Electricity re-jig model's last chance - Consumer

Photo / Mark Mitchell.

Energy Minister Gerry Brownlee's proposed re-jig of the electricity sector could be the last chance the competitive-pricing model has for the industry in New Zealand, Consumer New Zealand chief executive Sue Chetwin says.

Brownlee is to introduce the changes in the Electricity Industry Bill to Parliament this afternoon. The changes should be enacted by October 2010.

Under the bill, Meridian Energy would have to give its Tekapo A and B hydrostations to Genesis Energy, lines retailers would be allowed back into electricity retailing and Meridian, Genesis and Mighty River Power would have to conduct "virtual asset swap" for 15 years to increase competition.

All major generators would have to make available 3000 GWh of electricity to a hedge market and the Government would set up a $15m fund over three years to help customers switch between retailers.

Chetwin said the swaps would open competition up to a nationwide level, and increase its intensity.

"I think it is going to take two or three years to see whether it's working or not. But if it's not working, I don't think we should pretend and the Government should accept that the competitive model doesn't work in a utility-type industry," she told Radio New Zealand.

She expected aggressive nationwide door-knocking campaigns from providers eager to sign up new customers.

"I think the power companies are going to become the new encyclopedia salesmen quite quickly.

"I think the asset swap - both the physical one and the virtual swap - will mean they will no longer be just competing in the regional area they are generating in, but will have to go nationwide."

She said the move could bring new services and plans into the market, as well as open up new opportunities for new businesses.

"We've already got another a new player in the market, which allows you to buy you electricity in advance, which offers a slightly different way to get your electricity. There is going to be an opportunity for smaller, niche players to get in. Under the current model, it's almost impossible.

"I think New Zealanders are starting to realise they can look at their electricity and can get better deals.

Chetwin recommended people look at Consumer's website, where the organisation had posted a side-by-side analysis and comparison of different plans from different providers, "so people could compare apples with apples".

The site also led power users through the process of easily and electronically switching from an expensive power company to a cheaper one.

"On average, it takes about seven to 10 days to make a switch, which shows there are some very good electricity providers and some very bad ones. Next year, I think they are going to have league tables which show which are the bad ones, which will be great for consumers."

Chief executive of energy retailer Powershop, Ari Sargent, said yesterday the changes could backfire and increase prices.

The lack of competition in the market needed to be addressed, but the planned re-shuffle of generation assets could be a mistake, he said.

The Tekapo A and B power stations were on the first lake in the Waitaki River - the lifeblood of New Zealand's electricity supply system.

"Tekapo can control the water available to generate electricity throughout the entire Waitaki system," he said. It would weaken the coordination of water flows to Meridian's remaining six hydro stations downstream.

It was "completely reckless" to provide commercial incentives to a single supplier who had the power to restrict water to the rest of the downstream hydro stations, he said - it wasn't about water not reaching the remaining Meridian stations, but how flows could be "gamed" by Genesis to affect wholesale electricity prices.

"This puts the security of supply at risk and will see a change in river operation that will increase wholesale prices and prices to consumers, particularly in the South Island," said Sargent.

- NZPA