Soaring wholesale power prices in New Zealand have sparked an investigation of generating company pricing by the industry’s surveillance committee, but allegations of price fixing were rejected today by state-owned generator Meridian, who blamed cold weather and low lake levels for recent 50 per cent increases.
Consumers have been warned to expect big price rises for electricity soon, with retailers saying they can no longer absorb the significantly higher costs for the power they buy from generating companies. The wholesale price of power has jumped from 14.58c/kWh to 21.82c/kWh last week.
On Energy, the country’s largest retailer, today confirmed that it had asked the regulator to launch an enquiry. On Energy spokesman, Bruce Thompson, said the retailer was “looking at every avenue” to avoid having to put up prices to customers.
“We have made a request to the surveillance committee that they investigate the current market conditions to find out if anything is underlying the [recent high wholesale] prices, which is evidence of problems with the market.”
About a third of all New Zealanders buy their electricity from On Energy and its parent, Natural Gas Corporation. However, the corporation produces just 12 per cent of the country’s electricity, meaning it buys most of its power on the wholesale market.
A second retailer, TrustPower, said it would also go to the committee with its allegations that dominant, state-owned generator Meridian was forcing up wholesale prices. TrustPower spokesman Graeme Purches said Meridian has been allowing low prices for its retail customers while bidding into the wholesale market at “astronomically high” prices.”There are not enough players in the wholesale market to make it competitive,” said Purches.
Meridian rejects the allegations. Spokesman Alan Seay said some companies were left exposed to high prices because of “poor risk management”.
The surveillance committee, headed by Sir Duncan McMullin, has the power to fine any generator, retailer or electricity trader who plays games in the wholesale market to force up prices. Sir Duncan said the investigation would examine “the market’s management of prudential risks in the context of the current level of prices”, together with other pricing issues.
Last year, the committee investigated 136 complaints on a range of issues and imposed fines, costs and compensation totalling NZ$661,276.
New Zealand is one of a number of liberalized wholesale power markets which has experienced a surge in prices, most notably, California.