Almost a third of NZ households face energy hardship – reform has to go beyond cheaper off-peak power

The spotlight is again on New Zealand’s energy sector, with a group of industry bodies and independent retailers pushing for a market overhaul, saying the sector was “broken” and “driving up the cost of living”.

The Commerce Commission and the Electricity Authority has already established a joint task force, after prices peaked in 2024, to investigate ways to improve the performance of the electricity market.

The Authority recently announced new rules requiring larger electricity retailers to offer lower off-peak power prices from next year. The government is also expected to make further announcements on the sector.

But the question is whether these changes will do enough to help New Zealanders live affordably in dry and warm homes.

Some 30% of households face energy hardship. This means they struggle to afford or access sufficient energy to meet their daily needs.

Caused by a combination of poor housing quality, high energy costs and the specific needs of vulnerable residents, energy hardship can lead to serious health issues and high hospital admission costs.

We know from our own research over the past 18 years that having power disconnected can negatively affect health and wellbeing.

People have told us that not being able to afford enough power to keep warm made them more likely to get sick and exacerbated existing health conditions. They described mental distress from unaffordable electricity and the threat of disconnection.

Research participants used words such as “stressed”, “anxious” or “depressed”. They also spoke about having to choose between food and power bills.

If power is disconnected, there can be additional costs from losing food in the fridge and freezer, as well as the problem of paying disconnection and reconnection fees when people already can’t afford the bill.

What’s driving up power bills?

In 2024, a “dry year” that increased the value of hydro generation, combined with lower-than-usual wind and declining supply of gas, resulted in wholesale electricity price spikes. But these winter shortages aren’t the only factor pushing up power bills.

Electricity bills reflect several costs along the supply chain from generation to getting the electricity to the sockets in our homes. A new regulatory period for lines charges from April 2025 increased bills by $10 to $25 per month, depending on where you live.

At the same time, low fixed daily charges are being phased out. This means the cost of being connected to the grid is the same no matter how much power is used.

It is the poorest New Zealanders who are being hardest hit. The lowest income households spend a bigger proportion of their income on power compared to higher income households. Having electricity prices increase faster than inflation will put even more families at risk.

The average household electricity bill was up 8.7% in May 2025 compared to June 2024. According to a recent Consumer NZ survey, 20% of respondents said they struggled to pay their power bill in the past year.

Tackling hardship

The new Consumer Care Obligations might help reduce some of the risks. Power companies must now comply with these obligations when working with households struggling to pay their bills, are facing disconnection or have someone in the home who is medically dependent on electricity.

If households feel their power company is not meeting these obligations, they can contact Utilities Disputes, a free independent electricity and gas complaint resolution service, or the Electricity Authority.

But multiple changes are needed to address the different parts of the energy hardship problem. Improving home energy efficiency through schemes like Warmer Kiwi Homes is crucial.

Introducing an Energy Performance Rating for houses would make it easier for home buyers and renters to know how much it will cost to power a home before they move in. This would also help target energy hardship support.

The government can also make electricity more affordable by supporting not-for-profit power companies. Another good move would be to help more households to install rooftop solar by providing access to long-term low-interest finance.

Lower prices during off-peak hours are a good start. But it is clear the sheer size and complexity of the problems mean government action, with community and industry collaboration, needs to go beyond slightly cheaper electricity when there is less demand.

Kimberley O'Sullivan receives funding from a Rutherford Discovery Fellowship administered by the Royal Society Te Aparangi, the Health Research Council, the Ministry of Business, Employment, and Innovation, and Lotteries Health Research.