Power firms warned against profiting from ETS windfall

Meridian, which owns Benmore Dam, has no plans to increase prices in the short term. Photo / Simon Baker

The Government will monitor power companies for signs they are extracting "windfall profits" from consumers under cover of the emissions trading scheme and investigate any apparent profiteering, says Climate Change Minister Nick Smith.

State-owned Mercury Energy and listed company Contact this week announced they will raise customer charges by just over 3 per cent because of the introduction of the emissions trading scheme (ETS) on July 1.

Although the increases are less than the 5 per cent impact on prices expected by the Government, they have prompted warnings power companies will enjoy "windfall profits" as a result of the scheme.

With 80 per cent of the electricity industry in its hands, Act MP John Boscawen claims the Government is set to benefit from $150 million or more in extra annual power company profits and that has not been adequately disclosed.

Dr Smith has put the additional profits across the industry at $30 million a year but yesterday conceded that the likely impact of the ETS on prices and profits was far from clear.

Responding to questions in the House from Mr Boscawen, Dr Smith said it was "quite complex, having both the ETS and the complexities of the electricity market to determine the exact impacts".

He noted Government-owned companies Genesis Energy, which operates the Huntly power station, and Meridian, which has a large number of big hydro plants, had both said they had no plans to increase prices in the short term.

The 5 per cent increase expected by the Government would be among the smallest increase of any of the 29 countries which had similar schemes.

"The Government will be watching the power companies closely and if we believe that they are unfairly putting up prices as a consequence of the ETS we reserve the right to have some sort of inquiry."

The Government estimates the average household will pay an additional $165 a year for electricity because of the ETS.

The Reserve Bank estimates the scheme's wider effect on prices for goods and services will add about 0.4 per cent to inflation.

Minister for State Owned Enterprises Simon Power said there was no mechanism for any windfall profits to be used to offset the Government's Kyoto Protocol obligations.

Mr Boscawen and Act have worked hard opposing the introduction of the ETS, angering National MPs by targeting the party's rural supporters.

Act says grassroots National Party members are increasingly supporting its stance on the ETS.

Party leader Rodney Hide last week claimed National Party members at the Central North Island conference had voted in favour of a remit calling on the Government to delay the scheme.

That was confirmed this week by Prime Minister John Key.