Editorial: ETS rises must not wallop consumers

Prime Minister John Key. Photo / Mark Mitchell

As the meter starts ticking with the entry of the transport and energy sectors into the Emissions Trading Scheme, there is clear nervousness about the impact on household budgets.

The Prime Minister has issued a warning to companies about misrepresenting the impact of the scheme. Price gouging, said John Key, would not be acceptable. Yesterday, the Commerce Commission added its voice.

In what it described as a pre-emptive statement, it told businesses that they faced potential court action under the Fair Trading Act if they misrepresented price rises as being caused by the scheme.

The first impact on the public will be felt today at the petrol pump.

Most oil companies will lift their price by 3c to 4c a litre in recognition of their need to buy credits to cover the carbon emitted when their fuels are burned. They, however, are not the target of Government and watchdog concern. Under scrutiny are the power companies.

Already, Contact Energy and Mercury Energy have said they will raise their electricity prices by 3.2 per cent and 3.3 per cent, respectively, from today. The notification is premature, to say the least.

No power company is any position to apply a tariff rise because they are, as yet, unable to accurately calculate the effect of the scheme.

That impact is a matter of considerable complexity because of the structure of the industry and the intricacies of its wholesale market.

The most plausible attempt at an accurate estimate has been made by a technical advisory group of private-sector representatives and officials, which said the additional cost for each household should average $50 a year.

As it happens, that is within shooting range of the indicative figure of $5 a month that Mercury has announced.

But this remains very much an estimate. It is likely to be another six months before power companies will know the flow-through impact and can state categorically how much the emissions scheme is affecting wholesale electricity prices.

As much as been confirmed by Genesis Energy. It operates the emissions-heavy coal- and gas-fired Huntly power station, and will have a heavier financial obligation than generators that have a greater stock of renewable sources.

Nonetheless, it, most laudably, has put off making any pricing decision until December when the exact picture will be known. "Around that time, we'll be able to make a decision on how much of that cost we can absorb or how much we can pass through to our retail tariff," a Genesis spokesman says.

As the Commerce Commission noted, businesses are not required by law to give reasons when they raise prices. But when they do try to justify price increases to customers, the reasons they give must be accurate.

Nor, said the commission, could a business create the misleading impression that the Emissions Trading Scheme, say, was the sole reason for a price increase if the rise was more than the extra cost of the scheme. In that regard, Mercury, for one, could yet be on thin ice. Its website says its increased retail price is "a result of the ETS".

Consumers are not captive to any power company. As the Prime Minister suggested, they should shop around if they feel a company is taking advantage of the Emissions Trading Scheme.

The same applies to the retailers, trucking firms and many other businesses that will, in various measure, seek to pass on higher electricity and fuel costs.

If they wish to avoid a backlash, they will have to provide convincing explanations for price increases. Consumers are being asked to pay more than their fair share of costs to help this country meet its Kyoto Protocol commitments. They should not have to pay too great a price.