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Should You Be a Low User or Standard User? Navigating NZ's Electricity Plans

Navigating your way through electricity plans can feel like a maze. With the phasing out of the Low Fixed Charge Tariff regulations, it's crucial now more than ever to understand whether you should be on a low-use or standard-use electricity plan. This decision can significantly impact your annual power bills, making it an essential consideration for Kiwi households.

Understanding Low-use and Standard-use Plans

Low-use plans offer a discounted fixed charge, beneficial for households consuming less than 8,000kWh per year (9,000kWh for the lower South Island). These plans are ideal for smaller or energy-efficient homes, those using alternative energy sources like solar power, or households with a deliberate choice to minimise electricity use.

On the flip side, standard-use plans cater to homes with higher electricity consumption. These might include larger families, homes with poor insulation, or those with a high number of electronic appliances. Though the fixed charge on these plans is higher, the cost per unit of electricity used is lower compared to low-use plans.

The Low Fixed Charge Tariff Regulations: A Brief Overview

Introduced in 2004, these regulations aimed to support low-use, low-income households by capping the daily fixed charge. However, they've been critiqued for being poorly targeted and inadvertently causing some households to fall into greater energy hardship. The independent Electricity Price Review suggested phasing out these regulations over five years, a process that began in 2021.

The Phase-Out: What It Means for You

During the phase-out, the maximum daily fixed charge is gradually increasing, meaning those on low-use plans might see a rise in this part of their bill. However, electricity retailers are also being encouraged to introduce more flexible pricing plans, like Time of Use pricing, which could benefit all households by offering cheaper rates during off-peak periods.

Making the Right Choice

Deciding between a low-use or standard-use plan hinges on your household's electricity consumption. If you're under the threshold (8,000 or 9,000kWh annually), a low-use plan could offer savings despite the phase-out. However, larger or less energy-efficient households might find better value in a standard-use plan, especially considering the potential for innovative pricing plans in the future.

The Impact on Households

About 60% of NZ households are expected to see lower power bills during the phase-out, mainly those on standard-use plans or low-use plans with consumption above 6,500kWh annually. However, the full impact will depend on how electricity retailers adjust their pricing structures over the phase-out period.

Support and Long-Term Benefits

The government and industry are working to mitigate the phase-out's impact on low-use households, including a power credit scheme to help those struggling with higher bills. In the long run, the removal of the Low Fixed Charge Tariff regulations is expected to lead to a more equitable, sustainable electricity system, encouraging efficient use and supporting the growth of renewable energy.

In conclusion, whether a low-use or standard-use plan is right for you depends on your household's specific circumstances. With the ongoing changes in New Zealand's electricity pricing landscape, staying informed and reviewing your plan annually is more important than ever. This proactive approach will help ensure you're not only choosing the most cost-effective option but also contributing to a more sustainable and equitable energy future for Aotearoa.

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