Dialogue: Price rises will hit 'backbone' of NZ economy

By KEVIN TAYLOR

Power price rises announced this week by Genesis, and likely increases by other companies, reflect a dysfunctional electricity market that resembles a cartel, say business interests.

The Genesis rises affect 150,000 of its small commercial and domestic customers.

Other big electricity retailers say they are reviewing charges as well.

Looming rises for small commercial customers, coming on top of increases this year in contract prices for larger enterprises, were staggering, Auckland Regional Chamber of Commerce chief executive Michael Barnett said yesterday.

The increases would hit small businesses, which made up 90 per cent of New Zealand firms, including retailers, small manufacturers, and importers and exporters.

"This is the backbone of the New Zealand economy," Mr Barnett said.

Larger enterprises in the Auckland region with separate supply contracts had already faced rises of 40 to 50 per cent.

Genesis said this week that power would cost an average 9 per cent more for small commercial and domestic customers in Taranaki, Wanganui, Manawatu and Wairarapa from November 22. But it would also introduce a 10 per cent discount for prompt payment.

The higher charges are blamed on the rising cost of gas needed to fuel generating plants, and changes to the charging system used by lines company Powerco.

Genesis chief executive Murray Jackson hinted at increases for its other 300,000 customers, but said charges would be reviewed after Christmas.

The looming rises come after big profit announcements last week by Genesis and the other two state-owned electricity companies, Meridian and Mighty River Power.

Together, their profits totalled $244.1 million in the June year, up from $194.1 million the year before.

Contact Energy reveals its profit today and it is also expected to be big.

Mr Barnett said State-Owned Enterprises Minister Mark Burton should put the interests of consumers first instead of defending the profit performance of the power SOEs.

The rises suggested something was seriously wrong with the industry.

"It almost looks like a cartel. We see it around the fuel industry, and we are looking as though we are getting a similar situation in electricity."

Business NZ chief executive Simon Carlaw said the rises would hit business hard because one of the country's competitive advantages was its low energy costs, thanks to efficient hydro generation.

"We are moving in the direction of eroding our advantage," he said.

While Mr Carlaw supported firms making a profit, he said the electricity market was not working properly and needed fixing.

Some big firms were being offered only "take it or leave it" supply contracts from one company.

Some faced price rises of up to 50 per cent.

Businesses were afraid to speak out in case they could not secure a new supply contract, he said.

Meridan said it had no immediate plans to increase prices, but spokesman Alan Seay thought they would go up in the New Year.

"I could not give an indication at this stage of how much."

Mighty River retail general manager John Foote said it was reviewing prices.

Contact spokesman Pattrick Smellie said tariffs were always under review, but the company had consistently said prices in future would need to reflect the cost of new generation.

Meanwhile, Mr Jackson said Genesis was "embarrassed" by the way customers had been treated in the retail market, and was lobbying industry regulator Maria (Metering and Reconciliation Information Agreement) to solve problems such as double billing and trouble switching suppliers.

"The whole retail business in New Zealand has just been a nightmare."

Genesis recently bought all the North Island retail customers of former rival On Energy, making it New Zealand's largest power retailer.