Electricity prices not manipulated says committee

6.00 pm

An official investigation into the wholesale electricity market says prices have not been manipulated by electricity generators.

The Electricity Market Surveillance Committee launched the inquiry a month ago after electricity retailer On energy complained that the wholesale electricity price was too high.

Since May, wholesale prices have reached as much as double the retail price.

All four major electricity generators are also retailers and it was suggested they were able to sustain losses on the retail side because they were making a big profit on the generation side.

But the committee said in a statement that the electricity market was not affected by an "undesirable situation".

"The committee does not justify current spot prices...But on the evidence before it, it cannot find that they occurred as a result of the opportunistic use of market power," the committee said.

Committee chairman Duncan McMullin said the rules concerning an undesirable situation were designed to ensure an efficient and competitive spot market.

"Those rules should not be used to shield particular market participants from market forces unless, for example the failure of a market participant threatens trading and settlement on the spot market as a whole," he said.

Wholesale prices spiked to around $300 per megawatt hour early in June compared to a more typical $40 to $60 per MWh for this time of year as a dry, cold winter fuelled demand amid low hydro lake levels.

The price spike has prompted two large electricity retailers, Natural Gas Corp and TrustPower, to issue profit warnings but analysts have re-rated up Contact Energy which has surplus generation.

Energy Minister Pete Hodgson says the report offers a welcome reassurance that current high wholesale electricity prices are not the result of market manipulation or abuse of market power.

He said the report indicates the electricity market is "less than perfect" in some respects, and the Government will make adjustments to the structure of the industry.

- REUTERS, HERALD ONLINE STAFF