5 Sep 2023

Power retailer claims generators have 'hoodwinked' Electricity Authority, keeping prices high

12:25 pm on 5 September 2023
Genesis Energy's Huntly Power Station.

Genesis Energy's Huntly Power Station. Photo: Genesis Energy

The Electricity Authority (EA) is being urged to focus on industry competition and pricing as a means to address the unaffordability issues facing a growing number of households.

The authority is calling for feedback on whether retail customer care measures should be mandatory as opposed to voluntary, but the chief executive of retailer Electric Kiwi, Luke Blincoe, said the real issue was price gouging by the biggest power generators.

The consumer care guidelines were introduced in 2021, and covered consumer care, provided guidance on customer sign-up processes, what power companies should do when consumers were struggling to pay their bills, how power companies ensured medically dependent customers were protected, among other matters.

Blincoe said Electric Kiwi thought there was probably a need to introduce mandatory care standards, but that would not solve the underlying problems, which could best be solved with increased competition.

"Our real concern is that this is a distraction from the EA's real mandate and that's about affordability," he said.

"Affordability is what's driving these issues, and while the market sees record profits from generators again this year, EA is silent on that."

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Luke Blincoe. Photo: RNZ/Nikki Mandow

A recent Consumer NZ survey indicated 19 percent of households had trouble paying their monthly power bill in the past 12 months, while 12 percent of households reported being cold because they had to cut back on heating due to its cost.

Consumer NZ chief executive Jon Duffy estimated 40,000 households had gone without power at some point in the past year because they could not afford to pay.

"We acknowledge that profits are a healthy and normal part of business, but there's a question around what is excessive."

Blincoe said pricing competition would increase if the three large partly government-owned government generators, which included Meridian, Genesis and Mercury, were made to sell off some of their assets to another party.

He said another measure would be to break up the vertical market integration enjoyed by gentailers, which encouraged the cross-subsidisation between generation and retail.

"These aren't small problems."

Blincoe said a change of regulators would probably be required, as the EA had been unable to address the issue.

"It appears they're suffering from regulatory capture here. The generators seem to have completely hoodwinked them in terms of what's required."

Trade association the Major Electricity Users Group said it was also concerned about prices and the need to improve competition among generators.

It estimated consumers paid between $5 billion and $6b a year for electricity, with about two-thirds used to cover annual wholesale and retail market costs, with the balance used to cover costs associated with regulated electricity line service monopolies.

Executive director Karen Boyes said the customer care changes were not particularly relevant to major users, who wanted fair and competitive pricing in the wholesale market.

She said the group had recently raised the pricing and competition issues with the new EA chair Anna Kominik, as a priority issue for the largest consumers of electricity.

"We also have raised it with the Ministry of Business Innovation and Employment, and will do so during the consultation on the energy strategy as a key issue that we'd like to see work on."

In addition, Boyes said major users were concerned about the transition to renewable energy and whether future needs would be met.

The EA's consultation on customer care closes on 2 October, with relevant documents available on its website.

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