Report clears power retailers of price gouging

By RENEE KIRIONA

A Government report has cleared electricity retailers of gouging from increases in power prices but consumer groups are not convinced.

The Electricity Prices and Retail Competition (EPRC) report, released yesterday by Energy Minister Pete Hodgson, analyses electricity price movements since the industry was reformed a decade ago.

The 11-page report, triggered by consumer outrage over rising power prices, found there was no clear evidence of a "steep change" in profit margins for retailers. And it attributed the recent increases to the cost of new generation needed because of dwindling Maui gas supplies.

It was expected the Electricity Commission, hoped to be operating within two months, would address the report's other finding, that there had been slow improvement in the level of competition.

"The conclusions in this report are necessarily tentative but should usefully inform debate about the fairness of electricity prices," the report said. "Competition is essential for fair prices and the improvement in that area must continue."

However, the Major Users' Electricity Group, which represents a third of the country's users, believes the country's major power companies are making huge profits.

The group's executive director, Ralph Matthes, said the report failed to paint a full picture of the situation.

"Maybe the electricity retailers are not making profits but their parent companies, most of which are generators, certainly are."

Mr Matthes believed much of the profits were being derived from the increases in wholesale electricity that generators sold to retailers.

Contact Energy, Meridian, Genesis and Mighty River Power all ran retail and generation businesses.

The Consumers' Institute chief executive, David Russell, said that while the report was useful, he also agreed that analysing retailers in isolation gave only part of the story.

The report, he said, showed that the Government had not made any headway since the reforms started.

"At the time the reforms started, an accusation was made that electricity companies were fat and lazy and needed to be sharpened up by a more competitive market, but that does not appear to have happened."

In the past 12 months most parts of the country have been affected by electricity increases, with the most recent including Contact Energy/ EmPower's 14 to 15 per cent increase on the North Shore.

Outrage at similar increases by Contact in Invercargill has resulted in Mr Hodgson commissioning a second report on the firm's pricing.