AGL bid could bring cheaper power

By FIONA ROTHERHAM

Australian Gas Light's planned bid for TransAlta New Zealand is predicted to spark aggressive retail competition - a move that can only benefit electricity consumers.

Analysts and industry sources say the result could be the elusive lower power prices sought by former Energy Minister Max Bradford with last year's electricity reforms.

This would suit the Coalition, which is grappling with terms of reference due out this month for its industry regulation review.

AGL is expected to make a formal offer at the end of the week for TransAlta Corporation's 75.8 per cent stake in TransAlta New Zealand through its 71.6 per cent-owned subsidiary Natural Gas Corporation. If successful, it will become the country's dominant energy retailer.

Also tipped is a bid by AGL for Orion's North Island gas network. This tender closes at the end of March, but AGL could run into Commerce Commission trouble if deemed to be too dominant in this part of the market.

The big question is what Contact Energy's response will be to AGL's latest move - the market's second-biggest retail player is not commenting.

Similarly, United States-based Edison Mission Energy is remaining tight-lipped on whether it plans to increase its cornerstone 40 per cent stake in Contact, although it has been widely tipped to do so since a six-month standstill agreement lapsed in November.

Until now, the incumbent retail suppliers have largely stuck to their traditional customer areas.

While further industry rationalisation is likely, Contact's obvious answer is organic growth by competing more strongly for its rivals' customers.

AGL, which holds a strategic stake in TrustPower, is seen as aggressive at the retail end.

Where AGL will remain exposed is in its lack of electricity generation as the Government has made it clear further privatisation of the baby ECNZs is not on the agenda. The present oversupply would mean AGL is unlikely to want to build its own powerplant at this stage.