Power companies' practices questioned

The commercial practices of energy generators were put under the microscope at a commerce select committee meeting in Parliament today.

Fronting the meeting, Energy and Resources Minister Gerry Brownlee said 73 percent of energy production was renewable according to newly released figures, but the Government remained committed to a goal of lifting that to 90 percent by 2025.

Mercury Energy's recent announcement that it would hike retail prices by 3.3 percent when the Emissions Trading Scheme (ETS) starts next month was again queried by ACT's John Boscawen.

He asked how it could justify such an increase and cite the ETS when its energy came from parent company Mighty River Power, which generated the vast majority from renewable sources.

Mr Boscawen questioned whether Mercury was simply grabbing a chance to join the run of inevitable price rises by competitors resulting from the ETS.

"I can't answer for Mercury Energy what their pricing policy is," Mr Brownlee said.

"I understand this committee is going to write to them to ask questions about how they are treating ETS costs as such."

The answer would be interesting, Mr Brownlee said.

"But I think it's a clear position that if you have the opportunity to generate predominantly from renewable sources, then you should able to undercut competitors by quite a considerable amount over time."

While it was "probably not" acceptable to make windfall profits from the ETS, demand for power had been increasing at least at the rate of production and that left little commercial incentive to reduce prices.

A recent 10 percent hike in retail power prices by Contact Energy in Dunedin was also queried and Mr Brownlee admitted he was scratching his head over that move, considering the company was operating among competitors there.

He said the processes involved with switching providers were not restrictive and advised consumers to consider doing so if there were benefits.

Mr Brownlee was also cynical about claims that repeated power crises over the past 10 years were because of low lake levels due to lack of rain in the south.

Regarding Meridian Energy and its Waitaki River scheme he said "there has to be a reason -- other than lack of rain -- for such a frequent incidence of electricity crises in the country", and suggested inadequate resource management could have played a part.

Labour MP Chris Hipkins said Mr Brownlee was using that as an excuse for the Government's energy sector restructure, which included compulsory asset swaps between state-owned enterprises Meridian and Genesis.

Mr Hipkins said groups including the Institute of Professional Engineers had argued the Waitaki scheme worked best as a coherent whole, and splitting its assets between two generators could lead to less efficient use of water.

Under Mr Brownlee's watch, power prices would keep rising, he said.

Mr Brownlee said the restructuring would create incentives for good water management practices.




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