Electricity prices have been a major burden for some of New Zealand's less well-off.

A legacy of uninsulated and damp houses has meant people either turning on heaters to keep warm or, sadly, going without heating in an effort to keep feeding their families. Wrapping up in layers of clothing to stave off the chills is a common practice, even though it is not always effective.

It is still somewhat surprising, however, that the Electricity Price Review found New Zealand's residential electricity prices are nearly 80% higher than they were in 1990, after adjusting for inflation. Since 2000, New Zealand's residential prices have risen faster than most OECD countries.

About 103,000 households spent more than 10% of their income on domestic energy in 2015-16 - a situation now called energy hardship.

If housing costs are excluded, the picture becomes worse. The figure jumps to 175,000 households experiencing energy hardship. Worryingly, children are over-represented in households experiencing energy hardships.

New Zealanders will be aware many of the larger providers of electricity offer generous prompt payment discounts which can be as high as 26% of the bill. Budgeting and advocacy groups say those discounts are really late-payment penalties.

Meridian Energy was the first to take the price review's recommendations to heart by doing away with its prompt-payment discounts and giving everyone the discount rate. Meridian's actions means 18,000 of its customers will no longer be penalised for paying their bills late. Those who have been missing out on the discount can expect to save $20 to $30 off every bill.

Meridian's actions are to be applauded, but there is still a worrying aspect to its plan. Paying bills on time needs rewarding, not penalising.

New Zealand has developed a rather bad habit of paying bills late, particularly large corporates which delay payment to generate extra revenue while their suppliers - often small businesses - suffer.

Removal of the prompt-payment discount will cost Meridian $5 million a year but, as it is still majority owned by the Government, it is unlikely to face a shareholder revolt.

There is no explanation of what will happen when some of those receiving up to $30 off a bill continue to pay late, or not at all.

Consumer NZ says Meridian's move will give the rest of the market a wake-up call. Just what sort of reaction other companies have remains to be seen but it is likely others will follow the lead set by Meridian - particularly Genesis and Mercury, the others majority owned by the Crown.

The price review found there is a two-tier market developing in New Zealand between those who shop around and enjoy the benefits of competition, and those who do not and pay higher prices.

The average gap between the cheapest retailer's price and the incumbent retailer's price has increased by 50% since 2002, after accounting for inflation.

Some households struggle to understand the various plans and how to choose the one best for them. Better education will help.

There is still a lot of churn each month among electricity retailers as customers move from one supplier to another. In August, all of the big retailers, except Meridian, lost customer connections. Contact Energy reported the largest loss of more than 3700 customers, although 2000 of those were due to the Auckland Council moving to Trustpower.

The biggest gainers are the Tier Two retailers - Electric Kiwi, Pulse Utilities, Energy Club, Switch Utilities, Ecotricity, Nova and Flick Electric.

Consumers have a short wishlist. They want power that is reliable and affordable. New Zealand does have reliable power, mostly. But it is falling down on the other.

A second report is due in May with some solutions. The Government says it is committed to affordable power for Kiwis and that report will play an important part in meeting that goal.



