Power firm takes Government to task on high prices

By CHRIS DANIELS consumer reporter

The Government should start playing a bigger part in bringing down electricity costs, instead of just cashing in on big profits, says one power company.

Tauranga-based TrustPower is facing huge increases in wholesale power prices, ostensibly caused by low water levels in South Island hydro lakes.

Spokesman Graeme Purches said that at this time of high prices, the Government was happy to continue taking big dividends from state-owned power generators such as Meridian and Genesis.

Lake levels have crept up in the past week, but power retailers say the price of wholesale electricity is still too high.

Soaring wholesale electricity prices are already causing New Zealand's largest power retailer, On Energy, to lose more than $1 million a day.

It was forced to raise its prices by 16 per cent and is now facing a mass exodus of customers.

"The Government is getting well over half the average consumer's power bill," said Mr Purches.

"The biggest opportunity to influence power prices lies in the hands of the very people who have been jumping up and down saying a competitive market is going to fix this."

He said recent criticism blaming retailers for not planning properly for a cold winter and low lake levels was unfair.

With lakes at their current levels, a retailer should expect to pay around double the average cost for power on the wholesale market.

Instead, they were paying four times the average - an increase not justified by the hydro storage lake levels.

A spokesman for Energy Minister Pete Hodgson said $9 million would be spent on energy efficiency and conservation measures in the next financial year.

Not all power retailers had found it necessary to increase their prices as On Energy had.

While the retailers were feeling the pain of high wholesale power prices last year, Meridian, one of the state-owned generators, was paying high prices to competitors while work was being done on its Manapouri power station.

Meridian has already announced it will pay the Government a special dividend of $100 million.

It is one of the big generators accused of "gaming" - controlling the supply of electricity to drive the price artificially high in order to make a windfall profit or drive competitors to the wall, or both.

On Energy has asked the Market Surveillance Committee, which operates by rules agreed between the traders of electricity, to investigate whether the market is working as it should.

The committee is expected to publish its report this week.