Natural Gas Corp wants electricity retailing ringfenced

New Zealand's largest electricity retailer, Natural Gas Corp, is calling for electricity retailing to be ringfenced from generation.

NGC said late last week that it was raising prices for most of its customers as a spike in wholesale power prices continued to bite.

On Saturday, managing director John Barton said the structure of the electricity market led to difficulties for power retailers.

Insufficient price hedges were available and retailers were forced to go to competitors to get hedges, he said.

"Our view is that retailers should be ringfenced from the generators."

While not advocating a full unwinding of retailing and generating businesses, he said some separation was needed to put retailers on a level footing.

Wholesale power prices have averaged more than $200 a megawatt hour in recent weeks, against $40-$60 in average winter conditions.

Ratings agency Standard & Poor's has put the ratings of NGC and 66 per cent-owner Australian Gas Light Co on credit watch because of the exposure to the price spike.

A lowering of NGC's ratings would mean it would have to come up with a large amount of prudential security required to be posted with the New Zealand Electricity Market - possibly around $100 million.

The price surge has hit NGC's share price, which has fallen 18 per cent to a nine-year low of 97c since the company said it was unlikely to post a profit for the half year to June.

Natural Gas Corp has about 30 per cent share of the electricity retail market but only around 6 per cent of generation capacity.

Mr Barton said the price hikes, of up to 19 per cent for some business users in the Auckland region, would be reversed if more normal pricing conditions returned. Other retailers were expected to follow suit.

Retailer TrustPower on Friday issued a warning that its profits for the six months to September would be slashed by around 50 per cent because of the high wholesale prices.

Low hydro-lake levels have been cited as the main reason for the price spike but some market analysts have said that generator bidding behaviour had pushed prices well beyond what could be expected.

- REUTERS