Power push seen as lame
‘‘Urgent’’ action announced by the Electricity Authority yesterday to improve the electricity market may not be enough to lower prices, independent retailers have warned.
Electric Kiwi chief executive Luke Blincoe said the wholesale price of electricity had been high for the best part of a year.
‘‘That doesn’t support competition and it is only competition that keeps prices down,’’ he said.
The Electricity Authority wrote to the bosses of the country’s top four power companies yesterday telling them it intended to ‘‘urgently amend’’ rules that apply to the wholesale market for electricity.
The authority is invoking a ‘‘backstop’’ scheme that would allow it to quickly force Meridian, Mercury, Contact and Genesis to both buy and sell electricity futures through the wholesale market on regulated terms.
Blincoe said the theory behind such ‘‘market-making’’ reforms was to ensure generators sold a sufficient amount of power into the wholesale market at a fair price.
Energy Minister Megan Woods announced in October that she would require big power companies to sell electricity ‘‘at affordable rates into the wholesale market’’ to level the playing-field for smaller and independent retailers.
But Blincoe said the action taken by the Electricity Authority yesterday did not go far enough.
The regulator should have immediately implemented a mandatory market-making regime, instead of an invoking a ‘‘backstop’’, he said.
‘‘This appears to be a threat that they are going to hold in their back pocket.’’
Flick Electric chief executive Steve O’Connor said the authority was only ‘‘tinkering around the edges’’.
‘‘This move is unlikely to make power prices cheaper for consumers,’’ he said.
‘‘It . . . fails to address the fundamental issue that is stymying retail competition, which is that smaller retailers aren’t able to buy power on the same terms as the vertically integrated gentailers.’’
The flow of electricity between the South and North islands will be constrained until April because of maintenance work being carried out by Transpower, and the Pohokura Gas Field will be out of action from March 11 to 24 which will limit thermal generation.
There are concerns that could result in a significant spike in wholesale pricing, though Blincoe said that if this happened, it should not effect the vast majority of consumers who had locked-in power prices, in the short term at least.
Different industry sources speculated the Electricity Authority might have decided to take action on the wholesale market now only out of concern that it might be blamed for a coming price spike, or as a result of a ministerial intervention.
Electricity Authority chief executive James Stevenson-Wallace said in his letters to the power company bosses that its decision to invoke the backstop did not replace its longerterm project for ‘‘an enduring solution for market-making’’.
The authority said the new backstop mechanism would come into force on Monday but would lapse nine months later.
Blincoe said Electric Kiwi had been ‘‘consistently disappointed’’ by what he believed was the authority’s reluctance to act on calls for industry reforms.
He said the authority should by now have implemented a ban on customer ‘‘win backs and saves’’ that was recommended by the Electricity Price Review last year.
The proposed ban is designed to ensure large gentailers don’t wait until customers defect before offering them their most competitive pricing.
That change would have a direct bearing on consumers who were probably overpaying $500 million a year, Blincoe said.
‘‘That seems like something really easy to implement, but they are still consulting. I don’t buy any excuses that it is complex – the whole industry is complex.’’
O’Connor said the results of a consumer survey conducted for the Electricity Authority in March last year, but released only this month, was ‘‘a warning signal’’ that all was not well in the industry and for consumers.
‘‘The results were not good. The poor ratings are up in every single category,’’ O’Connor said, adding that he believed the authority could have released the survey findings earlier.