Genesis price rise sparks fears generators will pocket $214m in consumer savings

Friday, 29 November 2019

Most electricity bills should fall in April if power companies pass on a steep drop in lines company charges.

Price rises by Genesis Energy fly in the face of the Government's Electricity Price Review, the Electricity Network Association says.

ENA chief executive Graeme Peters feared generators were also preparing also pocket $214 million of savings that should flow into consumers' pockets from April as a result of reduced lines charges and transmission fees.

The Commerce Commission said on Wednesday that power bills should drop by between $3 and $34 a month in most part of the country from April, as a result of new rulings that will reduce the revenues lines companies and Transpower can earn from their networks over the next five years.

But Genesis spokeswoman Kiely Evans said Genesis would be increasing its 'standard electricity pricing' from January 7 'in most cases by up to about 5 per cent'.

Genesis, which remains 51 per cent owned by the Government, said the 'before and after' impact of its price rises would depend on the customer and the region.

But on average, monthly bills in Auckland, Wellington and Christchurch would go up by about $9.

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Evans said Genesis had reviewed its pricing following an 'extended period of higher than usual wholesale pricing'.

The company owns its own power stations, including the Huntly gas and coal power station, and would not say how much electricity it purchased on the wholesale market as a proportion of the electricity it supplied.

Genesis is not understood to have built any new power stations for more than 10 years, but said it spent $50m to $70m a year maintaining its existing ones, and would invest in Tilt Renewables' 133 megawatt Waipipi wind farm in South Taranaki that is scheduled to open in 2021.

Peters said the Electricity Price Review ordered by the Government last year and published in October was supposed to lead to more affordable power prices 'but that's not happening'.

Energy Minister Megan Woods said the Government had reassurances from other power companies they had no immediate plans to follow suit, after Genesis announced a January price rise, though Contact Energy confirmed it had increased some of its prices.

'Prices are going up – as we see with Genesis and possibly others.

'Network companies will be sending lower bills to retailers from April, but more than $200 million of lines revenue reductions look like they won't go to consumers – they will instead end up in the pockets of generators.'

Peters added that he felt for small retailers, as they were being squeezed by higher electricity generation costs and didn't have a natural hedge from generation.

Genesis Energy says its standard power pricing varies too much to publish in full.

The ENA represents the country's 27 lines companies.

Energy Minister Megan Woods said Genesis' decision was a commercial one.

'Consumers will make their own decisions about power providers based on this.

'We've had reassurances from other power companies they have no immediate plans to follow suit.

'I'd encourage people to shop around if they aren't happy with their power company.'

The Government's energy policy was putting downward pressure on power costs and helping more New Zealanders to pay their bills each month, she said.

The Electricity Price Review highlighted a need for greater price transparency, which the Government supported, she added.

The Government was also backing investment in renewables, she said.

'Transpower's Te Mana Hiko report made clear that the lowest cost future for consumers is one based on renewables, and that's what our policy settings are delivering. More renewables will mean lower prices, more jobs and lower carbon emissions.'

Evans said Genesis was not alone in raising prices.

'I know Contact has gone out with some changes, and have heard Trustpower and Electric Kiwi may have too.'

Contact chief customer officer Vena Crawley confirmed it had raised some prices over the past few weeks, also referring to higher wholesale costs.

'With the Commerce Commission announcement, we will be keeping an eye on each of the network companies' proposed changes for early next year. We don't yet know how this will impact our customers,' he said.

Commenting on the cost savings Genesis should be able to pass on from April, Evans said lines and transmission charges made up a major part of customers' bills and Genesis 'would welcome any opportunity that would enable us to reduce customers' prices'.

It looked forward to distributors confirming the detail of price reductions early next year, she said.