Govt hints at power price regulation

The Government is looking at moves to regulate electricity prices, as Contact Energy customers in the Nelson region are about to be hit with a 12 percent power price increase.

The power company's new increase, which equates to an extra $14 a month on the average power bill from November 1, comes as the cabinet is due to consider asking the Commerce Commission to hold an inquiry into electricity price increases.

Cabinet minister and Labour's Nelson candidate Maryan Street said today the extent of the price increases was "outrageous" and the cabinet would consider an inquiry into the increases before price regulation could be introduced.

Contact Energy customers in other parts of the South Island and Wellington have also been told to expect rises, and South Islanders have been told to brace for further increases over the next four to five years.

Nelson Budget Advice manager Marina Gosnell said the increase was "just another nail in the coffin" for low-income households already under pressure from skyrocketing fuel, food, rates, rents and other living costs.

"After October 1 they are going to get an average of an extra $14 a week in tax cuts. That (Contact Energy) increase is wiping out a quarter of that tax cut just to pay for power."

Mrs Gosnell said low-income families and beneficiaries were already hurting and trying to play catch-up with past increases.

"It just keeps adding and adding to it. It just gets more and more awful."

Contact Energy communications manager Jonathan Hill said Contact only had a few thousand customers in the Nelson region.

Mr Hill said the power price rise was necessary because of "historic, chronic under-investment" in the national electricity transmission system.

He said transmission constraints in the lower North Island along with the limited capacity of the Cook Strait cable to send power south, and a lack of new generation in the South Island had all contributed to power rises in the South Island.

South Islanders would probably face power price rises for the next four to five years, he said.

Mr Hill said he didn't know what the future increases would be, but said they were unlikely to be of the magnitude of the current jump of just under 12 percent.

"Certainly, this is an adjustment to factor in - the fact we expect higher wholesale prices in the South Island."

Before the latest round of increases, household power prices nationally had risen about 55 percent on average since 1999.

Consumer New Zealand chief executive Sue Chetwin said that of all the power companies, Contact was up there with "the most rapacious".

Contact said a month ago, when it posted a $237 million annual profit, that an increase of at least 6 percent was likely. This month, Contact directors came in for flak from the Shareholders Association over plans to almost double directors' fees to $200,000 each, which the association said was undeserved.

It is putting up retail prices at a time when hydro power lakes are almost back to average levels for the time of year and wholesale market prices have plunged.

Trustpower spokesman Graham Purches said the company had no plans for price rises until its regular annual review in April next year.

Meridian Energy spokeswoman Claire Shaw said the company continued to keep a "close eye" on pricing but had no immediate plans for increases.

Nelson MP, National's Nick Smith, said the Electricity Commission had failed to keep adequate oversight, in that power prices had soared by more than 50 percent since its establishment. National would make reforms to ensure there would be adequate electricity transmission, new generation and greater discipline on power companies like Contact Energy. It also wanted to provide for alternatives for households such as solar power.

- © Fairfax NZ News