Probe into power price-fixing

Every person paying a power bill will benefit from a Commerce Commission investigation into the cost of electricity, says a consumer advocate.

The investigation follows allegations from consumers about electricity price-fixing leading to high company profits and a lack of competition in the industry.

The average annual power bill is about $900 a year and Government figures show some power companies have hiked prices by 50 per cent in the past six years.

Major Electricity Users Group executive director Ralph Matthes said the inquiry would focus on the section of the power bill which was governed by retail power suppliers.

It was about $600 a year - and even a 5 per cent reduction would save consumers $30 a year.

Mr Matthes said the 5 per cent would be a conservative estimate and savings could be much higher.

The investigation was discovered after a letter to the Major Electricity Users' Group last week.

The letter read: "The investigation has been commenced due to complaints and concerns about electricity prices, company profits, issues around customer switching and a perceived low level of competitive activity."

A spokeswoman for the Commission said the inquiry was being carried out under a section of the Commerce Act that dealt with restrictive trade practices.

It included lessening competition, price-fixing and taking advantage of market power, although the commission had not highlighted a specific area, the spokeswoman said.

The commission said it hoped to complete the investigation by the end of the next year.

John Collinge, a trustee of the Auckland Electricity Consumers Trust and a former chairman of the Commerce Commission, said it was difficult to get a great difference in the price of electricity.

He said it was because all the electricity companies were selling the same product and if their business models were similar, then the price of electricity would probably be similar.

Mr Collinge, also a former chairman of the Auckland Electric Power Board and former deputy chairman of Vector Limited, said there was no great incentive for power companies to undercut each other.

He said if one power company set a higher price, it was likely to lead to the other companies to follow to maximise profits.

"I can see how the allegation of price-fixing might arise even if they [the companies] might claim to be independent.

"If there was collusion, it is quite serious in light of the Government policy to create competition," he said.

The Commission has already signalled a battle with the electricity industry after an announcement last Friday from Transpower - the electricity transmission company which runs the national grid - that it was planning to increase prices for the next five years.

Transpower said it would increase transmission charges by 19 per cent from June next year, and follow this with annual increases of up to 13 per cent a year for a further four years.

Commerce Commission chairwoman Paula Rebstock said in a statement that Transpower would have to prove the price rises were justified or it would not be allowed to carry out the increases.

Under the law, Transpower is only allowed to increase its prices annually by no more than the rate of inflation minus 1 per cent, unless the price increase is for investments that have been approved by the Electricity Commission.

The commission is already studying previous breaches of the threshold by Transpower.

Ms Rebstock said the commission had repeatedly asked Transpower to explain the increases - and the transmission company had failed to come up with sufficient justification.

- HERALD ON SUNDAY