The government has dropped the part of its liquefied natural gas plan that worried households most. The power bill levy that was meant to pay for a new gas import terminal is gone, and in its place the Energy Minister has told the companies that run the electricity system that keeping the lights on is now their job, with much larger fines waiting for those that fail.
Energy Minister Simeon Brown set out the change at the Auckland Business Chamber this week. When the terminal was first announced in February, the roughly one billion dollar facility was to be funded through a levy of about two to four dollars per megawatt hour, a charge that power companies would pay and that the opposition argued would land on ordinary bill payers. Labour spent months calling it a gas tax, and the label stuck. Brown has now abandoned that mechanism entirely.
“It will not be funded by a levy on power bills. Responsibility for keeping the lights on sits squarely with the electricity sector,” Brown said, as reported by RNZ. The Ministry of Business, Innovation and Employment will now work with the power companies on what the minister called a fair funding model, with the detail to come later in the year.
Two things appear to have forced the rethink. The first was the political damage from the gas tax framing, which gave the opposition a simple line to run in an election year. The second was the war between Israel and Iran in February and the closure of the Strait of Hormuz, which sent international gas prices spiking in a way the government’s own modelling had not allowed for. A terminal built to shield the country from energy shocks suddenly looked exposed to exactly the kind of shock it was supposed to guard against.
None of that has stopped the terminal itself. The government says it will press on, with the facility expected to be finished in 2027 or early 2028. Two possible builders have been shortlisted and a deal is expected this year. What has changed is who carries the bill, and the government would rather that conversation happen between officials and the generators than show up as a new line on a household power account.
Alongside the funding change, Brown announced a sharp lift in the penalties for power companies that fail to do their part. The fines attached to the Winter Energy Reliability Obligation, the rule that requires generators to have enough backup ready for cold, dry, still stretches of weather, will rise from two million dollars to whichever is largest of three times the commercial gain, ten per cent of company turnover, or ten million dollars. For the big generators that sell to most New Zealand homes, ten per cent of turnover is a far more serious number than a flat two million ever was.
The minister also confirmed that the Ministry of Business, Innovation and Employment has begun consulting on tougher dry year backup rules, and that the Electricity Authority will be given wider powers to oversee how the sector manages dry year risk and to report to the minister each year on whether it is doing enough.
Behind the regulatory language is a real squeeze. “New Zealand currently has an energy shortage. The lakes are low, the sun hasn’t been shining, the wind hasn’t been blowing, and we have an inadequate supply of natural gas to meet demand,” Brown said in a statement on the Beehive website. He said the country was running the highest wholesale electricity prices of any of the nations New Zealand usually compares itself to, calling the situation “devastating for our manufacturing and export sectors” and saying it was leading some firms to cut production or close.
About 88 per cent of the country’s electricity comes from renewable sources, mostly hydro, but a run of low lake levels and weak wind and sun can stretch on for weeks. Gas has long filled that gap, and with domestic fields in decline the government argues an import terminal is the insurance the country needs. Critics are not convinced. Labour energy spokeswoman Megan Woods has argued that imported gas “exposes New Zealand to this volatility around pricing around the world”, and that it was always going to be a more volatile and insecure way to run the energy system than the alternatives. The gentailer Meridian has gone further, telling MPs that New Zealand does not need imported gas at all to manage dry year risk, a view we covered earlier this month.
Dropping the levy removes the most obvious cost to voters, but it does not settle the bigger argument. The terminal still has to be paid for somehow, and a fair funding model agreed quietly between officials and generators can still feed through to power prices in the end. The fines, meanwhile, only matter if they are actually used. With energy near the top of the list of issues voters say they care about, this is shaping up as one of the defining fights of the campaign. If you want to see where the parties stand on energy and the rest before you vote in November, our voting tool lets you compare them side by side.
What do you make of the government dropping the power bill levy while keeping the terminal? Does shifting the cost onto the electricity sector reassure you, or just move the same bill around? Have your say in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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