Ruling opens the door for lower power prices

By Mark Reynolds

National retailers like Farmers and Progressive Enterprises will be able to negotiate significantly lower power prices for some of their stores following a precedent-setting Commerce Commission ruling yesterday.

The decision has implications for any tenant who is currently forced to buy electricity from their landlord.

The commission has ruled Trans Tasman Properties must increase the choice of power retailing companies available to tenants at its Finance Centre plaza in Auckland. The ruling means Trans Tasman and other major property companies like Westfield New Zealand will have to let tenants out of exclusive power-purchase contracts they are currently tied to.

Richard Rice, national manager of shopping centres for Westfield, which manages St Lukes Group's shopping centres, said the ruling would force his company to allow some tenants to buy power competitively. Currently Westfield buys power in bulk, and onsells it to its tenants.

"There will be some people who feel they can negotiate a better deal on their own and it looks like we will have to let them do that," he said.

Mr Rice said companies like Farmers and Progressive Enterprises have indicated they want out of the collective purchasing agreements.

"It could well be that if enough people want to negotiate on their own we will not get the bulk purchasing deals we have now. It could mean some tenants have to pay more for power," Mr Rice warned.

Mr Rice said Westfield makes a profit on its power retailing business, but he would not quantify how much money was at stake.

John Dakin, spokesman for the Property Council of New Zealand, said the commission ruling would allow tenants to choose their power suppliers, and that might well allow some tenants to cut costs. But property owners might have to renege on long-term power supply contracts with electricity retailers and there could be costs incurred in that.

"There could be issues of compensation for breaking those supply contracts," he said.

The Commerce Commission has made its ruling under the Electricity Industry Reform Act, which took effect from April 1. The act made it illegal for a company to both own monopoly power lines and sell electricity.