Low fixed charge (LFC) regulations are hurting many poorer households and should be ditched, according to Meridian Energy.
The regulations work by capping the fixed charge that qualifying households pay to around $9 a month for low users. By comparison, large households pay around $60 a month in fixed charges.
Because many low income households don’t qualify whereas many high income households do, Meridian Chief Customer Officer Julian Smith says the regulations are transferring millions of dollars every year from low income to high-income households.
“LFC regulations were introduced assuming poorer households use less power, but this was never the case. All income levels have a mix of low and high users of electricity so it was always a blunt and ineffective tool.
“Some of our poorest households have high electricity use because their homes are poorly insulated, and they have many family members under the same roof. In contrast some of the most well off qualify for LFC rates because they have well insulated homes with modern appliances and perhaps only two people in the house.
“We’ve ended up with struggling families in South Auckland subsidising power for holiday homes in Pauanui. It’s middle-class welfare and it’s time we ditched it,” Smith says.
The uptake of solar is exacerbating the problem by turning more well-off households into low users, shifting costs to and increasing bills for many poorer households.
“Households that can afford new technologies will continue to benefit at the expense of the lowest income households that cannot, and this gap will grow over time unless we do something about it,” Smith says.
Smith acknowledges some poorer households do benefit from LFC regulations but says targeting assistance by income level rather than power use is smarter and fairer.
“We recommend means testing and extending the government’s Winter Energy Payment to low-income households that genuinely struggle to pay energy bills.
“It could also be better targeted by applying it as a credit on bills or insulation spending. This would be fairer than the outdated and ineffective regulations we have today,” Smith says.
|Senior External Communications Specialist|