From 1 January 2021, Nova will be increasing the carbon charge component in our natural gas pricing for all residential and business customers to reflect increases in the cost of NZ Carbon Units (NZUs) driven by recent reforms to the NZ Emissions Trading Scheme (NZ ETS).
Nova’s residential and small-to-medium business natural gas customers* will see an increase of:
- 0.3071 cents per kilowatt hour (kWh), excluding GST and before any applicable prompt payment discount, for natural gas customers on price plans that include a prompt payment discount; and
- 0.2610 cents per kWh, excluding GST, for natural gas customers on supply plans that do not include a prompt payment discount.
For an average residential natural gas customer using 5,500 kWh of natural gas per year, this change will increase their monthly bill by $1.20. ^
For an average commercial natural gas customer using 50,000 kWh of natural gas per year, this change will increase their monthly bill by $10.88. ^
^ The effect of the change will vary depending on a customer’s natural gas use.
* The carbon charges applicable to Nova’s larger industrial business natural gas customers are managed and communicated separately.
The Emissions Trading Scheme – how it works
The NZ ETS is one of the Government’s main tools for meeting its climate change targets.
The NZ ETS 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).
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.
The reforms include:
- The NZ ETS will now have an emissions cap that will decline over time to meet New Zealand’s 2050 emission targets.
- The price for emissions produced in 2020 will be capped at $35 per tonne of CO2e, an increase from $25 per tonne of CO2e for emissions produced in 2019.
- From 2021, the price cap will be removed and will be replaced by auctions. The Government will commence auctioning NZUs from May 2021 and auctions will be held quarterly.
- For 2021, auctions for NZUs will have a floor price of $20 per tonne of CO2e and a ceiling price known as “cost containment reserve” that will be activated if the price for emissions produced in 2021 reaches $50 per tonne. Both the floor price and cost containment reserve price will increase by 2% per annum out to 2025.
These reforms have resulted in increases to the cost of NZUs. Since the announcement of the reforms, NZUs have been trading between $30 and $35. In contrast, for the majority of 2019 NZUs were trading near the fixed price option of $25.
More information about these reforms can be found on the Ministry for the Environment website.
Common questions and answers
When will I see these changes on my natural gas bill?
The changes take effect from 1 January 2021, so you will see your pricing change from your first bill after this date and onwards.
Why are these changes happening on 1 January 2021?
Nova has decided to increase the carbon charge component in our natural gas customer pricing from 1 January 2021 to recover cost increases to the price of NZUs resulting from reforms made to the Climate Change Response Amendment Act 2002. 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 Nova. Do these changes apply to me and can Nova make these changes under the contract?
Yes. Nova’s fixed term plans allow certain pricing components to be adjusted in certain circumstances, including as a result of government or regulatory changes to the NZ ETS. In this instance, Nova is increasing the carbon charge component of your natural gas bill as a result of changes made by the Climate Change Response (Emissions Trading Reform) Amendment Act, passed on 22 June 2020.