Speaker 1: Kiyota.
Speaker 2: I'm Chelsea Daniels and this is the Front Page, a
Speaker 2: daily podcast presented by the New Zealand Herald.
Speaker 3: New Zealand's energy sector is broken. That's according to an
Speaker 3: open letter calling for the government to do more to
Speaker 3: keep our power prices down. Soaring power costs is always
Speaker 3: a concern, but we now live in a country where
Speaker 3: for some it's a privilege.
Speaker 4: To have power.
Speaker 3: We've heard too many stories about businesses closing due to
Speaker 3: rising costs of just keeping the lights on and everyday
Speaker 3: kiwis are struggling as well. Tens of thousands of households
Speaker 3: are cut off from basic essential services just because they can't.
Speaker 2: Afford to pay their bills.
Speaker 3: So what can we actually do to keep prices down
Speaker 3: over winter? Can we ever get them to stay down permanently?
Speaker 3: Today on the front page, as part of The Herald's
Speaker 3: Power to the People campaign, we speak to the manager
Speaker 3: of Consumer and Z's Power Switch, Paul fuge. So Consumer
Speaker 3: and Z was part of this open letter calling for
Speaker 3: reforms in the energy sector.
Speaker 2: Why is the sector broken?
Speaker 5: That's a really big question bottom line, as we haven't
Speaker 5: seen enough investment in generation. We have seen some, but
Speaker 5: not enough and really because there's some structural issues in
Speaker 5: the market that have not been addressed. The current market
Speaker 5: structure basically centivizes just in time investment and being a
Speaker 5: little bit late rather a little bit early. That's because
Speaker 5: scarcity is rewarded in terms of high prices and seat
Speaker 5: of high profits for gent tailors. And one of the
Speaker 5: things we've observed in the market is that the price
Speaker 5: of electricity has been decoupled from the cost of actually
Speaker 5: reducing it, So the cost of eltricity, you know, the
Speaker 5: foward prices of electricity are currently well above the long
Speaker 5: run cost of building new power stations and happened since
Speaker 5: twenty nineteen. And that's a good sign that the market
Speaker 5: isn't delivering those sort of outcomes that you'd expect from
Speaker 5: a competitive market.
Speaker 3: Are Gen Taylor's meant to give a shit about how
Speaker 3: much we pay? Like, legally do they have to? Can
Speaker 3: they hold on to their profits and not build new
Speaker 3: generators because they're getting away with us spending loads with.
Speaker 5: No requirement on them. It's a free market that they're
Speaker 5: no requirement to build new generation Gen Taylor's, well, you know,
Speaker 5: and according to this tent's put in front of them
Speaker 5: so they've got a judiciary requirement to deliver maximize shareholder return, right,
Speaker 5: and that's what they're required to do, and so they
Speaker 5: will make those decisions and make those investments according to
Speaker 5: those rules. So what we would say is, if you
Speaker 5: don't like the outcomes, don't blame the players, change the
Speaker 5: rules of the game. If this was a game of
Speaker 5: rugby and you didn't like how the game was being played,
Speaker 5: or change the rules, you wouldn't blame individual players for
Speaker 5: the way they're playing because they're just trying to play
Speaker 5: to the rules as they are required to do. So
Speaker 5: I think it's not helpful to just simply beat up
Speaker 5: retailers or gentailers is as kind of villains. They are
Speaker 5: just doing what they are required to do and according
Speaker 5: to what the incent is put in front of them.
Speaker 5: So we would say change those incentives.
Speaker 2: Right, So what should we change those incentives too?
