Energy Minister Megan Woods has accepted a recommendation made in 2019 by the Electricity Price Review to phase out the requirement for power companies to offer “low fixed charge” electricity tariffs.
Power companies will be able to levy several hundred million dollars a year more in fixed charges as a result of the change.
But the Government expects households will see their variable power prices drop as their daily fixed charges rise, leaving ‘winners and losers’ but consumers no worse off on aggregate.
The low fixed charge tariffs are one of those things that sounded okay in principle, but actually caused more harm than good in practice.
But the Electricity Price Review concluded they were unfair, arguing the people who benefited from them most were in effect being subsidised by customers who used more power – including large families who might be living in poverty in poorly insulated homes.
Low user tariff caps were originally introduced by the Labour government in 2004 with the support of the Greens as a way to encourage electricity conservation.
But Woods said phasing them out would create a “fairer playing field” for consumers and encourage people to switch to electric vehicles and use heat pumps rather than gas to heat their homes.
Basically larger poorer families were subsidising smaller families.
Good to see the Government getting rid of this market distortion.