Contact's New Year gas hike

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Contact Energy is maintaining what is becoming a New Year tradition by putting up gas prices.

It also says it is prepared to lose thousands of electricity customers in the pursuit of higher-value users.

About 60,000 gas customers face an average increase of 6 per cent from January 1, which the company is blaming on higher wholesale gas charges and cost rises for transmission and meter rentals.

On January 1 this year, gas users, then numbering about 65,000, were hit with a price rise of 5 per cent.

The company says it is selling more power by focusing on high-use electricity customers and says many of the others who are leaving for alternative suppliers are not in the target group.

Its latest monthly operational shows the number of its electricity customers fell from 469,500 at the end of October to 467,000 at the end of last month. A year ago the company had 478,500 electricity customers.

Margins also plunged in November, which the company says was because of a costs "blip".

Spokesman Jeremy Seed said: "It's not a numbers game, it's finding the right customers. We can afford to lose customers and increase the volume of electricity sold."

The company was targeting small to medium-size business owners, especially those whose houses they could also supply. The company - more than half owned by Australia's Origin Energy - said its rivals were offering sharper deals.

"It would be suicidal from a business point of view to get involved in crazy cut-throat competition. We're not prepared to do that. We don't think a lot of the deals on offer at the moment are sustainable," Seed said.

Retail-only companies that didn't generate power were especially vulnerable to spikes in spot wholesale prices, such as the recent peak which had prompted the Electricity Authority to look into it.

"We acknowledge we are at the high end of the market. We are not a discount retailer but we offer our clients security," Seed said.

"If you are a standalone retailer the minute the prices go north you're in trouble."

Despite the push to higher-value customers, retail margins slumped to minus 2 per cent in November. Margins were flat the month before but over five months had been running at 3 per cent.

Seed said the November margin decline was due to a blowout in costs. "It is a blip, not a trend."

Meridian Energy subsidiary Powershop said small businesses were also leaving Contact.

"I'm sure it's more than the small guys. We've seen a number of small businesses come our way," said chief executive Ari Sargent.

Contact shares closed up 10c to $6.24 yesterday.