Speaker 5: So we think there's to be some changes to the market. So, firstly,
Speaker 5: we think markets are good for consumers. A thriving competitive
Speaker 5: market will provide consumers with choice, innovation, and help keep
Speaker 5: a lot on prices. So those are outcomes we're not
Speaker 5: seeing from this market. So obviously the market isn't delivering
Speaker 5: according to what it was intended, so we would say
Speaker 5: change the change the rules of that market. So one
Speaker 5: of the things we would say is you need to
Speaker 5: levelize the playing field. What we observe is some of
Speaker 5: the independent generators that this is the pure retailers and
Speaker 5: who are quite innovative, have higher customer service levels and
Speaker 5: tend to have lower prices, have really struggled to get
Speaker 5: a foothold in this market. And we've excess in the
Speaker 5: market condensed somewhat more recently. And in fact, if you
Speaker 5: look at the market concentration, the top four generators and
Speaker 5: their subsidiaries over an eighty six percent of the market share,
Speaker 5: and that's the same as it was ten years ago,
Speaker 5: which is quite remarkable, and that's not again, not a
Speaker 5: great sign that this is a market that's working well
Speaker 5: for consumers. To mean, these new innovative retailers have really
Speaker 5: struggled to gain a foothold. Even retailers that have been
Speaker 5: really successful overseas like Octopus Energy, have really struggled to
Speaker 5: come into the New Zealand market. And primary it's because
Speaker 5: they're struggling to compete with the gent tailors because they
Speaker 5: can't procure electricity or what they say is on equal
Speaker 5: terms as the people they're competing again, so that's quite
Speaker 5: a major structural flaw in the market. So that's something
Speaker 5: that the government should be looking at with urgency.
Speaker 3: How bad are prices at the moment and how have
Speaker 3: they gotten real bad over the last year.
Speaker 5: Yeah, so we've seen a little bit about ten to
Speaker 5: eleven percent increase from the same time last year on
Speaker 5: average across the country. That varies significantly. You know, the
Speaker 5: price of eltricity is a funny thing. There's no price
Speaker 5: eltricity in New Zealand. There's literally thousands and thousands of prices.
Speaker 5: So but on average across the country we've seen an
Speaker 5: eleven percent increase from last last year. So that's not great.
Speaker 5: You know. As a result Alida survey, thirty six percent
Speaker 5: of consumers have lost faith in the outlacity market or
Speaker 5: that it's delivering delivering positive outcomes for them. That's not
Speaker 5: a great a great sign when you know close to
Speaker 5: forty percent of people just don't think it's working.
Speaker 1: To know this from me, we can no longer maintain
Speaker 1: regional robustness unless we have affordable energy, not just for
Speaker 1: mums and dads, but for employers and employees, I've championed
Speaker 1: this issue. I've endeavored to get out in front of
Speaker 1: this issue because it's haunted key. We sport too long
Speaker 1: and we need to put the underlying security, the underlying
Speaker 1: well being of all New Zealanders ahead of the short
Speaker 1: term gent Taylor corporate riddle profits.
Speaker 3: What can be done to make sure that those smaller
Speaker 3: players can get into the game? And can you explain
Speaker 3: it to me as if I am, I don't know,
Speaker 3: like a five year old child or something. So Gen
Speaker 3: Taylor's are the ones producing and selling, whereas you've got
Speaker 3: other companies who are what trying to get a good
Speaker 3: wholesale price and then sell it onto us.
Speaker 5: That's correct. So retailers basically procure eltricity on the ectricity market,
Speaker 5: and they're sort of basically heating themselves. So they're they're
Speaker 5: basically buying on the wholesale market like other products, and
Speaker 5: intelling on the retail market. So they have to procure
Speaker 5: enough atris in the wholesale market to cover their cover
Speaker 5: they customers needs both now and into the future. The
Speaker 5: problem in New Zealanders, they're buying an electricity from the
Speaker 5: very people they're competing against, okay, and you can imagine
Speaker 5: that the disadvantages that they're in the resks that puts
Speaker 5: you under and also the skull diggory that could go on,
Speaker 5: because the temptation for a gent tailor will be to
Speaker 5: sell to its own retail arm at more favorable rates
Speaker 5: or in more favorable conditions than these independents who are
Speaker 5: trying to compete with them. So we make that a
Speaker 5: legal flaw. Well, what would say there is just have
Speaker 5: greater separation between the retail and generation functions so that
Speaker 5: the independence can compete on the same terms as these larger,
Speaker 5: larger retailers. And that's that's the fundamental flaw in thew
Speaker 5: in this market.
Speaker 2: Right. So if I was a gent tailor and I
Speaker 2: was creating my energy and then selling it to people,
Speaker 2: I can sell it to my mate for two dollars,
Speaker 2: but all.
Speaker 3: Of these guys over here has to have to pay
Speaker 3: three dollars. Basically they're working off a mates rates system.
