The Blog

Low User Plans Are Getting The Boot - Here's Why

Low and Standard User plans have always caused confusion for Kiwi electricity consumers - despite best intentions, they add another level of complexity to an already-confusing industry. And the Government’s plans to say haere rā to Low User Plans over the next few years has even more Kiwis scratching their heads. So, why are things changing, and what will it mean for Kiwis and their power bills?

The current situation

We love a good breakdown of industry information, and you can find a general overview of User Plans in this blog here. But in short, under the current user plan structure, distribution companies charge different metering rates for Low Users and Standard Users at regulated thresholds based on kilowatt (kWh) usage per year. Households that use more than 8,000kWh each year should be on a Standard User plan, while households that use less than 8,000kWh over a year should be on a Low user plan. From Christchurch south, however, the threshold is 9,000kWh.

The Standard User Plan has a higher daily charge and a lower charge per kWh used, and it’s usually for households of more than two people who are home lots and use a lot of electricity for heating and hot water, or large flats. The Low User plan has a lower daily charge but a higher kWh rate. These are usually households of one or two people living in well insulated, energy efficient houses, often also using other forms of energy (like gas hot water or a wood burner fire).

Why were Low Users and Standard Users split up in the first place?

Back in 2004, Low and Standard users were separated as a way of more fairly spreading the maintenance costs of our electricity infrastructure and getting power to our homes. The idea was that Low User plans would ensure those using less power than the average household weren’t having to pay more than their fair share (particularly low-income and low-use customers), as well as encouraging people to use less power and invest more in making their homes energy efficient. And generally speaking, that’s been the case - the Low User plan has mainly benefitted those in smaller households and energy efficient, well-insulated, cheaper-to-heat homes.

So why are things changing?

Well, while the Low User plan has helped some households, the flip side is that it’s also unintentionally pushed others further into energy hardship. The Electricity Price Review (EPR) data shows a correlation between low-income families and higher electricity use, which means that the current User Plans structure is actually burdening lots of low-income, high-use households with increased power bills.

We already know that Aotearoa’s housing stock isn’t great when it comes to energy efficiency, and making a home energy efficient (for example, by upgrading insulation or installing double glazed windows) isn’t cheap, either. So these households are stuck between a rock and a hard place - they can’t afford to make their home more energy efficient to help them fall within the Low User plan threshold, nor can they afford the higher price of power on a Standard User plan. Unfortunately that means we’re now seeing more and more cases of energy hardship where power use is being limited, and that leads to cold, damp, unhealthy homes.

On top of this, we can vouch for the fact that User Plans have been all-round confusing for customers. When we’ve run our User Plan checks, we’ve come across many households which should be on the opposite plan (often due to a change in their circumstances at home). It’s tricky to understand, and in our book, that means it’s not doing right by our Flick whānau.

What’s changing, and what will it look like?

Essentially, the Government is phasing out the distinction between Low User and Standard User for each pricing plan, so that everyone’s in the same category. With the axing of the Low User plan, daily fixed charges will increase by 30 cents a year for five years (so that from 1 April 2026 the daily fixed charge will be $1.80). On 1 April 2027, the low fixed charge will be phased out completely and there won’t be a price cap on fixed charges any longer.

Won’t that mean prices can keep going higher?

We hope not, and that’s not the aim of the regulatory change, but exactly how it will play out at this stage is unclear. What is clear is that the glue holding this phase-out together is retailer competition - dropping the Low User plan relies on Kiwi consumers having lots of options to choose from for their power provider, as well as lots of innovative plans (like our Off Peak plan) to keep electricity prices fair.

So, from our point of view, it’ll be more important than ever that the Government ensures fair play across the market so that independent retailers can afford to stay in the game, keeping the pressure on and continuing to provide better prices and better service.

So how is Flick approaching these changes in its pricing?

While we don’t break down individual charges on the dashboard and bills for all of our plans, we still set our prices using a cost-based approach. We do this by taking all the direct costs Flick incurs from our suppliers (for things like distribution, metering and generation), and adding our small Flick fee to cover the cost of operating and delivering a fair return so that we can continue to invest in our products and services.

With the Low User changes in mind, we want to assure our Flicksters that:

  • Our pricing approach for these changes uses a transparent methodology and is, as always, based on our values of fairness and transparency. We hold ourselves accountable to our own high standards.
  • Where variable charges and fixed daily charges have been adjusted by Network companies to accommodate the regulation changes, we’ll simply be passing these through to you.
  • Flick won’t be making any additional profit as a result of the Low User changes. We’ll simply recover the costs of supplying electricity to our customers’ homes and businesses as we’ve always done.

So who will benefit from the phase-out?

The reality of removing the Low User plan is that some will win, some will lose. MBIE’s research suggests 60% of households will be better off from the phase-out, with lower power bills - that’s those who’re currently on Standard User plans, and those on Low User plans using more than 6,500kWh a year. But that also means that approximately 40% of households may face higher power bills during the phase out, and this will most likely be those on Low User plans who use less than 6,500kWh a year.

Of particular concern for us here at Flick are the low-income, low-use households. But we’re hopeful that government initiatives will provide the support that’s needed, including the Winter Energy Payment, the Warmer Kiwi Homes programme, the Healthy Homes Initiative, and the changes recommended by the Electricity Price Review to target energy hardship.

Here at Flick, we’re supportive of the phase-out of Low User plans so that power prices are more fair across the board. But, as we’ve said above, it’ll need to be underpinned by a market that allows competition to thrive and gives all Kiwi consumers everything a well-functioning electricity market should: affordable, sustainable and reliable power.