CMA: Contact ‘price gouging, plain and simple'

Canterbury Manufacturers’ Association

27 September 2006.

The Canterbury Manufacturers’ Association says that the forthcoming rise in electricity prices by Contact Energy is a ‘price gouging, plain and simple’.

The Association also disputes Contact’s assertion that the transferring of costs onto consumers is a ‘reality of the industry’ given that the company posted a profit of $280 million this year - a rise of 14 percent on 2005.

“Energy companies are guaranteed to retrieve their long run marginal costs through their pricing. Here is a company sitting on $4.6 billion in assets and New Zealand’s largest wholesaler and retailer of natural gas saying that it has no option but to pass the costs of managing those assets onto the consumer. This might be good news for some but it is the consumers are having to pay” says CEO John Walley. “In the absence of any real competition retail prices will continue to escalate without any of the natural controls associated with a free market”.

“Consumers should be angry at such rises. Especially as 15 cents on each dollar of there electricity bill pays for the competitive sham of electricity retailers, with what benefit for the consumer?” asks Mr. Walley. “Where is the promise of competition, where is promise of the market, where is the promise of consumer choice?”

Mr. Walley says that electricity pricing and reliability has an increasingly political dimension, especially following this year’s blackouts, growing demand and an absence of any effective response on supply and transmission.

“There seems too much complacency from Government, and the industry seems comfortable about the money it is guaranteed to make. There are alternate strategies; it seems the only way for those to be considered will be for consumers to demand them through the ballot box. It is time that the New Zealand electricity consumers made our politicians take notice”.

ENDS

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