Energy Minister defends state-owned 'gentailers' after their profits double

Wednesday, 24 August 2022

Energy Minister Megan Woods has defended the Government’s stewardship of the electricity industry and gone in to bat for the big three state-controlled ‘gentailers’ after they reported big profit jumps.

But Woods said she would be “very disappointed if consumers were faced with unjustified price hikes from any company making large profits”.

The combined profits of Genesis, Meridian and Mercury totalled $1.35 billion in the year to the end of June, up from $601m last year.

Meridian Energy, the last to report, posted a 55% increase in its annual profit to $664m on Wednesday.

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Mercury and Genesis, which like Meridian are 51% government-owned, previously reported big profit jumps over the past two weeks.

The three firms’ combined operating profits also rose significantly, but at a slower pace, from $1.51b to $1.73b.

Woods said it was important to note “the vast amount” of firms’ profits weren’t driven by consumer price increases but by what she said were changes in their “financial and corporate structures such as sales and acquisitions”.

“However I do believe that prices must remain fair and not be disproportionate to the profits made by gentailers, which is exactly why, after a period of relatively high bills, for residential consumers, I commissioned the Electricity Price Review in 2018,” she said.

“As a result of that we now have the Consumer Advocacy Council to advocate for residential and small business electricity consumers.”

Other measures the Government had taken to ensure residential consumers were being charged a fair price included legislation to modernise electricity regulation and promote competition, the phase-out of low-fixed daily charges, and new market rules to improve retail and wholesale competition, she said.

Deborah Hart, chairperson of the Consumer Advocacy Council, said consumers wanted reliable and sustainable electricity into the future, “but they also want fairly priced electricity”.

The council was established with the support of the Government this year to advocate for the interests of consumers and small businesses in the sector.

“It is jarring in the week that Genesis posted a 600% increase in profits that it also said that its customers can expect a price increase for their electricity,” Hart said.

“The Consumer Advocacy Council hopes that in times of increased inflation, when consumers are facing rising bills, that electricity retailers will take great care when considering the price of electricity for their customers.”

Hart noted other companies had also posted significant annual profits.

“We believe price increases need to be justified and proportionate to their costs and capital requirements and we will be watching closely to ensure this is the case,” she said.

Hart said the council was planning to conduct a survey of the sentiment of power users and would soon “better know what consumers think about the prices and services they receive”.

Meridian said its profit for the year was boosted by a $214m gain on the sale of its Australian business and by a $281m rise in the value of “hedge instruments”.

Genesis also reported a large increase in the value of its derivative contracts, which reflected an increase in forward pricing for electricity on the wholesale market.

Meridian chief executive Neal Barclay said it had “a challenging, but successful year”.

The company announced a 3% increase in its dividend and said it “continued to focus on customers first”, including through an Energy Wellbeing programme to assist vulnerable customers.

Most of New Zealand’s electricity is generated from hydro schemes build decades ago.

Barclay said power prices had been rising at rate below the rate of inflation over the past decade.

“All the evidence tells us strong competition is working for customers in the New Zealand electricity market,” he said.