Energy Minister Simeon Brown promises new generator rules will put 'downward pressure' on power bills

Huntly Power Station.

Photo: RNZ

The minister of energy says the government's scrapping a planned power bill levy because he made the call that households should not have to pay to secure the country's electricity supply.

Simeon Brown is adamant the cost of shoring up supply should sit with generators instead, and changes announced on Tuesday could see power bills drop by hundreds of dollars each year.

Brown revealed the government would no longer introduce a power bill levy to fund a liquefied natural gas (LNG) import facility, which would be a fallback option in dry years when electricity generation is low.

The facility is going ahead, but the government's still working out how to pay for it.

Brown also announced new requirements on electricity generators to shore up supply ahead of dry years, with penalties of up to $10 million if they fail to do so.

"What we're saying here is... the power companies, who make significant profits, they are responsible for managing the dry year risk in New Zealand, and the government is saying very clearly they will be required to pay for this.

"We are putting the responsibility where it sits very firmly in their camp, not on... the bills of power customers."

Brown said as the new energy minister (having replaced Simon Watts in April) he looked at the planned levy and decided the cost should not fall on New Zealanders.

"We've now made further policy decisions, and we're fixing it."

Simoen Brown making the announcement on Monday, 9 June.

Photo: RNZ

As it stood, big power companies had been baking a dry year risk premium into power bills, Brown said - but that would now become part of their normal operating costs.

The risk premium translated to between $210 and $350 each year for an average household's power bill, he said.

"The reduction in that risk premium will mean downward pressure on power bills for New Zealand households and businesses."

The government was empowering the Electricity Authority to crack down on power companies if they did not sufficiently manage supply, he said.

"What we saw in 2024 when I was last the minister of energy, was... prices hitting $800 a megawatt hour, businesses shutting their doors, the collateral damage of jobs, and particularly in regional New Zealand, that is not something that I can accept, or the government can accept."

The government was currently negotiating with the power companies on the matter, Brown said.

Meridian takes security of supply 'extremely seriously'

Meridian Energy chief executive Mike Roan said the company already took measures to secure supply.

"Meridian looks forward to taking part in consultation on the Winter Energy Reliability Obligation, but New Zealand's security of supply is already something the company takes extremely seriously," he said.

"Last financial year that responsibility cost Meridian $300 million in hedge contracts to get New Zealand through Winter 2024, and we see this as a key advantage for the country of having financially strong generator-retailers."

Hedge contracts helped to smooth out electricity market price spikes, which can happen when supply is low.

Roan also confirmed Meridian was in confidential talks with the government about "various aspects" of an LNG terminal.

The Electricity Retailers' and Generators' Association has been approached for comment.

Two possible providers for LNG facility

The government had asked two providers to pitch for building the LNG facility, Brown said. They had to prove global experience, be able to have the facility in place by winter 2028 and cover 1.5 terawatt hours of electricity over winter.

There may be law changes required to make it happen which would become clear during the pitch process, Brown said.

The successful supplier would be decided before the election, he said.

'Serious questions remain' - Labour

The Labour Party said the government was rushing into committing to the facility, without detailing potential costs for New Zealanders.

"New Zealand's energy security is vital, but an LNG facility locks New Zealand to international gas prices that we have no control over, with no evidence that this is the most secure and cost-effective option for Kiwi households," said energy spokesperson Dr Megan Woods.

Woods said local alternatives needed to be examined, and Genesis had told Parliament it could upgrade the Huntly power station and use biomass fuel for less money than the LNG facility.

"Investing in locally generated energy would do more for long-term energy security than sending money offshore to import gas from volatile parts of the world," she said.

Greens co-leader Chlöe Swarbrick said New Zealanders remained on the hook to pay for the facility, given the government was pressing ahead without a plan to fund it.

"These self-proclaimed 'economic managers' want to sign our country up to a billion-dollar contract and work out who pays for it afterwards," she said.

"Power companies like Meridian have already been clear that we do not need this terminal, so it is hard to see how the energy minister expects to convince the gentailers to volunteer to fund something they don't see any economic or practical sense in."

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