Generator price rises reflect market power

Generator price rises reflect market power

Genesis Power’s announcement that it intends to raise average retail prices to some of its customers by nine percent should be viewed with extreme concern by all consumers the chairman of the Major Electricity Users Group (MEUG), Mr Terrence Currie, said today.

“The withdrawal from the market of the largest electricity retailer, On Energy, at the beginning of winter means the level of competition in the domestic electricity market has dramatically changed,” he said.

“The beneficiaries of On Energy’s departure are the remaining generating retailers such as Genesis Power, Mighty River Power, Contact Energy and Meridian Energy. These companies can increase their consumer prices knowing the intense pre-crisis competition has now essentially vanished.

“Raising prices after having eliminated your largest competitor is a textbook anti-competitive practice that every jurisdiction in the Western world deems illegal, Mr Currie said.

He said the investigation by the Commerce Commission into the practices and behaviour of the dominant generators in New Zealand over this winter would be the first real test of whether the recent changes to the Commerce Act are effective.

“The generators may claim that this is how markets work; that any ‘weak’ electricity retailer will be forced from the marketplace. The reality is that end consumers now have less choice between retailers and in some areas no choice at all. Many domestic and small business consumers will end up paying substantially more for power than they did before the winter crisis occurred.

“Consumers are now basically at the mercy of the remaining generators and Genesis has indicated that it will waste no time in taking advantage of that opportunity.” Mr Currie said the Review by the Minister of Energy into events over winter 2001 needs to be mindful that investors in energy intensive industries must have confidence that the competition laws of New Zealand will be vigorously applied. They must also be confident that producers for all input factors, such as electricity generation, are not allowed to exercise unbridled market dominance.

“Both large and small consumers want and deserve effective competition at all stages of the electricity supply and delivery chain. The electricity structure has failed to deliver that outcome and Government now needs to consider all options,” Mr Currie said.

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