From 1 January 2023, Megatel will be increasing the carbon charge component in our natural gas pricing for our residential and business customers. *

We are making this change due to increases in the cost of NZ Carbon Units (NZUs) driven by changes to the New Zealand Emissions Trading Scheme (NZ ETS).

Natural gas customer price changes*

Residential and small-to-medium business natural gas customers will see an increase of:

• 0.376 cents/kWh (excluding GST) for properties on pricing

For an average residential natural gas customer using 5,500 kWh of natural gas per year, this change will increase their monthly bill by $2. ^

For an average commercial natural gas customer using 50,000 kWh of natural gas per year, this change will increase their monthly bill by $18. ^

^ The effect of the change will vary depending on a customer’s natural gas use.

The Emissions Trading Scheme – how it works

The NZ ETS is one of the Government’s main tools for helping New Zealand meet its climate change targets. It puts a price on greenhouse gas emissions, through the purchase and surrender of NZUs to offset emissions.

One NZU is the equivalent of one metric tonne of carbon dioxide or carbon dioxide equivalent (CO2e).

Government reforms

On 22 June 2020 the Government passed reforms to the NZ ETS through the Climate Change Response (Emissions Trading Reform) Amendment Act 2020 and related regulations that were incorporated into the Climate Change Response Act 2002.

The reforms included:

• an emissions cap built into the NZ ETS that will decline over time to meet New Zealand’s 2050 emission targets; and
• the removal of the previous ‘fixed price’ regime for New Zealand’s Carbon Units (NZU’s) that set the maximum price for carbon unit trading. This was replaced with a quarterly auction system in 2021, and a new mechanism to cap NZU demand and supply, called the cost containment reserve (or CCR). The CCR operates by ensuring there is a limited reserve supply of NZUs at each quarterly auction, with additional NZUs being released when NZU market prices reach a certain level (known as a “trigger price”).

These 2020 reforms resulted in increases to the cost of NZUs.

On 23 August 2021 the Government announced new regulatory settings for the NZ ETS - updating the overall cap on unit supply, setting auctioning volumes, and raising both the auction floor price and the CCR trigger price (from $50 to $70 in 2022, then increasing by 10% + CPI each year thereafter).

The 2021 reforms to the NZ ETS were passed as regulations on 27 September 2021 (via the Climate Change (Auctions, Limits, and Price Controls for Units) Amendment Regulations 2021) and are available on the New Zealand Legislation website.

Currently the Climate Change Commission and the Ministry for the Environment (MFE) are consulting on changing to a two-tier structure from March 2023 – with increasing trigger prices for 2023 – 2027 starting at $171/t and rising to $214/t. The consultation closed on 6 October 2022 and the Climate Change Commission are currently considering the submissions and will put final proposals to the Minister of Climate Change and Cabinet for approval to come into force on 1 January 2022. See the consultation webpage here for more details: https://consult.environment.govt.nz/climate/nz-ets-limit-and-price-settings-2022/.

More information about the NZ ETS can be found on the Ministry for the Environment’s website.

Common questions and answers

When will I see these changes on my natural gas bill?

The changes take effect from 1 January 2023, so you will see your pricing change from your first bill after this date and onwards. If you terminate your gas service in January 2023, the final gas reading will be calculated with the increased pricing for your final gas invoice.

Why are these changes happening on 1 January 2023?

Megatel has decided to increase the carbon charge component in our natural gas customer pricing from 1 January 2023 due to increases in the cost of buying NZ Carbon Units under the New Zealand Emissions Trading Scheme.

We understand the impact price changes have on our customers and we do not make price change decisions lightly.

I am on a natural gas fixed term plan with Megatel. Do these changes apply to me, and can Megatel make these changes under the contract?

Yes. Megatel’s fixed term plans allow certain pricing components to be adjusted in certain circumstances, including changes to the NZ Emissions Trading Scheme.