The suggestion about losing customers came from Electricity Commission chairman David Caygill, who told the Otago Daily Times it was quite common in Australia for power companies to shed customers considered too expensive to serve.
Contact is putting up electricity charges to Dunedin, Central Otago, Nelson and Wellington customers from November 1.
Mr Caygill said he was simply looking at the company's proposed actions, in the wake of last winter's South Island electricity supply problems.
"Perhaps another explanation altogether is that if they put the prices up, and the people pay, well that's fine.
And if they leave, well that's rebalanced their books."
Contact spokesman Jonathan Hill yesterday denied the price rise was designed to encourage South Island customers to go elsewhere for their electricity.
"That's totally untrue.
We don't want to lose any customers."
He would not say how many Dunedin and Central Otago customers the company had, but said it was "a large market for us".
Commerce Minister Lianne Dalziel and Energy Minister David Parker flagged the price rise as a discussion issue at yesterday's Cabinet meeting and pushed for a broad inquiry.
"We will be asking Cabinet to consider whether a broader inquiry is needed into whether these price increases are evidence of a lack of competition and market power being used to ratchet up prices," the ministers said after the power price rise was announced.
Prime Minister Helen Clark said Cabinet yesterday discussed the Contact Energy price rises - "which we don't accept the case for at all".
But current inquiries into the electricity sector would report back by the end of the year and these would be acted upon to get more competition by next winter, she said.
Mr Hill blamed high winter wholesale power prices in the South Island caused by a lack of generating capacity and the bottleneck at the Cook Strait electricity cable.
Ways to ensure ample competition in the electricity market was a matter the commission was considering in its review due out by the end of the year.
Mr Caygill said power companies did not need to explain themselves over how they operated in the retail market.
Contact's price rises for Dunedin customers, effective from November 1, are expected to cost the average customer about $14 more a month.
