How inflation impacts your utility bills

Posted on Jan. 6, 2023, 10:08 a.m.

How inflation impacts your utility bills

What's coming in 2023? 

As you'll no doubt be aware, we're currently operating in a high-inflation global environment.

Historically, at least in the last five years, inflation has generally been well controlled in NZ. However, NZ is not immune to the effects COVID has had on the global economy, with CPI increasing at about 7.5% pa for the Sept 22 quarter (Source: Stats NZ). To put this in perspective, inflation in the Sept 21 quarter was 4.9% and 1.4% in 2020.

This is largely driven by recent COVID-19 impacts, increased government spending and borrowing, and Russia’s invasion of Ukraine, all of which has had a major hit on our supply chain and supply costs (particularly, retail and consumables).

On top of high interest, NZ’s historically had high property prices (and rent), which is expected to result in households and businesses finding themselves in a more difficult time in the second half of FY23, and going into FY24.

There is also a strong market sentiment that there will be a technical recession in 2023, causing major concerns for the NZ population and NZ business owners. In the face of an impending economic crisis, and NZ imports facing potential supply chain constraints due to a significant COVID outbreak in China, 2023 will likely bring major challenges for NZ businesses and households alike.

So what can you do?

A few things can offer some respite for NZ businesses. This includes emphasising cost management (i.e., business spending and/or costs), and reducing any excess spending on projects or activities not directly related to your goals.

In terms of combating energy costs, some ways you can manage any rate hikes within the coming year by your power company include:

  • Signing up for long-term fixed pricing plans (with benefits and discounts), which will provide you with greater certainty in uncertain times, and a lower energy cost overall
  • Looking into green subsidies and/or grants for your business - if applicable, look into applying for government grants and subsidies to support your business’ costs, such as EV rebates for your car fleet, and applying for sustainable grant funding (e.g., EECA) for any capital costs (e.g., machinery, equipment etc.) that might be required by your business
  • Looking at your power consumption load profile, and see if your current electricity plan is right for your business’ type. For example,
    • If you use more power during the off-peak than on-peak periods, it might make more sense to go for a peak/off-peak pricing plan to reap the advantages of the different pricing for different periods
    • If you have a flat load profile, look at the weighted average cost on a typical day, and see if you’re better off staying with a peak/off-peak option, or if you’d be better off on a lower fixed rate option.

Prepare for the downside

It’s unlikely that the current period of high inflation will improve in the immediate term. It's likely to last for another 1-2 years until it returns to more ‘normal’ levels given the lag effect on any new policy changes that are implemented now.

This means that now is a better time than any to prepare for the upcoming challenges the economic environment will bring, and to make moves to protect your business from high expected costs.

At Tensor, we provide households and businesses with flexible options specifically catered to what they need. By controlling your utility costs using one of the approaches above, you’ll be able to at least prepare your business so it is well set up to face the upcoming challenges that 2023 will likely bring.

We highly recommend fixing your supply contracts at a rate that’s affordable for your business, where possible - whether it’s for interest rate/mortgage payments, or for power supply. This will help you manage (or effectively, hedge) some of the price risk that will be coming in the next year.

If you’re considering switching power suppliers to help manage your utility bills and/or would like to discuss your options for power supply, contact us using our website chat, our general email address, or using our contact form here to talk through your options.