Avoid Genesis deal, says academic
An electricity specialist says he would not touch Genesis' proposed "lock-in" price deal with a barge pole because he believes electricity prices will fall.
Genesis has offered "selected" customers in Christchurch and elsewhere a locked-in price for two years in exchange for raising its prices by 9.5 per cent.
Customers who accept the offer and later break it by switching to another retailer will be charged a $150 penalty.
Wellington academic and electricity industry researcher Geoff Bertram said the deal was designed to protect Genesis from a drop in prices in the future.
"No, I wouldn't touch it with a barge pole," Bertram said.
Genesis could see serious pressure coming to drop retail electricity prices, he said.
"What they [Genesis] want to do is to lock in the highest retail prices they can lay their hands on for as long as possible in order to ensure their customers can't desert them in droves for other companies and other deals as the prices go down."
Genesis last week blamed most of the 9.5 per cent price rise proposal on Orion being permitted to raise its prices, which are regulated.
However, Orion chief executive Rob Jamieson said yesterday its increase in charges this year would add 3 per cent to the electricity bill and less than 1 per cent next year. Its charges formed only 25 per cent of an electricity bill.
Transpower's prices were also rising and would add 1 per cent to the bill this year.
So it appears the remaining 5.5 percentage points of the 9.5 per cent increase is the increase in Genesis' prices.
Spokesman Richard Gordon said last week Genesis' increase was a small part of the overall increase but it appears it is more than half of the 9.5 per cent rise.
Gordon said yesterday Genesis had to cover its rising costs but he would not detail those.
"I'm not going to go through them one by one. There are cost increases we are facing and they have to be recovered."
Bertram said a drop in electricity prices would come if the Labour-Greens won power and brought in their reforms or the Government came under pressure in election year to offer something appealing to voters.
"I think we will see prices turn either of their own accord on the expectation of trouble ahead or on actual intervention by Government to drive the market back into a more electorally survivable place," Bertram said.