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Electricity reforms will 'take pressure off monthly power bill'?

Most people who use a lot of electricity, don't shop around for power, or who sometimes pay their bills late, can expect lower power prices as a result of a sweeping overhaul of the electricity market.

But others who rely on gas for most of their power needs, or who have invested in their own home-solar systems, could end up paying hundreds of dollars a year more as plans that reward low electricity usage are phased out.

Energy Minister Megan Woods announced the Government was backing 20 changes to the electricity market, that together amount to the biggest shake-up for the industry in 20 years.

The reforms, which include new regulations designed to bolster competition, stem from the Electricity Price Review that the Government ordered last year.

One of the most widely anticipated new rules will temporarily ban electricity companies from offering discounts to win back customers who have given them notice that they intend to switch suppliers.

The move is designed to address concerns that Kiwis who have never shopped around for power are paying a $400 million "loyalty tax" because power companies can wait for customers to threaten to jump ship before offering them a competitive price.

Electricity companies will be also encouraged under threat of regulation to stop offering special pricing to customers who pay their bills on time, in the expectation that should lower power bills by $45 million overall as bills average out at a lower rate.

Woods said the "prompt payment discounts" really amounted to "hidden late payment penalties" for those who didn't get them.

In what may prove one of the most controversial changes directly affecting consumers, the Government plans to phase out the requirement for electricity companies to sell plans that offer a low fixed daily charge and a higher variable charge for power used.

Industry sources said about 60 per cent of consumers were on such low-fixed charge tariffs, but the Government has ordered officials to develop proposals to phase them out.

Households that consume less than about 8000 kilowatt-hours of electricity a year can expect to lose out to varying degrees from that particular change, depending on how little power they consume.

In its final report, the Electricity Price Review acknowledged criticism the could discourage people from installing solar systems or insulating or double-glazing their homes.

But it said the low-fixed charge tariffs "unintentionally shift costs to households with low incomes and high electricity consumption".

Under-the-bonnet changes to the way the electricity market operates could have big implications for the balance of competition in the industry.

Auckland University professor Stephen Poletti argued last year that generators were earning nearly $800m a year in excess profits, potentially dwarfing the impact of "win back" offers in the retail market.

Woods said new rules would force large power companies to sell electricity to independent retailers through the wholesale market "at affordable rates".

It is understood the Government is backing a recommendation that would force Genesis, Meridian and Mercury to buy and sell electricity in the wholesale market at an agreed spread.

That "market-marketing" requirement emerged as a main battleground issue when the Electricity Price Review published an earlier paper in February.

"Right now, our electricity system is dominated by a small number of big 'gentailers' – companies that generate and sell electricity," Woods said.

"It can be too hard for small and independent retailers to compete and survive, meaning fewer choices for consumers and less innovation in the market."

As expected, the Electricity Price Review recommended against going further by forcibly structurally separating electricity generators from retailers.

Woods said the reforms would "level the playing field" for consumers, and the Government would check "in our second term" that the expected savings were passed on to them.

It would pass "backstop legislation" to allow it to introduce regulations directly where required, she said.

NZ First's Under Secretary for Regional Economic Development Fletcher Tabuteau backed the review saying the future energy regulatory structure would provide long term stability "while ensuring the needs of every New Zealander are met."

The Government will press ahead with a variety of measure to tackle "energy hardship" and improve the availability of information to consumers about switching retailers.

It has also taken a step further than the recommendations set out in the Electricity Price Review by indicating it will give the Electricity Authority a steer on how it should respond to climate change.

"A Government Policy Statement will be issued to the Electricity Authority and the Commerce Commission to have regard to the Government's objectives for more energy sector innovation," a statement released by Woods said.

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