Speaker 5: That's the suspicion, and that's what independent retailers say, and
Speaker 5: that's you know, there's I'd say, there's some evidence for that.
Speaker 5: And so what you what you can do is is
Speaker 5: your your retail arm then operate at a loss or
Speaker 5: to break even point, and but you more than make
Speaker 5: up for it on your generation arm. And that's not
Speaker 5: a luxury. That's that's available to independents who just we're
Speaker 5: just living and dying basically on the retail part of it.
Speaker 5: And so obviously they can't compete. And it's it's more
Speaker 5: complex because these innovative retailers are sort of looking for
Speaker 5: different types of hedges that they're they're offering more time
Speaker 5: of use products, So it's not just the rates, it's
Speaker 5: also the time of the day that they're trying to buy.
Speaker 5: Buy by elbxiosity as well.
Speaker 3: How about a world where we just can we create
Speaker 3: more energy?
Speaker 5: Well, well that's what's neat fundamentally, what's what's driving you know,
Speaker 5: the high energy prices is scarcity. So there's a lack
Speaker 5: of energy and also there's there's the risks to it
Speaker 5: is that there's there's a fear that there will be
Speaker 5: a lack of energy in the future. So New Zealand's
Speaker 5: ultracity system is as fantastic thing, highly renewable though, so
Speaker 5: we we really are at the vagaries of weather and
Speaker 5: so when it doesn't rain, don't get enough snow, the
Speaker 5: price of octricity can can get higher because of not
Speaker 5: energy in the system, and so we need to have
Speaker 5: almost like an over capacity to accommodate those dry years.
Speaker 5: And the current sort of system doesn't really allow for
Speaker 5: an over supply of electricity because powerstations are expensive to
Speaker 5: run and you don't want to have a power station
Speaker 5: if you're missed in one sitting sitting there there idle.
Speaker 5: So that's a real flaw in the system, is that,
Speaker 5: you know, this is just the physical nature of New
Speaker 5: Zealand system doesn't lend itself easily for the current market structure.
Speaker 5: And as a result, we've sort of lurched from energy
Speaker 5: crisis to energy crisis. I mean, we've had like, you know,
Speaker 5: three energy crisis since twenty twenty. So it's sort of
Speaker 5: not a great way to run an economy because because
Speaker 5: truly is so essential to not just households, the health
Speaker 5: and well being of households, but also for the functioning
Speaker 5: of the New Zealand economy, right, and that's what this
Speaker 5: is the problem now is prices become become elevated for
Speaker 5: so long that's actually affecting the economy because there's businesses
Speaker 5: now that are sort of curtailing production or shutting down completely.
Speaker 5: And that's what's really got the intention of I think of
Speaker 5: this government is it's sort of becoming a risk to
Speaker 5: the New Zealand economy.
Speaker 2: Now, why hasn't anything been done about this? Is it
Speaker 2: just too hard?
Speaker 5: Yeah? I think it's just been that they've kicked for touch.
Speaker 5: You know, successive governments you know, have tinkered around the
Speaker 5: edges with this, but no one's been prepared to make
Speaker 5: the consequential reforms or changes that are needed to sort
Speaker 5: of arrest this. So, you know, we've given it a
Speaker 5: good go. It's been twenty five years since we've put
Speaker 5: the retail market in and we've had several crisis in
Speaker 5: that time. The writing's been on the wall for a
Speaker 5: while now that things have gone up a a ry,
Speaker 5: Like I said, since twenty nineteen, the prices have been
Speaker 5: above the cost of production. So, you know, as the
Speaker 5: open that has sort of said the type of tinkering
Speaker 5: is over when consequential reform and change in this market
Speaker 5: to sort of get it working as it was intended
Speaker 5: to be working.
Speaker 2: So what can the government do tomorrow to help us
Speaker 2: all out it was.
Speaker 5: A few things, like some simple things that would really
Speaker 5: help consumers. I mean, we've talked about the level of
Speaker 5: playing field, but some of the basic things that we
Speaker 5: haven't got right in New Zealand is something we've been
Speaker 5: saying for decades basically is just for a start, make
Speaker 5: power bills so people can understand them. It sounds but
Speaker 5: try to say it, but you know, one five people
Speaker 5: don't even bother opening their power bill. People are just
Speaker 5: bamboozled by their power balls. People might be surprised to
Speaker 5: know that US is quite unique and that our powerbles
Speaker 5: a unstandardized at all. What's on a powerbill, what information
Speaker 5: is shown, and how it's shown, it varies between retailers.
