Industry inquiry as power prices soar

Soaring wholesale power prices have sparked an investigation of generating company pricing and a switch allowing more power to flow to the South Island.

Consumers have been warned to expect big price rises for electricity soon, with retailers saying they can no longer absorb significantly higher costs for the power they buy from generating companies.

The wholesale price of power has jumped from 14.58c kW/h to 21.82c kW/h last week.

Generating companies blame low lake levels and cold weather for the escalating prices but some retailers are crying foul.

As chilly temperatures continued and wholesale prices continued to rise there were two major developments yesterday:

* The electricity industry's market surveillance committee will investigate wholesale pricing and review its security criteria for companies wanting to buy power. As power becomes more expensive, retail companies will have to prove they can still afford to buy it.

* Transpower told Energy Minister Pete Hodgson that changes to the way the national grid works would enable it to send another 100MW of power from the North Island to the South Island by June 22 at the latest.

The day began with the country's largest retailer, On Energy, confirming it had asked the independent market surveillance committee to launch an inquiry.

On Energy spokesman Bruce Thompson said the retailer was "looking at every avenue" to avoid having to put up prices to customers.

"We have made a request to the surveillance committee that they investigate the current market conditions to find out if anything is underlying the (recent high wholesale) prices, which is evidence of problems with the market."

About a third of all New Zealanders buy their electricity from On Energy and its parent, Natural Gas Corporation. However, the corporation produces just 12 per cent of the country's electricity, meaning it buys most of its power on the wholesale market.

TrustPower said it would also go to the committee with its allegations that dominant, state-owned generator Meridian was forcing up wholesale prices.

TrustPower spokesman Graeme Purchase said Meridian was able to supply its own customer base without disclosing its prices, but was charging astronomically high prices on the spot market.

Meridian rejects the allegations. Spokesman Alan Seay said some companies were left exposed to high prices because of "poor risk management."

The surveillance committee, headed by Sir Duncan McMullin, has the power to fine any generator, retailer or electricity trader who plays games in the wholesale market to force up prices.

Last year, the committee investigated 136 complaints on a range of issues and imposed fines, costs and compensation totalling $661,276.

In another move, the Electricity Networks Association yesterday promised to maintain an electricity price freeze until at least August.