Power prices will need to be raised by 4 to 5 percent a year
to cover the costs of building new power plants, Contact
Energy says.
Contact told the finance and expenditure select committee
today current prices were not high enough to warrant
investment in new plants, specifically in the construction of
new geothermal generation.
"Prices must support the investment needed in new generation
to ensure that we maintain security of supply," said
Contact's development and acquisitions manager Liz Kelly.
"New Zealanders enjoy some of the most competitively priced
electricity in the OECD."
Responding to a question from Labour's Charles Chauvel, Ms
Kelly said there would need to be price rises between 4 to 5
percent a year before Contact could invest in new geothermal
generation.
The finance and expenditure select committee was meeting
today to discuss the electricity industry bill which aims to
improve both competition in the electricity market as well as
security of supply.
A range of groups, including some of the big power companies
made submissions on the Bill. While most supported its
intentions, many had concerns that some aspects of it would
go against its desired outcomes.
The Bill, which passed its first reading in December, aims to
increase competition through a range of measures, including
allowing lines companies to enter the retail market and
setting up a hedge market which would allow new companies to
enter the retail market.
Upon the Bill's introduction into Parliament, Energy and
Resources Minister Gerry Brownlee said "competition is vital
in order to constrain future price increases."
A number of submitters told the select committee that the
Bill contains too many barriers for new entrants into the
retail market.
Powerco told the committee that forcing lines companies to
split their companies if they want to enter the retail market
was a major barrier to entry and said that if the bill goes
through unchanged, it would not be entering the retail
market.
Vector Energy chief executive Simon Mackenzie said that the
bill did not go far enough to lower electricity prices. He
was concerned that the hedge market would be run by the
existing companies.
It was not in the existing companies' interest to set up a
hedge market that allowed for new retailers, as this could
damage their own business, Mr Mackenzie said.
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