Mercury Energy is blaming the Emissions Trading Scheme (ETS) for its planned increase in energy prices from July 1.

The ETS is a government-imposed cost on all electricity and gas production that emits greenhouse gases, reflecting the total volume of greenhouse gases produced by the electricity and gas industries as a whole.

The company said today that the scheme would increase wholesale electricity and gas prices and the effect for Mercury Energy customers would be an extra $5 a month, 3.3 per cent, to average residential electricity bills and $1.75 a month, 2.4 per cent, to average residential gas bills.

The Government has given New Zealand's energy sector strong encouragement to invest in renewable sources of energy.

Mercury Energy is the retail arm of Mighty River Power which has acted on those signals and in recent years has invested $1 billion dollars in renewable generation.

One effect of the ETS is the creation of an incentive to invest in renewables by deliberately transferring value from thermal generation to renewable generation.

"To put it simply, those who have invested in renewable generation will derive a financial benefit that others will not," said Mercury Energy general manager James Munro.