Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Regulator sees little reason for power prices to rise

Regulator sees little reason for power prices to rise

By Pattrick Smellie

Feb. 7 (BusinessDesk) - The Electricity Authority sees few reasons for residential electricity tariffs to rise in the next 12 to 18 months, as increased transmission and distribution costs are offset by a glut of electricity generation capacity and far better information about the future path of wholesale prices.

At a breakfast briefing in Wellington, the authority's chairman Brent Layton and chief executive Carl Hansen ran through a string of new measures the EA uses to measure both the extent of retail competition and the impact of recent initiatives such as electricity futures trading to moderate prices.

"The futures market is giving a clear view of prices into the future," said Hansen. "It's a very stable wholesale price outlook."

There was "no way" retail tariffs could be pushed up in that environment, especially as there had been a "big fall" in expectations for spot prices in the futures market, which showed contract prices for energy in 2015 dropping an average 26 percent in recent months from $120 per Megawatt hour to $90 per MWh.

"There have been massive changes in view about weakness of demand," said Hansen, reflecting the closure of major plant in Kawerau by paper-maker Norske Skog and uncertainty over future demand from the Bluff aluminium smelter.

The smelter's majority owners, Rio Tinto, are seeking to renegotiate long term contracts covering around one-seventh of total New Zealand electricity consumption to reflect weakness in the global aluminium market.

"The market's perception is that the future shows the supply/demand risk is receiving," he said. "How will that affect retail prices? There's a lot of competition that's possible to come out of that."

That pressure came on top of the increasing public understanding that switching power companies is relatively simple, driven by the EA's "What's My Number?" campaign, and evidence that concentration of market power in regional markets had reduced substantially in the last few years.

"The Electricity Authority will be watching this in next six to 12 months to see how competitive the market is," said Hansen.

He also warned major electricity users who chose not to hedge against spikes in wholesale electricity market spot prices that they shouldn't expect sympathy if such spikes cost them money.

The EA had conducted stress testing last year which found four major industry players were not hedged against adverse wholesale market events.

"That's fine, but what we don't want is people coming back to us complaining when spot prices rise," Hansen said. "You've provided the information, so you know (the risks).

"Don't expect Ministers, the Authority, officials or indeed the media to be sympathetic," he said. "WE know that it rankles with some parties, but we think it's very important to the market."

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Skodafone Goneski: Sky TV, Vodafone Drop $3.44 Billion Merger Plan

Sky Network Television and Vodafone New Zealand have terminated their merger agreement which aimed to create the country's largest telecommunications and media group, and have withdrawn an appeal against the Commerce Commission's rejection of the plan. More>>

Quake Insurance: Reforms To EQC Act Announced

· Increasing the monetary cap from $100,000 (plus GST) to $150,000 (plus GST) for EQC building cover.
· Clarifying EQC land cover is for natural disaster damage that directly affects the insured residence or access to it... More>>

ALSO:

Reserve Bank: Official Cash Rate Unchanged At 1.75 Percent

Global economic growth has increased and become more broad-based. However, major challenges remain with on-going surplus capacity and extensive political uncertainty... More>>

Kaikōura Earthquake: Private Insurers Receive $1.8b Claims

Insurance Council Chief Executive Tim Grafton said most is for commercial loss at $1.36 billion, with residential claims amounting to over $460 million. “...We have a high level of confidence that most people will have received settlement offers by the end of this year." More>>

ALSO:

Forms And Data: New Proposals To Simplify Personal Income Tax

The Government is proposing to make tax simpler for individuals, with people whose only income is from a salary, wages or investments no longer being required to file tax returns to receive tax refunds or to calculate any additional tax. More>>