Power price increases excessive, review finds

Electricity prices are excessive and householders may be compensated when they face power shortages, a ministerial review has found.

The review was released today and will be open to five weeks of consultation.

The review recommended replacing the Electricity Commission, allowing line companies back into retailing, and compensating consumers when they are asked to save power during a conservation campaign.

"The government does find many of the recommendations appealing, including a system of offering compensation to consumers when asked to save power during a conservation campaign, " said Energy and Resources Minister, Gerry Brownlee.

He said the compensation idea creates "a big incentive for generators to manage their resource and ensure conservation campaigns are a last resort.   If conservation measures are needed the consumer compensation will be an acknowledgement for inconvenience."

He said the Ministerial Electricity Market Review released today is an opportunity to address consumer concerns about rising power bills and security of supply.

The review was conducted by the Technical Advisory Group appointed by the Minister and chaired by Dr Brent Layton with assistance by officials from the Ministry of Economic Development.

"The primary goal of the review is to tackle the steep price increase to the consumer power bill over the last ten years, and to examine ways to reduce vulnerability in dry years," said Mr Brownlee.

The review offers a range of recommendations including:

*governance improvements with the Electricity Commission replaced with an Electricity Market Authority.

*line companies allowed back into retailing

*compensation payments to be made to consumers if they face conservation campaigns.

*a reallocation of assets among SOE generator-retailers to increase competition in wholesale and retail markets.

 "It is important to emphasise that this is a discussion document and my officials and I look forward to receiving feedback on the proposals - before any final decisions are made," said Mr Brownlee.

"Ministers have discussed restructuring SOE generation assets and have ruled out option one and two as too costly and risky, and  need to be convinced about the third option" (ie asset swaps between Meridian and Genesis), he said.

By DAVID GADD, Businessday