Speaker 5: Now it's a real flaw because people just can't understand
Speaker 5: their own power bill and own power usage and even
Speaker 5: knowing if that's normal and that what that does is
Speaker 5: create vision and epathy and mistrust and people have become
Speaker 5: disengaged from this market. And when you've got a market
Speaker 5: where people disengage from it, it's never going to function properly.
Speaker 5: So it's such a simple, easy life cost, non controversial
Speaker 5: thing to do right is just make poweraballs easy to
Speaker 5: understand eltricity is sort of analogous to petrol. So when
Speaker 5: you think about how they show petrol prices, you can
Speaker 5: drive down the road in your car and through through
Speaker 5: a random town, look at the wind screen of your
Speaker 5: car and look at the petrols the silent petrol station,
Speaker 5: and you know that's a good or bad price. But
Speaker 5: if you think in the petrol, it's complex, it's dangerous, difficult, supply, complex,
Speaker 5: supply chains, et cetera. So similar to electricity. So how
Speaker 5: come they can show the price of petrol in a
Speaker 5: way that everyone can understand it in an instant ultricity
Speaker 5: prices people are just completely bamboozled by it. And also
Speaker 5: access to data, so we invested in using a big
Speaker 5: success story in ultricity smart meters over a decade. Now
Speaker 5: you know we're over ninety percent penetration and smart meter
Speaker 5: roll out and these offer huge potential for consumers, but
Speaker 5: we've locked that data away and so we run power
Speaker 5: switch for example, So we struggle to help consumers as
Speaker 5: much as as we could if we were able to
Speaker 5: access that data, and other people as well access that data.
Speaker 5: So it's a real own goal. The smart mat of
Speaker 5: thing is that we've invested in this this amazing technology,
Speaker 5: but we haven't unlocked the potential benefits to consumers from
Speaker 5: that because we just haven't enabled access to that data
Speaker 5: and that's been an ongoing thing for more than a decade,
Speaker 5: and that's that's a real problem, but also it's a
Speaker 5: real frustration and something that would be that would that
Speaker 5: would really help consumers that it sort of hasn't been
Speaker 5: enabled for such a long time.
Speaker 2: And I suppose if making bills easier to read, because
Speaker 2: I put my hand up, I'm one of those people
Speaker 2: who go, is, oh, sixty.
Speaker 3: Dollars last month, the ninety dollars this month?
Speaker 2: Okay, But I suppose if you understood how and why
Speaker 2: it works, you have better options when it comes to
Speaker 2: perhaps switching companies as well. Should people be doing that more?
Speaker 3: And should we are?
Speaker 2: We not doing it enough?
Speaker 5: Well exactly, And that's that was what would drive change
Speaker 5: as well, if I consumers basically started changing on mass,
Speaker 5: and that's what we're trying to get happening with our
Speaker 5: Powersweap service. So we've had some success in that. We've
Speaker 5: seen massive upswing and site usage over this year. So
Speaker 5: in June we saw the largest number of Initiato switches
Speaker 5: ever on the site and it was more than double
Speaker 5: the previous highest months, which is astonishing. We've put an
Speaker 5: investment in an AI bill reader now, as I talked
Speaker 5: that before that people find bills confusing, So we've built
Speaker 5: this tool that can read any power bill in New Zealand,
Speaker 5: all the different variations, and take that information and feed
Speaker 5: it into our calculator and give people really fast, faster,
Speaker 5: more accurate comparisons that are more compelling. So people are
Speaker 5: up with their bill are twice as likely to change
Speaker 5: providers that those don't. This is the real game changer
Speaker 5: because the issue we had is, like I said, getting
Speaker 5: the data into the model, and it's been difficult because
Speaker 5: a we don't have access to the smartmet of data,
Speaker 5: but b because people can't read their powerble able to
Speaker 5: enter their own data. We can do that for them
Speaker 5: now with the AI bill reader. So this is the
Speaker 5: first the first thing we're doing, and then we're going
Speaker 5: to build some additional tools AI tools basically to help
Speaker 5: people with their power build more. One of the things
Speaker 5: you said is like is my powerball normal? So just
Speaker 5: tell people through the AI bill reader, you know, is
Speaker 5: what they're paying sort of normal for their household circumstances.
