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

 

R18: The Warehouse Group Praised For Removing Games

The decision by New Zealand’s largest retailer The Warehouse Group (TW Group), to withdraw stocks of the latest version of Grand Theft Auto V (GTA V) and other R18 games, has been praised by advocacy group Stop Demand Foundation. More>>

ALSO:

Air NZ Wine Awards: Victory For Villa Maria As Pinot Noir Thrills

It was a night to remember as Villa Maria Estate picked up one of the highest accolades of the evening, the O-I New Zealand Reserve Wine of the Show Trophy, at the 28th Air New Zealand Wine Awards. The Villa Maria Single Vineyard Southern Clays Marlborough ... More>>

ALSO:

Future Brighter Money: RBNZ Releases New Bank Note Designs

New Zealand’s banknotes are getting brighter and better, with the Reserve Bank today unveiling more vibrant and secure banknote designs which will progressively enter circulation later next year. More>>

ALSO:

Commerce: Supermarket Inquiry Finds No Breaches By Countdown

The Commerce Commission inquiry into anti-competitive behaviour by Countdown supermarkets, alleged by former Labour Party MP Shane Jones, has found nothing to warrant prosecution, although it warns supermarkets to take care in the way they communicate... More>>

ALSO:

Crown Accounts: English Flags ‘Challenge’ To Budget Surplus

Finance Minister Bill English is warning next month’s half yearly fiscal and economic update from the Treasury may not forecast a budget surplus, saying that returning the government’s accounts to surplus in 2015 will be “a challenge”, given the decline in commodity prices and weak global inflation. More>>

ALSO:

March 2015: Netflix To Launch In Australia And New Zealand

World’s Leading Internet Television Network to Offer Original Series, Movies, Documentaries, Stand-Up Comedy Specials and TV Shows for Low Monthly Price More>>

ALSO:

Price Of Cheese (Is Up): Dairy Product Prices Fall To Five-Year Low

Dairy product prices fell in the latest GlobalDairyTrade auction to the lowest level in more than five years, led by declines in rennet casein and skim milk powder. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news