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Contact’s price increase suggests weak competition

1 October 2008

Contact’s price increase suggests weak competition

Electricity lines businesses stress that the concern over Contact Energy’s price rise announcement yesterday relates to the unregulated energy trading segment of the electricity industry, and that their own charges have stayed flat in real terms over a period when prices for the energy segment have risen by around 50%.

Electricity Networks Association Chief Executive Alan Jenkins says that the Government’s announcement that it will consider a broader inquiry into the level of competition in the market will be welcomed by the lines industry, where there is a strong interest in promoting local competition now that the ban on lines businesses generating and trading in electricity has been partially lifted. He says that getting past the current “closed shop” of integrated generator-retailers will become increasingly important as local supply options are being developed.

“We are aware, too, that the Commerce Commission has been conducting a protracted inquiry into the effectiveness of competition in the wholesale and retail electricity markets. A progress report from this exercise could helpful in improving our understanding of issues behind the Contact price increase.”

ENDS

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