Electricity price rises spur more demands for industry intervention

By CHRIS DANIELS

Price rises of up to 60 per cent are pushing Auckland businesses into the swelling ranks of those calling for the Government to step in and sort out an uncompetitive electricity industry.

Previously the battle cry of consumer groups, businesses are now calling for Government intervention to get realistic competition in an industry many feel has become "too cosy".

Alasdair Thompson, chief executive of the Northern branch of the Employers and Manufacturers Association, said North Island power users were now reporting price rises of a size recently seen by Christchurch businesses.

Increases of such a magnitude were excessive compared to the long run cost of electricity and in the absence of any crisis, said Thompson.

Mark Wheeler, managing director of plastics company Alto Plastics, met Deputy Prime Minister Jim Anderton yesterday to try to pressure the Government into doing something about the increases.

Alto Plastics, which employs 400 people in two plants, one each in Auckland and Christchurch, is facing a jump in its annual electricity bill of $400,000.

Wheeler said that regardless of which company was pitching for the account, the minimum price rise would be around 60 per cent, bringing a total increase over the past four years of 78 per cent.

"Who else can justify any increase of that kind in their business? The cost of generating power has not gone up."

A cosy monopoly between the big four power companies - three of them Government-owned, had developed and businesses were being taken for a ride, he said.

None of the supposedly competing companies was trying to undercut the other, all offering "take it or leave it" contracts.

Energy Minister Pete Hodgson, who is overseas, asked the chief executives of all the major power companies into his office last week.

He has been saying for some time that the level of competition in the electricity market is not good enough. He asked the companies to come back in a few weeks with some solutions.

Thompson said his association and the business lobby group Business New Zealand had put suggestions for new regulation of the industry to the Government. They included forcing power generators to commit a block of their production to supply hedge contracts.

Thompson said resource consent problems were stopping development of small-scale hydro and wind power projects.

"If all else fails Government should separate generators and retailers," he said.

The need for, and threat of, more Government regulation was the main talking point for some of the big players in the New Zealand energy industry, who met in an annual conference in Auckland yesterday.

Electrical engineer and consultant Bryan Leyland told the Utilicon conference that last year's power crisis was a failure of the market, which cost the economy $200 million.

During the times of high wholesale power prices and apparent shortages of electricity, there were 400MW of available thermal generation that was not being used.

He said that both the New Plymouth and Huntly stations operated below maximum capacity.

"I suspect that capacity was not made available because of actual or threatened transmission constraints, some restrictions of fuel availability, maintenance requirements and a commercial imperative to 'make hay while the sun shines'."

He argued for supply side competition, with a central co-ordinator that would operate the power system, buy and sell electricity and manage hydro storage.