Editorial: Electricity plans are mild but useful

When Labour and the Greens launched NZ Power in 2013, the policy caused share prices to sink. The latest Government proposals are tepid in comparison.

Recent political history might have suggested the release of the Government's response to the Electricity Price Review may have been deeply concerning for the sector.

The review was promised as part of the coalition deal between Labour and NZ First, which promised a "full-scale review into retail power pricing".

NZ First has previously railed against the power prices and pledged to buy back the shares in the companies partially sold by National.

Labour's last major proposals for the electricity sector - NZ Power, launched jointly with the Green Party - represented such an overhaul of the sector that even though the parties were in Opposition, the New Zealand sharemarket sank in response to its release.

The resulting partial sales of Meridian, Mighty River (now Mercury) and Genesis saw the Government reap hundreds of millions less than expected.

But Thursday's release was summed up by the response of the sector and the Government's opponents.

The Electricity Retailers Association, which counts New Zealand's largest electricity generators as its members, largely welcomed the proposals.

National's energy spokesman Jonathan Young came close to suggesting the reforms did not go far enough, saying the proposals "failed to deliver meaningful savings for New Zealanders".

In some areas the Government's response was tepid.

Having long complained that prompt payment discounts were simply a tax on those who struggled to pay their bills on times, Energy and Resources Minister Megan Woods stepped back from regulating the discounts out of existence, giving the industry six months to do so voluntarily.

But the reforms are not without substance.

Woods has signalled to Cabinet that she will direct the Electricity Authority to work out how to compel New Zealand's largest generators to sell more electricity to the wholesale contract market and at a price within range of the spot market.

While New Zealand's electricity supply is good, at times of stress - such as an unexpected supply outage when lake levels in the South Island are low - prices rise so far that small retailers complain they can quickly become uncompetitive.

Meanwhile, the Government is to pilot a scheme to somehow get those households who have failed to change retailers in years.

The industry is likely to oppose the measure and the cynical answer to why is obvious. While competition is fierce for customers who change, those who do not often pay much more than they otherwise might.

These customers will be highly profitable and the retailers know if they lose them, they will probably not get them back.

In some ways, the reforms may actually disadvantage those who have engaged closely with their bills, something all households should do.

Currently retailers often offer discounts to those who merely threaten to leave, or contact those who have recently left with special deals.

The Government is considering banning such "save and win-back" tactics, believing that it is a sign of a two-tier market, where active customers are subsidies by those who are loyal.

Likewise, prompt payment discounts are clearly popular with consumers.

But as much as they benefit those who seek out discounts, they are not a sign of a market benefiting all consumers. The latest changes may improve overall competitiveness of a sector which affects everyone.