One of New Zealand's major power companies has replaced its so-called prompt payment discounts, saying they simply penalise people who struggle to pay their bills.

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This move from Meridian Energy comes just days after a Government investigation into electricity prices, which questioned the fairness of the practice.

Budgeting advisers deal with the fallout from steep energy prices on a daily basis.

"We see many people who are constantly being disconnected who find power to be a very significant part of their spending," says Tim Bennett, chief executive of National Building Financial Capability Charity Trust.

This week, a government investigation found those who can't afford to pay their bills on time are being charged up to 26 per cent more for their power.

That's because power companies offer so-called "prompt payment discounts," which look like savings but are really just penalties for those who pay late.

Meridian Energy has now officially pulled the plug on the practice.

"We're getting rid of the prompt payment discount because it's fundamentally unfair, especially to customers who struggle to pay their bills," says chief executive Neal Barclay.

The move has been welcomed by Energy Minister Megan Woods.

"I'm absolutely thrilled by the leadership that Meridian's showing today, that they've listened to what I think are really compelling arguments - that essentially we had a penalty for those who struggle to pay their power bills the most."

"It's great, I think really they were misleading and they were late payment penalty fees most impacting low income Kiwis and I urge other retailers to do it as well," says Green MP Gareth Hughes.

"One company at least has seen sense and is going to treat people fairly regardless of how much income they've got," added Mr Bennett.

The Meridian logo Source: 1 NEWS

Other major power companies were contacted by 1 NEWS to see if they'd follow suit.

While Genesis, Contact and Mercury have no plans to ditch their prompt payment discounts, Trustpower is considering it.

Smaller retailers like Pulse Energy, who have already ditched the practice, call the payments deceptive and want them gone for good.

Meridian is set to replace the discount scheme with credits of equal value for all customers and says no one will be worse off.

"The total cost to us is $5 million so that's money back into those customers' pockets," says Mr Barclay.