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"Competition" benefits suppliers not consumers

Press statement, DEUN (Domestic Energy Users' Network), 30 September 2008

Companies are using "competition" to benefit suppliers, not consumers.

“Contact Energy must come clean about why they are hiking prices”, said Molly Melhuish, analyst for the Domestic Energy Users’ Network.” They are about to raise prices to their domestic customers in Wellington and the South Island by 10% to 12%.

* First Contact said. "South Island demand has been increasing much faster than North Island demand." That trend has been evident since 2002, and is caused mainly by irrigation and dairy factories.

* Today Contact said "South Island demand has increased as a result of heat pumps." That trend is much more recent, and little has been released publicly on what is actually happening. It appears that South Island clean heat programmes are installing heat pumps that are too small, so resistance heaters are needed on cold days to maintain acceptable heating, and this means even more electricity is used.

* Contact also says that transmission constraints have increased the cost of supply to their southern customers. But that arose partly through their own wrongdoing. Contact closed New Plymouth after one Cook Strait converter had been shut down. Therefore New Plymouth could not support South Island lakes, as had been expected, during the approach to winter.

Contact Energy will be more than happy for its southern customers to switch to other companies. This furthers the trend, where generator-retailers are using PowerSwitch to consolidate their customer bases to regions close to their generation base.

“This shows that the companies are using 'competition' to benefit suppliers, not consumers,” Mrs Melhuish said.

DEUN calls on Government to review both domestic electricity prices and demand trends, to ensure pricing reflects real costs not market power.


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