Customer power savings unclear

By Mark Reynolds

The price of electricity on the wholesale market continues to drop, following ECNZ's split into three competing companies two weeks ago.

But the degree to which a drop in wholesale prices would be reflected in a reduction in power bills for household and business consumers has still to be determined.

"Obviously if prices stay down, then that will be passed on to customers," said Jeff Williams, chief executive of Taruranga-based TrustPower which has 200,000 electricity customers nationwide.

"But it's too early yet to say that wholesale prices are going to stay down at these new levels," he said.

The price for a unit of electricity on the wholesale market has dropped by about three-quarters over the past week. The price drop was partly caused by the three former ECNZ companies offering low prices in order to increase their market share. Prices were also pushed down by rain, which has refilled southern lakes and made more water available for hydro-power production.

Retail electricity companies, like Contact Energy, TransAlta and First Electric, buy some of their power on the wholesale market and onsell it to customers for a margin. Some companies rely almost totally on the wholesale market to supply their power, while others have their own generations facilities to supply customers.

Either way, the wholesale price is an indicator for retail prices.

Doug Heffernan, chief executive of Might River Power - which operates under the Mercury Energy and First Electric brands - said the wholesale market is expected to take a few weeks to settle down.

"There is a bit of manoeuvring going on. I think we need to wait and see where it settles down."

The average price for a megawatt of electricity - the main measure for quoting on the wholesale market - had moved to just over $18 yesterday. That compares with more than $75 before ECNZ was split.