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Contact Energy’s price increase an overreaction

Contact Energy’s price increase an overreaction

“Contact Energy’s proposed 10% price increase to its Wellington household customers commencing November is premature and an overreaction,” said Sue Chetwin, Chief Executive of Consumer NZ and spokesperson for CC93.

“We have yet to see the written advice to customers, but the reported reasons for the increase so far seem to be flimsy. Contact Energy reportedly suffered losses on sales to residential customers in the South Island and Wellington in autumn and winter of this year because of constraints on the inter-island cable (the HVDC link) and the grid feeding Wellington affecting spot prices. Contact sees this risk repeating itself.

“The dry weather this year was a very unusual event and is unlikely to be repeated for each of the next winters in 2009, 2010 and 2011, ahead of the just approved HVDC upgrade being commissioned in 2012. Electricity suppliers have had handsome profits over the last few years and are likely to continue to do so until competition in the retail market can be improved. For Contact Energy to take one bad year and add a risk premium onto prices for all future years seems an overreaction.

“Transpower is considering ways to improve flows across the HVDC for next winter. Until those investigations are complete nobody knows what the constraints will be. It’s premature for Contact Energy to pre-suppose nothing will be done to alleviate HVDC constraints. If the HVDC is improved for next winter, Contact Energy should rescind the price increase.

“Our advice to Contact Energy customers is to compare prices of other retailers (using for example, Consumer Powerswitch[1]) and if worthwhile change supplier.

“The best long term protection of consumer interests is robust competition. We are a long way from that goal and therefore we support the Electricity Commission finding smarter regulatory tools such as disclosure to provide more transparency on suppliers unilaterally increasing prices and shifting risk to consumers,” said Ms Chetwin.


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