Price rise warning for gas customers as wholesale power crunch continues

Rising electricity bills have customers looking at options. Photo / 123rf

By Susan Edmunds of RNZ

Things are looking grim in particular for gas users as the wholesale power crunch continues, Powerswitch says.

The electricity sector has been hit by a surge in wholesale power prices due to a shortage of gas supplies and a dry winter.

Powerswitch general manager Paul Fuge expects households will eventually be exposed to the price increases, which have already forced some large businesses to shut.

“Retailers will be hedged to varying degrees. But as hedges progressively run out, there will be increasing pressure to put up prices.

“There will also be a lag as retailers generally have to give their customers advance notice of any price increases. But we have received a flurry of price change requests for Powerswitch over the last few days.

“These have not been processed as yet so we can’t quantify the overall affect on prices, but, in particular, it’s looking a bit grim for gas users.”

He said Powerswitch had been told that price increases of about 10% could be coming for gas.

“Hard to put a finger on what it will mean for overall residential electricity prices as yet, or when these will flow through.

“It really depends on the retailer you are with, and their position regards how hedged they are. I must caution it’s too early to draw any firm predication – but overall, it’s not looking good. We will continue to monitor.”

Electricity Authority chief executive Sarah Gillies spoke to RNZ on Thursday and said steps were being taken to tackle the increase and spot prices had already come down.

Electric Kiwi chief commercial officer Huia Burt said that was true, but the fall was not sufficient and no real solution had been found.

Some power companies have stopped or reduced the number of new customers they are taking on because they cannot afford to supply them at the current wholesale rates.

Burt said spot prices had come off their peak of about $800/MWh and were about $450.

“That’s still almost double what retail prices are so there’s still very much a live issue. For independent retailers, commercial and industrial customers, we’re managing risk based on future prices. Spot changes will only have an impact on people who are fully exposed to the spot market.”

Transpower announced on Thursday it would bring forward generators’ ability to access water storage, to alleviate the risks to power supply.

Burt said allowing generators to “mine” further down into the hydro lakes was part of the short-term fix, alongside deals done with Methanex and Tiwai’s smelter to increase gas supply and reduce electricity demand.

“What it really means is that you are creating more risk for the future as well. You’ve got a lot of rain needed to fill up those lakes.”