by Phil Squire
It’s 2026, and the cost of paying for the basic things we need to live continues to rise. As you’re no doubt aware, electricity is one of them.
It’s an essential requirement to give us heat, light, and power our appliances, but our electricity bills have jumped by 15% on average over the past two years alone. That’s hitting a lot of people in the pocket and, especially over winter, many are making the decision to reduce or go without essential home heating.
So, what’s driving these price increases?
Without sounding too radical, the truth is it’s largely our capitalist economy with its unceasing profit-hunger – more on that further down the piece. It’s also due to big increases in the lines charges this year, which are the charges we (and you) pay for sending power across pylons and lines to actually reach your home. Lines charges can now make up around 40% of your bill. Increases have happened recently as lines companies are doing maintenance and major upgrades to support electrification (higher electricity demand) on their networks. These costs are passed down to retailers such as Toast, and while it’s a bitter pill to swallow, we have to keep our own lights on, too.
The other major parts of electricity costs are the generation (wholesale cost of us ‘buying’ the power), transmission (the big pylons that carry power up and down the country), metering, retailer margins, and GST. Add in some increases to each of these components and this essential supply quickly becomes expensive…
There’s also something to be said for how exposed (or not) decision-makers are to the realities of doing it tough. Unlike us, most folks in control of these industries are earning north of $150k/year, and we’re going to guess that unlike us, they don’t regularly interact with community organisations or people on the ground. They’re less likely to witness things like energy hardship or poverty and thus miss the feedback incentive to support the most vulnerable. We’re not saying that some companies aren’t running programmes that help their customers facing energy hardship – they are. They tend to partner to achieve this though, rather than hold that perspective on a daily basis.
The fact is, for good or bad, we live in a market-based economy. Even for an essential supply like electricity, the rule of this economy is that companies will generally charge as much as they can to maximise profits. Controls on these prices are provided by competition (i.e. if one company provides it cheaper than another company, prices might decrease across the board), social licence (companies don’t want to be seen ‘price gouging’), and occasionally by the threat of regulation by central government. But on the whole, large profits are sought and celebrated. This is probably why people are so surprised to hear that Toast celebrates 0% profit, every year.
In the New Zealand electricity industry, we’ve got four big generator-retailers (gentailers) who supply more than 80% of the generation and retail of electricity. They have a lot of market power. Recently, there’s been robust discussion on how to increase competition in the electricity market, with the idea that this will reduce overall prices and force others to innovate. Ideas have resurfaced, like dividing up the gentailers into separate generation and retail companies so they’re not ‘vertically integrated’ (i.e. they can’t both produce and sell power under the same brand). Not everyone agrees that this will bring in more competition and get those prices down, but one thing is for sure: there is a lot of money being made in the electricity industry. Rivers of cash are flowing from everyday New Zealanders to the for-profit companies who produce and sell the stuff.
How much?
Last year, there was enough money made that the four big gentailers could pay out their shareholders around $1.4 billion in dividends. This isn’t even total profits, just the piece of the pie that shareholders get. Hefty dividend pay-outs are attractive to investors, who are looking to make some money from the business of electricity themselves. So, what would happen if gentailers decided to do something else with that money – like give it back to those who are struggling to afford power? Well, for one thing, their share prices would fall – which is unappealing for the shareholders (including the government, who maintains a 51% share in three out of four gentailers). As shareholders are the ones who vote on things like dividend payments, it’s pretty unlikely they’ll decide en masse to forego their profits anytime soon. In the meantime, these dividends are acting as a transfer of wealth from everyday New Zealanders paying for an essential service to those who can afford to buy shares in these companies and thus, make a profit.
There are various estimates around how many households are struggling to pay their bills. Consumer NZ Surveying released last month showed that 1 in 4 New Zealanders struggled to pay their power bill in the past year. The University of Otago estimated that a huge 360,000 people in Aotearoa were facing energy hardship – but this was a few years ago, so this estimate could now be higher.
Imagine this scenario: instead of paying that $1.4 billion out to shareholders each year, you provide free electricity to all those 360,000 households. You’d still have half-a-billion dollars in dividends to pay your shareholders! Like I said, there’s a lot of money in electricity.
Here’s a thought…
Why not create an electricity company that is committed to returning 100% of its dividends to the community – the real shareholders – and specifically to those who are struggling? You could staff it with like-minded people, set it up as a not-for-profit and watch the customer numbers roll in.
Imagining even further into the future… completely changing our inherently unequal capitalist economy is pretty unlikely, but picture an alternative built on social enterprise: a New Zealand with not-for-profit retailers covering 80% of the electricity market. Swap the gentailers' share for people like us and energy hardship could be a thing of the past.
At Toast, we believe this is not only possible, but essential. We are doing our bit, in our corner, to build a system where communities can take care of those who are struggling. If you’re not already part of the Toast movement, we invite you to join the whānau.