Your power bill

Generation is the cost of producing the electricity you use.

The proportion of generation costs in the average power bill has increased over the last decade, reflecting higher wholesale electricity prices.

Increased demand for electricity during peak periods, relatively dry weather conditions and gas supply uncertainty have contributed to price rises, compounded by delays in generation investment, including due to the COVID-19 pandemic, and uncertainty surrounding Tiwai Point’s future.

Distribution is the cost of building and maintaining the power lines that transport electricity from the grid to your home.

Transmission is the cost of building and maintaining the national grid.

Distribution and transmission costs have decreased as a proportion of the bill over the last decade, due to the timing of when the Commerce Commission set regulated distributors’ revenues. This is because the last Commerce Commission reset in 2020 occurred during a period of low interest rates, resulting in reduced pressure on these costs relative to the other services included in a power bill.

The grid owner and distributors’ revenues have recently been reset at a time with higher interest rates and these costs are beginning to be passed through now to consumers. We may see an increase in the proportion of distribution costs when analysing the average power bill in future years.

Retail is your power company’s operating costs.

The proportion of retail costs in the average household power bill has reduced slightly over the last decade – although retail costs were not separately listed in our legacy bill breakdown data.

The exact cause of this small reduction is unknown but may be due to differences in the methodology we used to calculate retail costs compared to our previous estimates.

The GST inclusive amount of tax we all pay.

Reading and maintaining your electricity meter.

The proportion of metering costs has increased slightly. This may be due to the significant uptake of smart metering technology over the past decade, and differences in the methodology used to calculate metering costs compared to earlier estimates.

Government levies for operating and regulating the electricity market where electricity is bought and sold.

This is the typical rate you pay for any unit of power used during the day or night that is not controlled by your power company.

Power is cheaper to generate outside peak periods, such as early in the morning and late in the evening. Your power company may offer you a lower per unit price for power during off-peak times to encourage off-peak usage. This helps manage pressure on the electricity system.

How to get cheaper power bills with a time-of-use plan

If you have a 'controlled' hot water cylinder, your power company may offer you a lower power rate in exchange for the ability to turn off your cylinder if there is a large amount of demand on the local network.

Your cylinder can keep water hot for long periods of time without power if it is well insulated, so most people do not notice this happening.

The electricity market fee funds our work to regulate the wholesale market and fund market operations service providers, such as Transpower.

How we are funded

The fixed or daily charge covers the basic costs of maintaining an electrical connection to your home or business. It's the cost you pay for having access to power.

The installation control point number (ICP) tells you how your property is connected to the electricity network. Each residence has a unique ICP that identifies it as an individual power connection.

Power companies use ICPs to locate your connection both physically and on the national electricity registry.

Power is typically charged per unit. A unit is 1 kilowatt-hour or 1kWh. It's a measurement of energy in which one kilowatt of power is consumed over one hour of time.

An electricity meter records your power use. The standard unit of power consumption is the kilowatt hour, or kWh. This is a measure of energy over time and is comprised of 1,000 watts of power consumed over one hour. So for example, running a 1,000 watt heater for an hour will consume one unit of electricity or one kWh.

Your power usage is not based just on time. High-powered appliances that run for a short time can use the same number of kilowatt hours as a low power appliance running for a long time. For example, running a 2,000 watt appliance for half an hour will use one kWh unit, or running a 500 watt appliance for two hours will use one kWh unit.

Yes, you can calculate your power. Power companies usually charge in cents per kWh c/kWh. If you know your rate in c/kWh and the power output of an appliance, you can figure out how much it will cost to run that appliance continuously for one hour. For example, if you pay 20 c/kWh for your power, a 2,000 watt heater will cost you 40 cents to run for one hour.

The fixed charges on your bill cover the basic costs of maintaining an electrical connection to your home or business. It's the cost you pay for having access to power.

The charges are fixed in the sense that they don't change depending on how much power you use. Even if you are not at home and using no power, you will still be charged a fixed cost if power is connected to your home. There are two types of fixed charges:

• Standard charges - the amount you pay every day no matter how much power you use
• Low-fixed charges - if you use less than a certain amount of power in a year, you may be on a low-fixed charge plan. You may pay low-fixed charge, but a higher per unit cost for power.

Fixed costs generally cover:

• Lines charges - that connect your home to the distribution network
• Metering - to make sure you are billed correctly
• Connections to a separate secondary network - if you are on one. A secondary network is managed by a separate network owner or company and are common in apartment buildings, subdivisions and retirement villages.

Spot pricing is the concept of paying for your power at a rate determined by the wholesale market.

The spot price is the price retailers pay when they buy electricity from the wholesale market. Prices are updated every half hour, so retailers and spot pricing customers pay a range of rates over the day/month/year. 

Spot price customers may benefit from savings when spot prices are low in the wholesale market. However when spot prices are higher, during winter or at peak usage times (weekday mornings and evenings), then power costs more for retailers and for spot price customers.

Spot pricing contracts are uncommon. Typically, a power company will charge fixed charges for your usage for a set period that allows for fluctuations in wholesale electricity prices.

If you generate your own power and are connected to the grid, you may have a section on your bill to buy back power from your power company. This is paid into your account or deducted from your total bill and is measured in c/kWh. For example, if you generate 20 kWh of energy over a month and are paid 13 c/kWh, you would receive a rebate or credit of $2.60 on your bill.

In some cases, depending on your usage and the amount you generate, you could end up getting paid more for what you generate than what you use. Note, you may still have to pay for fixed charges, as these are charged regardless of the amount you generate.