The government has reversed course on who pays for New Zealand's planned LNG import terminal, dropping a proposed levy on power bills and instead requiring gentailers to cover the costs.
The government has abandoned plans to charge households a levy to fund a new liquefied natural gas (LNG) import terminal in Taranaki, announcing instead that the cost will sit with the power companies that generate and sell electricity.
Energy Minister Simeon Brown made the announcement at the Auckland Business Chamber on Tuesday, saying New Zealanders had made clear the responsibility for keeping the lights on should sit with the electricity sector, not consumers. The policy reversal comes after the previous Energy Minister, Simon Watts, had announced in February that the approximately $1 billion terminal would be funded via a levy of between $2 and $4 per megawatt-hour on power bills.
What changed and why
Under the original proposal, the LNG facility — intended as a fallback during dry years when hydro generation is low — would have been partly funded by a charge on electricity consumers. The government argued at the time that the terminal would reduce future prices by at least $10 per megawatt-hour and provide insurance against the kind of price spikes seen in 2024, when spot prices hit $800 per megawatt-hour and businesses in parts of the country were forced to shut down.
The government has also agreed to proceed with the terminal, with the Ministry of Business, Innovation and Employment beginning consultation on new regulations for power companies' dry year supply backups.
Brown, who returned to the energy portfolio in April, said the previous government's levy approach was wrong in principle. "What we're saying here is actually the power companies who make significant profits, they are responsible for managing the dry year risk in New Zealand, and the government is saying very clearly they will be required to pay for this."
The government is currently negotiating with gentailers — companies including Contact Energy, Genesis Energy, Meridian Energy and Mercury Energy that both generate and sell electricity — on how the facility will be funded. Genesis, Meridian and Mercury are majority government-owned. The terminal is still expected to be operational by winter 2028, with two providers currently in a competitive pitch process.
What it means for power bills
The dry year risk premium had been baked into power bills for some time, with Brown estimating it translated to between $210 and $350 per year for an average household. The government's shift means that premium should now sit within gentailers' operating costs rather than being passed through to consumers as a visible levy line item.
Whether that translates to lower power bills in practice depends on how the negotiations between government and gentailers proceed, and whether the companies absorb the cost or find ways to recover it through other charges. The Electricity Authority will also have new powers to penalise generators that fail to adequately manage supply ahead of dry years, with fines of up to $10 million.
The opposition has called the reversal a "gas tax" backdown, pointing out the government had already committed to the levy approach and that the terminal's final cost and funding model remain unclear.
This article is for general information only and is not personalised financial advice. Seek advice from a licensed financial adviser (registered on the FSPR) for guidance specific to your situation.