'Drop prices' to stay in power

TrustPower lost 5000 customers last year - and has been warned it needs to lower its prices or face losing more.
But the Tauranga-based energy company says it has compensated by winning more "high-value" customers and customer loss was not a reflection of how the company was performing.
The company this week revealed its 221,000 customers at the end of 2010 were 1000 fewer than three months earlier, and down 6000 from December 2009.
TrustPower chairman Bruce Harker said retail competition remained strong and was expected to continue for some time as state-owned generator-retailers rebalanced their North and South Island customer bases.
Company spokesman Graeme Purches said the loss in customers was not a reflection of how the company was performing.
"The real measure is the bottom line.
"The impact on the bottom line is nothing like a 3 per cent loss in customers would suggest," Mr Purches told the Bay of Plenty Times Weekend.
The company partly compensated for its losses by picking up more customers where power usage was higher.
This resulted in fewer customers overall but more "high value" customers on average, Mr Purches said.
But Molly Melhuish, independent energy analyst and spokeswoman for the Domestic Energy Users Network, believed TrustPower would have to lower its prices if it wanted to stop losing customers.
"If they want a long-term solution they should cut their prices," she said.
Ms Melhuish believed the loss of 5000 customers would not be a big percentage drop for the company "but they would be worried if that continued year after year".
She said customer bases were shifting among the energy market's big players as they tried to keep customers close to their power sources.
"The point is that there's a great deal of discounting by companies who want customers to be close to their power stations."
TrustPower sold 3113 gigaWatt hours (GWh) of electricity in the nine months to the end of December, 2 per cent lower than a year earlier.
Generation of 1763 GWh for the nine months was up 9 per cent on a year earlier, due to stronger hydro production in both the North and South Islands. But New Zealand wind generation dropped 7 per cent, due to lower wind production at the Tararua Wind Farm during the third quarter, Dr Harker said.
Lower than expected wind conditions at the Snowtown wind farm in South Australia continued during the third quarter, with production for the nine months down 18 per cent from a year earlier to 232GWh.
Production had improved in recent weeks.
TrustPower's main hydro storage catchments were at or above average levels for this time of year following good inflows during the end of the third quarter and during January.
The commissioning of pumping equipment at the company's Highbank hydro generation scheme, in Canterbury, was completed on schedule in December.
The pumping equipment provided additional irrigation capacity to local irrigators and was an important first step in providing greater irrigation capacity to the Canterbury region, Dr Harker said.
Progress continued on schedule and on budget at the 36 megaWatt (mW) Mahinerangi wind project in Otago.
All wind towers were now on site with the first two sections erected. The project's 12 3mW wind turbines were expected to be commissioned from February to May. In December, TrustPower was also granted consents for both the Arnold and Wairau hydro generation schemes.
The proposed Arnold scheme is located inland from Greymouth with an installed capacity of up to 46mW, while the proposed Wairau scheme is located inland from Blenheim with an installed capacity of 72mW.
Those consents were the only two major hydro consents achieved since the introduction of the Resource Management Act, Dr Harker said.
Within its overall development portfolio, TrustPower now had 400mW of wind generation and more than 100mW of hydro generation options in the South Island fully consented.
Attention would now focus on the economic viability of those options, but TrustPower noted the negative impact current pricing for allocation of the cost of the Cook Strait cable had on generation development options.