Pricing Inquiry must be broadened

Press statement, DEUN (Domestic Energy Users' Network), 1 October 2008

Pricing Inquiry must be broadened to include all household energy pricing.

“An enquiry into electricity pricing, announced today, is desperately
needed,” said Molly Melhuish of DEUN today. “But its scope needs to be far broader than the inquiries held to date.”

The Commerce Commission has already spent three years investigating electricity markets and pricing. Its inquiry, yet to reach a conclusion, is based on the assumption that if competition between electricity companies really worked, then electricity prices would sort themselves out. The Electricity Commission’s review of the electricity market assumes the same thing.

“However competition in electricity has failed consumers completely,” said Mrs Melhuish.

Contact Energy’s price rises to its South Island and Wellington customers may force consumers to switch to some other power retailer. “This is a sort of ‘competition,’” said Mrs Melhuish, “but not competition to benefit consumers. Contact Energy is using the PowerSwitch system to tell its consumers, “just switch companies if you don’t like our price rises.”

“These price rises will actually further Contact’s objective of consolidating its customer base, by shedding customers who are not close to its main generation assets in the north of the North Island”, Mrs Melhuish said.

The inquiry must also consider how the Home Energy Fund will be used to reduce energy bills. A full price review must be made of tariffs and fixed charges for gas, inverse step tariffs for electricity and pricing plans for other fuels. It is wrong to look at electricity prices only, because alternative fuels are often much cheaper, and because home insulation can do far more to reduce power bills than just fiddling with electricity prices.

Home energy is a top policy priority today, because some 24% of New Zealanders are now living in fuel poverty. Price rises are driving further inequalities throughout society.

“Domestic energy user’s rights to affordable energy must be reflected in all analysis and decisions,” said Mrs Melhuish, “Consideration should be given to restructuring the Electricity Commission as an Energy Commission with full representation of domestic consumers.”

“Domestic consumers must be consulted on the terms of reference for the proposed inquiry,” Mrs Melhuish concluded.

ENDS

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