Minister attacks power retailer over price hike

Energy Minister Pete Hodgson has criticised the country's largest electricity retailer for failing to protect customers from a surge in prices.

Natural Gas Corporation, which has 450,000 customers on the North Shore, in West Auckland, in Hamilton and in other centres, intends to lift its charges to households and businesses by an average of 16 per cent from next month.

Mr Hodgson blamed the company's failure to arrange sufficient "hedge" contracts to ride out usually high prices caused by low hydro levels and the arrival of cold weather.

The company "must now be prepared to explain how it got itself into winter with what is apparently an inadequate level of hedge cover against high spot market prices," he said.

Natural Gas, which retails electricity and gas under the brand On Energy, had not expected the recent jump in wholesale prices, said managing director John Barton.

The prices were not justified, he said. Last October, the hydro lakes had been even lower than now and generators were offering lower prices than those prevailing now.

Mr Barton conceded that the company had entered winter with less of its electricity needs covered by fixed-term contracts than it wanted.

The company had some long-term contracts, he said. He declined to say what proportion of its electricity was bought under such arrangements.

Mr Hodgson said it was no secret that On Energy had been under financial pressure from its spot-market exposure. It was "navigating a difficult line between the risk of heavy financial losses and the risk of heavy customer losses as a result of its price increases."

The minister urged other electricity retailers to be ready to switch customers from On Energy if asked.

The industry's ability to handle customer switching was still "patchy," he said, "despite the unprecedented enthusiasm of New Zealanders for changing companies."

Heavy rain in the South Island helped to cut wholesale prices each day in the latter half of last week, although they remain well above average.

Green Party co-leader Jeanette Fitzsimons wants the Government to use money from higher power prices to upgrade energy efficiency in elderly people's homes.

She said the higher charges were the result of market scarcity rather than higher generation costs and the profits would flow through to the Government as higher dividends.

"People on low incomes, particularly the elderly and those with asthmatic children, faced serious hardship if the prices were passed on.

"This is an excellent opportunity to use the extra dividends to put in place long-term energy savings and health benefits for those most vulnerable to energy prices."

It cost about $1500 to insulate a ceiling, insulate and damp-proof under the floor, wrap the water heater cylinder, install a hot water-saving shower head, do some draught proofing and install energy-efficient lights.

"This will make a home substantially warmer and drier, save power at peak times when the system is most under strain and reduce power bills."

She challenged the Government to boost funds for the 15 community groups that carried out such work.

Energy Efficiency and Conservation Authority funding was cut this year, leading to a three-month wait.