Speaker 5: Is it more than their neighbors? How much could they
Speaker 5: save if they change that sort of thing? What if
Speaker 5: they change their behavior, what if they change their appliances.
Speaker 5: So this is the first step and what could be
Speaker 5: quite a revolution in retail. So we're really excited about
Speaker 5: it and what we're finding. People on the site are
Speaker 5: really excited as well because it's been such a high
Speaker 5: uptake of that tool. But in general, people can save
Speaker 5: between four and five hundred by changing provider. Look who
Speaker 5: aren't aware of that? Just how much money they can
Speaker 5: save by changing plan or provider a year, That's right,
Speaker 5: So that's a significant part of your bill. That's about
Speaker 5: the level at which people will change providers. So we
Speaker 5: have seen people respond to that. We'd like to see more.
Speaker 3: Our companies are making huge profits.
Speaker 5: They can reduce their prices.
Speaker 4: Well, so again I ask you, what will you do
Speaker 4: to come hard on these big companies. Well, we'd have
Speaker 4: an electricity market review happening, which samm Brown is kicking off,
Speaker 4: and we'll look into that and we'll monitor that. But
Speaker 4: I just say to you also need those companies to
Speaker 4: be profitable because they have to go make big investments
Speaker 4: and actually new renewable energy facilities and production facilities in
Speaker 4: order to be able to make sure that we double
Speaker 4: the amount of renewables we're going to get in the
Speaker 4: next few years, as well as we have to work
Speaker 4: really hard to find a new supply of gas and
Speaker 4: make sure that we've got gas in the market too.
Speaker 3: A review into the energy sector was announced in November
Speaker 3: last year.
Speaker 2: What are we are at an end of July?
Speaker 5: Now?
Speaker 3: What do you hope that reveals?
Speaker 2: And are just are we moving quickly enough?
Speaker 5: Here? Know we're not, And hence the open letters that
Speaker 5: we've we've been tinkering for too long. Some of the
Speaker 5: stuff we've seen coming out is they're not bad things
Speaker 5: in themselves, but I liken it too. You know, some
Speaker 5: of these the initiatives that are coming out from the
Speaker 5: ultru See Authority, for example, sort of they're not consequential
Speaker 5: enough for the for the for the crisis we find ourselves,
Speaker 5: and so I likened it to saying they're consulting on
Speaker 5: you know, the color of the kitchen cabinets when the
Speaker 5: house is on fire. It's just's what it feels like.
Speaker 5: So it's nice that they're they're asking the kitchen cabin
Speaker 5: it should be it's not a bad thing, but what
Speaker 5: we would say is the house is on fire, you
Speaker 5: should probably be looking at their first. And so some
Speaker 5: of these initiatives around increasing soule of iyeback making retailers
Speaker 5: of the time and use crisis. These are good things.
Speaker 5: There's no doubt that that we wouldn't say they're bad,
Speaker 5: but they're not the things that they should be focusing on.
Speaker 5: Because we've got people who are going cold, they're turning
Speaker 5: off the water cylinders, you know, you know, living seeing
Speaker 5: people say then your homes because it's too expensive. You
Speaker 5: know that that's that's that's the real crisis. Rather than
Speaker 5: sort of rewarding people who are fortunate enough to bet,
Speaker 5: you know, for flip solar systems among those people, you know,
Speaker 5: helping them shouldn't be a priority.
Speaker 2: Thanks for joining us, Paul, No problem.
Speaker 3: That's it for this episode of The Front Page. You
Speaker 3: can read more about today's stories and extensive news coverage
Speaker 3: at enzherld dot co dot MZ. The Front Page is
Speaker 3: produced by Ethan Sills and Richard Martin, who is also
Speaker 3: our editor.
Speaker 2: I'm Chelsea Daniels.
Speaker 3: Subscribe to the Front Page on iHeartRadio or wherever you
Speaker 3: get your podcasts, and tune in tomorrow for another look
Speaker 3: behind the headlines.