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Faster Action Needed For Competitive Electricity Markets

The Electricity Authority’s low-key release of the big four electricity generator-retailers’ self-disclosed pricing data is a reminder that urgent action is needed to ensure competitive electricity markets for households and businesses, Octopus Energy Chief Operating Officer Margaret Cooney said today.

It’s now five years since the independent expert Electricity Price Review in 2019 concluded that “Generator-retailers are considered by some to be making excessive profits and favouring their retail arms to undermine competition, but we lack the information to properly test this belief” and recommended greater disclosure to fill the information gap and get answers.

But a report by economists NZIER, commissioned by the Consumer Advocacy Council and released last week, concluded the disclosure rules put in place (and the resulting data released by the Electricity Authority) cannot show whether the gentailers are making excessive profits, or if they are charging independent retailers more than their own retail arms.

(NZIER concluded “the disclosure of ITPs and gross retailer margin alone cannot show whether or not gentailers are making excessive profits”, essentially because the gentailers have wide latitude to nominate their ITPs, which function as an internal accounting treatment rather than a reflection of the price they offer independent retailers or a reflection of pricing in a competitive market.)

“Households and businesses have effectively lost five years in the battle to get more competitive electricity markets,” Octopus COO Margaret Cooney said. “That’s crucial lost time, not just with the huge expected increase in demand from electrifying New Zealand and EVs as we move to net zero 2050, but simply facing another winter of rising prices and grid outage warnings.”

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“The Commerce Commission last year began an investigation into allegations of a ‘market squeeze’ by the gentailers, that is charging independent retail firms more than their own retail arms and so suppressing competitive markets. It concluded the market structure was consistent with the conditions for a market squeeze, but that the complexity of the market meant it referred its investigation to the Electricity Authority.”

“Meanwhile, the existing disclosure rules don’t tell us anything at all. The Electricity Authority has promised to review the existing rules, but we need more than just another tweak or more fiddling at the margins, to make sure households and businesses can enjoy the benefits of innovation and price from a genuinely competitive market.”

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