keep prices as competitively low as is sustainable.
- The Electricity (Low Fixed Charge Tariff Option for Domestic Consumers) Regulations 2004 (the LFC Regulations) have made it easier for low-income households to pay for the electricity services they need.
- The Electricity Commission is working to reduce the number of avoidable disconnections.
From Vision to Action
- The draft National Energy Efficiency and Conservation Strategy (NEECS) can assist low-income households through its energy efficiency initiatives by targeting underlying causes of high spending on electricity, such as inadequate house insulation.
- Strengthen capabilities, collaboration and networks (both domestic and international) around key sustainable energy themes such as energy demand management, renewable energy, energy system modelling and whole-of-system infrastructure.
- Consider options to create a dynamic environment for energy innovation in New Zealand such as R&D tax credits.
- The government is also examining a range of options to provide further help for low-income households, including improvements to the current low fixed charge.
7.1 Our Present Direction
Cheap and abundant energy - particularly gas and electricity - has been one of the foundations of the New Zealand economy's competitive advantage. As a result, investment in energy efficiency measures in homes, businesses and industry has been relatively low. However, electricity prices have risen, largely in response to growing demand and the depletion of cheap Maui gas. In the transport sector, oil prices have increased sharply as a consequence of overseas price increases.
The government does not set prices for energy. Competitive markets are used to keep prices as competitively low as is sustainable. Prices provide important signals for producers to ensure necessary investment in new supply. Consumers also should, and do, react to prices when making choices about what goods and services to purchase and whether to economise.
People need the services derived from energy - heat, light and access to transport at the most basic level. The adoption of measures and practices that increase energy efficiency and sustainable delivery of energy need not increase consumers' bills. In fact, using energy more efficiently can save households money and contribute to better health and wellbeing. However, it is recognised that some energy efficiency actions can entail initial up-front costs, even if these are soon repaid through savings in energy costs.
7.2 Options and Actions
Reliable access to energy resources is essential to a vibrant economy. The government has a programme of fostering greater energy efficiency and maintaining security of supply at fair and efficient prices.
Low-income households are more vulnerable to energy price increases in homes and for transport. Energy costs may take up a relatively high proportion of their income, leaving less money for other essentials.
7.2.1 Household Heating, Lighting and Cooking
7.2.1.1 Electricity
Research42 has established that New Zealand houses tend to be cold and damp, and to have lower indoor temperatures than is recommended by the World Health Organisation. This is particularly true for low-income households in colder parts of the South Island.
Several central and local government initiatives are under way to make it easier for low-income households to pay for the electricity services they need.
The Electricity Commission is working to reduce the number of avoidable disconnections by improving communication between retailers and social agencies, and by making sure low-income consumers are able to access any information or tools available - such as advice on energy efficiency practices and technologies - to help them meet their electricity costs.
The draft NEECS addresses many of the energy efficiency initiatives to help households by targeting underlying causes of high spending on electricity, such as inadequate house insulation.
The LFC Regulations currently provide benefits for households that use less than 8,000 GWh per year in electricity. The current LFC regime, though, does not take into account regional differences in energy use associated with winter heating demand and is therefore of less benefit than intended for households in colder parts of the country.
Action: The government is considering changes to the LFC Regulations to take account of regional climate variations that impact on heating costs, and hence better target the benefits of the low fixed charges.43
7.2.1.2 Gas
The Gas Industry Company (GIC), the new co-regulatory body of New Zealand's gas sector in New Zealand, is required to work to keep gas prices down and to minimise barriers to competition for the long-term benefit of gas consumers.
The GIC has also worked on developing an effective switching arrangement for gas consumers, which is expected to improve competition in the gas retail market and to reduce associated costs for retailers and consumers. In addition, the GIC hosts annual consumer conferences to keep in touch with consumer concerns and to update consumers on current retail-related gas issues.
7.2.2 Mobility
High personal transport costs make it harder for people on low incomes to maintain involvement in community, economic and social activities. Rising prices can have a disproportionate impact on particular groups of people, such as those living in rural areas or in outer suburbs of large cities.
Chapter 2 of this action plan sets out the measures to be advanced to improve the fuel efficiency of the vehicles on our roads. This will have the effect of lowering fuel costs at the pump.
The government has increased central government funding for public transport services by nine-fold over the last seven years.
Action: Government to consider taking a stronger role in supporting the development of more sustainable urban form and transport infrastructure changes.
These issues are examined in government sustainable development and transport policies, local government planning, and the draft NEECS. Policies such as more public transport would increase financial costs to central government, but might be justified in broader cost-benefit terms.
7.2.3 Making Informed Energy Choices
As well as helping low-income households, the government wants to ensure all consumers have access to high quality comparable information on energy options when choosing how to obtain the energy services they want in their homes (i.e. heating and lighting) and transport (i.e. the vehicles they travel in). Improving the provision of consumer information is a core focus of the draft NEECS. Further consideration could be given to providing a one-stop service, such as a website, with easy to use information about all energy forms and related choices, including links to other services or sites offering more specific information.
Action: Government to consider provision of a one-stop information service for consumers on energy options and choices.
7.3 Have Your Say
This chapter outlines the issues around affordability and wellbeing. The government welcomes feedback on this issue through its consultation on the replacement National Energy Efficiency and Conservation Strategy as well as comments on questions raised in this discussion, such as:
Access to services:
Are additional measures required to reduce unavoidable disconnection?
Are regional heating costs an important factor in differing access to energy services?
On underlying causes:
Do you agree that further initiatives are required to help low-income households by targeting underlying causes of high spending on electricity, such as inadequate house insulation? If so, what should these be?
On mobility:
What kind of measures are required to achieve greater mobility through improved urban form and transport infrastructure?
Is there any further work needed in this area?
On the provision of information:
Do consumers have adequate access to comparable information about energy options?
If not, what further measures are required?
Back to Top