Prosecution warning for power firms

Power companies have been warned they will face court prosecution if they continue to mislead customers.

Commerce Commission chairwoman Paula Rebstock, speaking at an energy conference in Auckland yesterday, said power companies had been "slow to understand" their obligations under the Fair Trading Act, which covers false and misleading advertising. Four investigations into power company breaches of the act were under way, she said, and the commission was unlikely to continue making out-of-court settlements, instead moving straight to court prosecution.

Most of the big power companies - two of which are state owned - have in the past few years either reached out-of-court settlements for breaching the act, or been prosecuted.

Contact Energy is facing court action for what Ms Rebstock said was misleading consumers into thinking they had to switch companies and what rates were being charged. This relates to Contact's Empower brand.

Contact last year paid a $30,000 donation and ran public apologies in newspapers after admitting it broke the law when it misled customers about the real reasons for price hikes.

It had implied that charges from the lines companies had increased, when it was Contact raising its prices.

Other big players in the industry, including Meridian and Trustpower, have reached out-of-court settlements, while Mighty River (owner of the Mercury brand) has been prosecuted for misleading television advertisements.

Ms Rebstock said the commission was also looking into two cases of alleged anti-competitive behaviour, one from Auckland energy network company Vector and the other from Contact Energy. The Vector case began after a complaint from rival gas company Nova Gas, while clauses in Contact's contracts with commercial energy customers were being investigated.

She said the inquiry into Contact was at a very early stage.