New Zealand consumers 'really annoyed' as power firms bank billions, and bills keep rising

Fears of economic polarization grip New Zealand as household electricity costs keep rising, while major power companies are simultaneously posting profits of hundreds of millions of dollars and operating earnings above $1 billion.

That contrast is stark and has already drawn criticism from people who say families under pressure from the cost-of-living squeeze are shouldering the downside while the market continues to favor the monolithic utility companies.

Here's what to know

With Meridian and Genesis also expected to report results, RNZ said Mercury booked $321 million in net profit after tax in its full-year result, while Contact Energy reported a record $423 million net profit and $1.011 billion in operating earnings.

RNZ said support for splitting gentailers was very common: polling by Electric Kiwi and 2Degrees found roughly one in five respondents strongly favored the move and about a third somewhat backed it, while fewer than 10% said they were somewhat or strongly against it.

Under structural separation, companies would no longer combine electricity generation and retailing. Rivals say keeping both businesses under the same roof gives gentailers advantages that other retailers do not have, even as household bills rise. 

More background

Electric Kiwi chief executive Huia Burt said the survey points to a loss of confidence, with many consumers feeling the electricity market is not serving them.

"The cost-of-living crisis is continuing on and energy bills have played a big part in inflation. They've seen it with their own eyes, bills going up, and they want to see real change," Burt said.

RNZ said average power prices rose 12% over a one-year period and then increased by about another 8% in April. Burt said consumers are being hit with higher charges just as companies announce eye-popping earnings. He also pointed out that gentailers would likely argue that more generation investment helps explain those profits.

"That's true but the vast majority of it is still being earned by high prices on fully depreciated assets. New build is part of the story but we can't ignore the fact that high prices are what benefit gentailer profits," Burt said.

Consumer NZ chief executive Jon Duffy said people react strongly to electricity costs because power is essential to modern life. If it becomes unaffordable, he said, "there's something fundamentally broken in the system."

What's being done?

The Electricity Authority's new rules require power generators to offer hedges to all buyers on the same basis, preventing them from giving their own retail arms better "price or non-price" terms. Those contracts help retailers manage wholesale price swings, which can ultimately affect what customers pay.

While Burt described that as "a step in the right direction," she said the deeper incentive problem remains unresolved. She argued that separating generation from retail would create more genuine competition and more pressure to lower prices for consumers.

ERGANZ chief executive Bridget Abernethy also told RNZ that past reviews have not found evidence that separating generators would make power cheaper or the system more reliable. A spokesperson for Contact Energy said the company has invested "more than $2.4 billion in new renewable generation and energy infrastructure, including geothermal, solar and battery storage projects" over five years, adding: "Profit enables us to continue making these long-term investments in New Zealand's renewable energy transition."

With households still grappling with higher monthly bills, Duffy said the anger is becoming too strong to ignore.

"I think the Government has twigged to the fact that people are also voters and they are annoyed. They're really annoyed," he said.

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