Energy companies under ETS scrutiny

More questions were raised today over whether the pending implementation of the emissions trading scheme (ETS) is being used to the financial benefit of energy companies.

Mercury Energy and Contact Energy have announced retail increases which will add 3.3 per cent and 3.2 per cent respectively to household power bills after July 1 on account of the implementation of the ETS.

Ari Sargent, chief executive of online energy retailer Powershop, said it was never in doubt that the ETS would have an effect on wholesale energy prices.

"But the ETS scheme has been known about for quite some time, so our view is that wholesale prices already reflect the ETS scheme. So to some extent that should have already been reflected in retail prices," Mr Sargent said.

"So it seems a little bit opportunistic to be using the ETS as an excuse to put up prices now, when in fact they would have been reflected in wholesale prices for probably the last nine or 12 months."

Mr Sargent said retailers who had not indicated upcoming price increases were likely to have already worked them into pricing structures over the past several months.

Contact Energy said today while never popular, the increased costs were a direct result of the ETS and were based on the Economic Development Ministry's average emissions intensity calculations.

"Contact has assessed the impact of the ETS and we will increase our variable charge for gas, LPG and electricity mass market customers to reflect the increasing cost of energy."

Some customers on Contact's winter price promise would not face a July 1 electricity price increase.

Act Party MP John Boscawen said yesterday the Government would get "windfall gains" from energy generators, particularly when they sold power produced from renewable resources.

He pointed out in Parliament today figures in the budget forecasting an increase in the value of electricity generation assets of $821 million and asked if that included windfall profits from the likes of Mercury Energy.

Climate Change Minister Nick Smith said the valuation change was not a reflection of the ETS, and in terms of pricing, there were complexities in the electricity market and from the ETS which made it difficult to determine exact impacts.

"The Government will be watching the power companies closely and if we believe they are unfairly putting up prices as a consequence of the ETS we reserve the right to have some form of inquiry," he said.

- NZPA