Report backs power price complaints

Consumer groups say concerns over power price rises have been justified by a Commerce Commission report stating that energy companies had overcharged.

The report estimated the companies had been profiteering, perhaps to the tune of more than $4 billion.

It said the Government, which owned three of the four main companies, stood to benefit from the practice.

Sue Chetwin, chief executive of Consumer New Zealand, said her organisation often took calls from people complaining about power bills. It was fair to say there was not enough competition in the marketplace and structures around the competition had been ineffective.

The Government was in an interesting position, because as the owner of three of the four biggest players, it benefited from the prices but also held the tools to do something about it, she said.

Domestic Energy Users Network analyst Molly Melhuish said it was significant that when the power companies maximised profits the Government not only reaped dividends from its three state-owned companies, but also took income tax and GST from residential consumers.

She said the information pointed to why the Government would be hesitant to do anything about the power market - because it benefited so much from it.

However, the country's biggest generator, Meridian Energy, hit back at the finding in the Commerce Commission's report that hydro producers price-gouged during dry periods.

A spokeswoman said analysts for the taxpayer-owned company were examining the report which "had raised eyebrows".

"The message is little bit confusing - saying that we've been gaining from dry years is certainly not the case."

She said that during three dry years mentioned in the report the company's revenues were nearly $200 million down on forecasts.

A Genesis spokesman said the report was three to four years in the making and "we're not going to rush into comment - we want to analyse and understand what it means".

Fellow SOE Mighty River Power said it had no comment "at the moment" on what was a complex report.

Contact Energy managing director David Baldwin said the company had not yet had the opportunity to study the report but the conclusion that all generators had operated within the market rules meant the wider issues raised could be constructively addressed by the ministerial taskforce.

Prime Minister John Key said the $4 billion figure was theoretical and there was some debate over the method used to arrive at it. "But what it shows is a real need to have a look at the structure of the energy sector and that is what the Government is doing."

Business NZ chief executive Phil O'Reilly said his organisation was pushing for reform of the sector, aimed at putting sustained downward pressure on prices.

TrustPower is not in the firing line for price gouging but has been singled out for a warning letter from the commission after a claim of collusion with Genesis. The claim was not upheld.

Chief executive Keith Tempest said the investigation arose from a board minute in which a competitor was mentioned but in no specific context.

"We see it as a minor matter and wait to see the warning."

IN THE GUN

Contact Energy - Listed company majority owned by Origin Energy of Australia. Revenue last year: $2.7 billion, profit $237 million.

Meridian Energy - State-owned enterprise with mainly South Island hydro power stations. Revenue: $2.6 billion, profit $104 million.

Genesis Energy - SOE with most generation from Huntly power station, the country's biggest retail supplier. Revenue: $2.4 billion, profit $99 million.

Mighty River Power - SOE with mix of generation in the North Island, retail arm is Mercury Energy. Revenue: $1.4 billion, profit $111 million.