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What goes up must come down

Friday, 15 June 2001 Media Statement

What goes up must come down

On Energy's announcement of price rises for its small business and residential customers is unwelcome but no surprise, says Energy Minister Pete Hodgson.

"It's no secret that On has been under real financial pressure in recent weeks because of its exposure to high wholesale electricity prices," Mr Hodgson said. "The company is navigating a difficult line between the risk of heavy financial losses and the risk of heavy customer losses as a result of its price increases.

"Today's announcement puts the onus on the rest of the electricity industry to ensure it can switch customers from On if asked. The industry's performance in this area is slowly improving but is still patchy, despite the unprecedented enthusiasm of New Zealanders for changing companies.

"I note that On has promised to drop its prices again as wholesale prices come down. That is a promise I and at least 450,000 affected electricity consumers will be expecting the company to keep.

"Wholesale prices have in fact dropped over each of the last three days, although they remain higher than average. Heavy rain in the South Island is an encouraging development, as is the news this evening that Transpower has installed and activated the equipment necessary to enable transmission of up to 100 extra megawatts of electricity to Wellington and the South Island.

"On must now be prepared to explain how it got itself into winter with what is apparently an inadequate level of hedge cover against high spot market prices. I expect it to acknowledge the responsibility it has to its customers to manage its wholesale market exposure effectively."


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