Energy prices are effectively dropping, and Kiwis can look forward to years of smaller increases, the boss of one of New Zealand's major power companies says.
Mighty River Power chief executive Doug Heffernan said today that energy prices were effectively falling for consumers. Only added distribution prices, regulated by the Commerce Commission and at no profit to retailers, were climbing.
“If prices are going up at a consumer level, it's coming from the transmission and distribution side,” Heffernan said in Wellington.
“Energy prices for our residential customers are falling in real terms. They're not going up at inflation rates. The T and D [transmission and distribution] may well be [rising], depending on what particular area you're in, and that's a regulator decision.”
Mighty River Power revealed today that in the last three months of 2013 its average sales price rose by just 0.6 per cent on the same period a year earlier.
The company, the first of the three state-owned electricity to be partially sold last year, says it will not increase residential prices until at least April 2015.
Heffernan said other countries were making a difficult transition from thermal to renewable energy.
However, New Zealand was well placed to see muted increases for years to come because renewable energy sources were not subject to cost increases in the same way coal or gas could be.
“My view would be New Zealand from an energy side of things, is in a much better place than the rest of the world, because we've now got significant renewables in place that do not face upwards cost pressure," he said.
"That's a good story for residential consumers in New Zealand.
“They're not going to see the increases that we've seen in the past.
"Other jurisdictions are seeing those. Australia is ramping up, Europe's ramping up, because they've not made the investment we've made."
The market was fiercely competitive, Heffernan said.
“It's bloody out there. That's part of why prices aren't going up.”
Demand was flat, but even as the economy grew, Heffernan did not expect cost increases to return to the level of the last decade.
Electricity demand was less linked to economic growth than in the past, while appliances were becoming more efficient, and the number of devices being carried by consumers was reaching saturation.
Meanwhile, there were ample options for new generation that would be economic at current levels, if there was enough demand.
“There's a heap of opportunities for new renewables and probably other investments, that are just waiting, ready to go ... that are economic at today's prices,” Heffernan said.
“If demand lifts, they'll come back, but we won't bring upward price pressure."
Shares in Mighty River Power, which is 51 per cent owned by the Crown, dropped half a cent to $1.955 on today's statement.
- Fairfax Media