New Zealand power companies accused of “windfall” gains

A leading New Zealand MP has said that state-owned power companies have made windfall profits of more than NZ$150m ($63m) in the winter power crisis, wiping out consumer gains from electricity competition since 1998.

The comments by National Party finance spokesperson, Bill English, were reported in the New Zealand press Monday who quoted English as saying the windfall profits should be “reimbursed”.

The government has not given details of the extent of profits made from high wholesale power prices in the past few months. But English said his sources in the industry said it was about $2 million a day, but there were more increases on the way. Many small businesses faced higher prices when contracts with big power companies came up for renewal after October 1, he said.

Meanwhile, the New Zealand Prime Minister Pete Hodgson has said that the nationwide power saving campaign is over and that no blackouts were now threatened. The campaign urging New Zealanders to save ten per cent on electricity usage over a ten week period is being halted three and a half weeks early having been sufficiently successful to allow hydro lake levels to stabilize.

Hodgson said he hoped household would continue to make voluntary savings. He believes four per cent power savings are possible on an ongoing basis.

The minister has also announced a review of the way the electricity system functioned over the winter.

Figures out on Sunday from wholesale electricity market company M-Co showed power savings of 8 per cent for Saturday, close to the 10 per cent target for national savings needed to avoid a power crisis.

Wholesale market prices fell to just under 6c/kWh on Thursday, near the market lows for the past few months, and heading toward more normal levels for this time of year. Prices peaked at more than 40 cents a unit in July.

But the seven daily rolling average is still about 8 cents a unit, still double levels a year ago. Average prices were between 3 cents and 4.5 cents in August last year, varying slightly in different parts of the country.

The average price this year for July was between 22 cents a unit and 24 cents. In July last year the average ranged between 2.7 cents a unit and 3.5 cents, while this year the monthly average was between 9 cents and 12 cents a unit.

National water storage in hydropower lakes is at 61 per cent of the average for the time of year, with 1263 GWh of stored power. South Island storage was just over 1000 GWh of stored power, 66 per cent of the average for the time of year.

Inflows into the hydro lakes in the past week were 70 per cent of the average, though the inflows in the South Island were slower, at 55 per cent of the average for the time of year.

Meanwhile, English argued that gains from changing the electricity system three years ago should be kept. Up till the recent power crisis, the real price of electricity, after inflation, had fallen for both households and businesses since 1998.

The average commercial power price fell 3 per cent a year, after adjusting for inflation after the power reforms, with farmers paying 5 per cent less a year. Figures from the Ministry of Economic Development showed domestic consumers benefited by up to NZ$50m a year from the reforms. But some small power users have seen their bills rise in the past three years, as fixed line charges have risen. Lines companies have added about NZ$200m more in charges since 1993 by changing the system for valuing assets.

Auckland lines company Vector said the harsh reality of power cut threats were “only just behind us”. The company is encouraging its residential customers to use a system which allows the power company to turn off hot water heating for up to 5 hours a day, in return for a price discount. The system allows for greater control of power demand, allowing the company to flatten out peak loads on the network.

The company aims to have virtually all customers on managed supply by next winter.

The government will spend NZ$1.2m to improve energy efficiency in homes. The programme includes a private sector project to create a commercial residential energy efficiency industry and another scheme to conserve power for low-income households. The schemes will start in November and include things like hot water cylinder wraps and insulation.

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