Editorial: Comfy enough are we, Contact?

Last updated 08:01 28/02/2013
Opinion poll

Contact Energy notified their customers of a pending price increase. Is it fair?

Yes. I've got shares in Contact and the more profit they make, the more I get in dividends.

No. I'm struggling to pay my power bill now.

It's not fair when wholesale prices have fallen.

Vote Result

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OPINION: Contact Energy recently pronounced itself "not uncomfortable" with market forecasts of full June year operating earnings up to $525 million.

It's presumably also comfortable to have posted a half-year profit of $88 million.

Comfort levels might be just a tad less padded, however, among its almost 20,000 customers in Southland.

Residential and small-to-medium business customers have just been given a heads-up (though it's the sort of news that tends to make heads drop) that they are facing an average 5 per cent rise from April 1.

This on top of the savage increases last year - 10 per cent for residential customers, and 8 per cent for businesses.

Contact hastens to assure us that it recognises that price rises cause concern.

But gee, what can it do when it is balancing so many complicating factors; not just those increasing network costs but the vagaries of the wholesale electricity market, volatile bazaar that it is?

Generating costs have been lower and wholesale prices have been down lately, but foolish us if we think that this should be reflected in any adroit changes to the prices we pay.

As we are so often reminded by power companies, Contact included, the retail tariff that residential customers pay provides us stability against those lurching ups and downs.

That argument would travel just a bit further down the community's gullet were it not for the fact that Contact is one of the country's biggest power generators as well as retailers.

And we're not just talking about its Clyde and Roxburgh hydro plants.

It has been investing heavily in further generation, devoting at least $350 million a year on capital investment in what amounts to a $2 billion development programme.

The Te Mihi geothermal station near Taupo should be farting and snorting like a good 'un by the middle of the year, saving $60m in production costs and most likely replacing more expensive thermal plants, which are less attractive under the emissions trading scheme.

Being both a generator and an earner provides Contact itself with what some of its rivals would consider an enviable protection from the more turbulent aspects of the market.

If these are comfortable times for Contact, and encouraging ones for its investors, it may come as scant consolation for about 100 of its staff, facing redundancy by the middle of the year. This is part of a $40 million cost-cutting programme so the company can continue to "offer competitive services to customers", we're told.

And the coming year is unlikely to be too terribly comfortable for southern customers, more than just a few of whom have themselves been made redundant in recent times and so many of whom are feeling financially stressed.

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Especially when times are hard, power prices are right up there among the heaviest household burdens.

- The Southland Times

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