Power and gas tipped to rise in spring

By CHRIS DANIELS energy writer

Energy companies are waiting until early spring before working out how much to increase their prices, with gas and electricity both expected to rise.

The Reserve Bank is expecting power price rises of at least 4 per cent in both the September and December quarters.

Mercury Energy general manager John Foote said there would be no price rises before the end of next month. He could not say what would happen after then.

"I just don't know when we [will] form a view on medium-term price expectations. We are in a competitive market here - as On Energy found out when they put up their prices.

"It would be a very unusual market if everyone was paying more for their base product over a period of time than they were actually recovering. It would be very unusual for everyone to continue to go blindly down that path just tossing money into a hole continuously."

Genesis has made a similar commitment to keep prices stable until the end of winter. As with Mercury Energy, its freeze is due to expire at the end of next month.

Contact Energy, widely believed to be the company that has done the best out of the recent high wholesale power prices, said yesterday that it did not have any immediate plans to adjust its power prices.

"Our position as a retailer and generator allows us to smooth out price fluctuations, but sustained changes must inevitably work their way through the whole system," said corporate affairs manager David Hunt.

First Electric, the other power retailer owned by the state enterprise Mighty River Power, had no plans to increase its prices, a spokeswoman said.

Meridian Energy spokesman Alan Seay said his company had no plans for any changes in price until at least October but it was likely to look at its price levels then.

The competitive pressures on electricity retailers have changed dramatically in the past few months with the exit of On Energy, previously TransAlta.

On Energy, owned by the Natural Gas Corporation, tried to increase its prices in June. So many people tried to switch to competitors that it cancelled the price rise and sold all its customers to state-owned rivals Meridian and Genesis.

Many believe that the high wholesale prices have pushed out any company that has more retail customers than power-generation capacity.

With only five major companies now selling electricity, they may increase power prices by similar amounts, as the oil companies do with petrol prices.

NGC will be increasing its gas charges this year, saying it has held prices steady for two years.

The company has yet to announce how big the rise will be.

A review of the gas industry began in March, looking at whether it was organised in the most efficient way.

Feature: Electricity

Energy Efficiency and Conservation Authority