Electricity prices pegged despite chaos

By CHRIS DANIELS energy writer

Dry winters, regulatory dramas and a shambolic start to retail competition have been part of the New Zealand electricity industry in the past four years.

But the latest Government research has shown something that few industry watchers expected: that power prices for home users have barely shifted since 1998.

Ministry of Economic Development officials have, for the past four years, surveyed all the electricity retailer and power lines companies. In their latest report, they say prices charged by the monopoly power lines companies have fallen by an average of 1.7 per cent, or $9 a year, for the average domestic power user.

Retail charges levied by the incumbent, or dominant, retailer in each region have increased by an average 6.7 per cent, or $72 a year.

If consumers chose the cheapest retailer offering power in their area, they would have, on average, had a price fall of $13 a year.

A big factor in the nationwide drop in line prices has been the 11 per cent cut in charges by Vector, which cut bills for its 221,880 Auckland, Manukau and Papakura customers this year.

A spokesman for state-owned generator-retailer Meridian, Alan Seay, said the declining - or at least stable - domestic electricity prices of the past four years would not continue.

The cheap prices of the past were the result of an increase in the level of competition between rival electricity retailers and an excess of supply over demand.

The surplus of generation capacity was ending and new power stations needed to be paid for - meaning a likely increase in power bills.

Contact's general manager of corporate affairs, David Hunt, said the ministry's figures should be interpreted with caution.

However, it could be concluded that the areas that have had the largest price increases are the parts of the country where electricity prices in 1998 did not reflect the full cost of supply.

Across the Auckland region, there is a difference between those connected to the publicly owned Vector network (Auckland City, Manukau City and Papakura) and those covered by UnitedNetworks (Rodney, North Shore City and Waitakere).

UnitedNetworks customers are paying an extra $79 a year on their power bills, with $49 of that increase coming from UnitedNetworks in lines charges, while the rest comes from a 3 per cent price rise from incumbent retailer Genesis (formerly On Energy).

Country areas have been hit by rises in the past few years, in some cases by hundreds of dollars a year.

Second worse in the country was Meridian's price increases in the Northpower region, which includes Whangarei. In the past four years, Meridian's prices have added $340 to an average annual bill.

This 34 per cent jump is exceeded only for Trustpower's customers in the Buller network region of the West Coast, where prices have gone up by 35 per cent.

Northland customers in the Top Energy area (the Far North up to Cape Reinga) are being asked to pay an extra $228 a year on their power bills by incumbent retailer Contact Energy.

Coupled with a 15 per cent increase in lines charges, this means the average Far North residential user is now paying $309 more a year.

Feature: Electricity

Energy Efficiency and Conservation Authority