Press release, Domestic Energy Users Network

21 May 2009

Commerce Commission report must investigate retail electricity prices

The Domestic Energy Users Network welcomes the spotlight thrown on excessive electricity charges to domestic consumers by the Commerce Commission's investigation of wholesale electricity costs.

A follow-up investigation of retail costs and prices is now urgently needed.

The Commerce Commission has said it will not go ahead with such an investigation. It says this is because wholesale electricity makes up a large portion of the price of retail electricity.

That is not true.

In fact, in 2007, the wholesale cost of electricity came to just over one quarter of the 20.9 cents per unit paid on average by residential consumers. (see graph below)

Half the residential electricity price is made up of retail margin plus "cost-to-serve" mass market consumers. This is unreasonable, and the Commerce Commission must investigate it.

The Ministerial Inquiry on electricity issues is not an appropriate forum to discuss retail prices. The government is conflicted because it benefits from high prices. Every time the price rises, it takes in more dividends, more company tax, and more GST.

The first priority, over and above any attempt to fix the electricity market, is to commit some of the Government's income from electricity windfall profits to relieving energy poverty - now - this winter.

Electricity is an essential service. People's health is put at risk when they cannot afford their power bills. Energy poverty is a reality in New Zealand, especially in the South Island where incomes are low on average, and winters are cold.

ENDS

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