PM admits public face hefty ETS bill

Photo / Alan Gibson

Households will bear more than their fair share of increased energy costs when the next phase of the emissions trading scheme takes effect on Thursday, Prime Minister John Key has acknowledged.

The Sustainability Council recently suggested households would bear half of the cost of the ETS during its first five years despite accounting for just 19 per cent of all emissions.

Yesterday, at the start of a week in which the transport and electricity sectors come under the ETS, the PM conceded that "a disproportionate amount" would be paid by households under the scheme.

"But that's because if we are too heavy handed with businesses ... on day one, that runs the risk of those very same households potentially losing their jobs. That's just the balance here."

Mr Key said the initial heavier burden on households was the scheme's "entry point" and over time most of the further costs would fall on industry.

The Government estimates the ETS will add 1c a kilowatt hour or 5 per cent to the cost of electricity.

Contact Energy and Mercury Energy recently began notifying customers of electricity and gas price increases which take effect with the ETS on Thursday. Mercury is increasing electricity prices by 3.3 per cent and Contact by 3.2 per cent.

Yesterday, the Prime Minister warned power companies "to make sure that they don't start blaming the emissions trading scheme and use that as a reason to raise prices if it's not justified".

He noted the company that stood to be most affected was state-owned Genesis, which operates the coal- and gas-fired Huntly power station, "and they're not raising prices from day one, so I just caution companies to make sure that they are upfront and honest with their consumers".

Genesis spokesman Richard Gordon said it would be December before power companies were likely to know exactly how much the ETS was affecting wholesale electricity prices. "Around that time we'll be able to make a decision on how much of that cost we can absorb or how much we can pass through to our retail tariff."

The chief executive of electricity retailer Powershop, Ari Sargent, said most of the impact of the ETS was already incorporated into wholesale power prices.

"Anything that's in the immediate to medium term should only be a fine-tuning of what's already been assumed."

While the estimated ETS-driven price increase was in line with what consumers had regularly faced in recent years, on top of the GST hike in October and power price rises due to other factors "it is a bigger overall impact", Mr Sargent said.

Independent energy analyst Molly Melhuish said many consumers, particularly the elderly, were already cutting back on power consumption to the detriment of their health and lifestyle.