Power rise leaves Bradford red-faced

By Mark Reynolds

Business Herald reporter


The Government has suffered another setback in its electricity reform programme, with state-owned First Electric yesterday announcing a 9 per cent rise in prices.

First Electric is the company that Max Bradford switched his Rotorua household power account to last year.

The minister responsible for energy made the switch to show consumers they had a choice of supplier following electricity law changes.

A further embarrassment for Mr Bradford is that First Electric is owned by Mighty River Power, one of three companies formed from the split of Government-owned ECNZ.

First Electric said the price rises for its 26,000 customers were caused by high charges by some network or lines companies, and the costs of servicing electricity meters.

"We are now in a situation where we can no longer afford to carry the line charges and those new meter charges at our current pricing," said First Electric chief executive Alasdair MacLeod.

Mr MacLeod said the price increase was not linked to the current volatility in wholesale electricity markets.

Even after the latest increases, First Electric's prices in Auckland will still be about 16 per cent lower than Power New Zealand's and 14 per cent lower than Mercury Energy's charges.

Mr Bradford said the price increases underlined the need for regulations to be introduced to control line company charges.

"The Government will be dealing with monopoly lines company abuses in a very short while."

He said he remained confident that competition would lead to price reductions in the future, "but in the meantime we will regulate monopoly lines companies to make sure consumers are not being fleeced."

That confirmation came as Christchurch-based network operator Orion pledged to freeze its line charges for three years.

Orion chairman John Gray said yesterday that there was therefore no need to regulate because competition was starting to work.

"It is important to avoid hasty, reactive regulatory decisions which would prevent the reforms from working," Mr Gray said.

But Labour energy spokesman Pete Hodgson said the First Electric price rise was solid proof the electricity reforms were a failure.

"If the Government's own retailer is going to join the dismal series of price rise announcements then New Zealanders can safely conclude that the reforms have failed."

Mercury Energy, which is also owned by Mighty River Power, said it would hold its prices for at least 12 months.