Fixed-price power a 'one-way bet'

Sunday, 25 June 2017

Most fixed-term contracts still allow increases in network costs to be passed on.

Households are being warned that taking a fixed-price deal from their power companies could be a one-way bet.

Many power companies are offering their customers the chance to fix their prices.

Consumer NZ chief executive Sue Chetwin is wary of fixed-price power deals.

Consumer NZ chief executive Sue Chetwin said it was likely that some power retailers would have seen publicity about spot prices moving up because of a dry winter, and decided it was a good time to tempt people into fixed-term contract.

But she said it was not worth paying more for protection against possible future rises.

Strong competition in the electricity market was likely to limit price increases, she said. 'The chances of a radical increase in prices are probably quite small.'

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And most power companies' contracts allow them to pass on any increase in transmission costs, which is about 10 per cent of a typical bill, and other associated network charges.

Chetwin said in many cases the retailer was only promising to fix the price of about a third of the bill. The rest could rise regardless.

She would not recommend a fixed-term deal. 'You're stuck and you have to pay a break fee if you want to get up. The fact is the market is pretty competitive, why would you bother? You can drive a decent bargain by speaking to your electricity retailer.'

Contact is rolling out an offer to some customers, telling them their prices are rising but they can fix the new rate until 2019 to avoid further price hikes.

But it says prices will change if the network increases its prices, or there are changes to levies, taxes or regulations.

'Fixed plans are proving popular with our customers as they provide more certainty around customers' energy costs, which helps with budgeting. We have around 30 per cent of our customers on fixed plans,' a spokesman said.

There are a number of processes under way that could lead to significant increases in network charges for some customers.

The Commerce Commission is assessing lines company Powerco's application to hike prices to meet the cost of its planned $1.32 billion investment in its North Island network.

The investment over the next five years represents an increase of about 55 per cent compared to what it invested in its network over the past five years.

This investment would be recovered through price increases affecting 320,000 homes and businesses in Manawatu, Rangitikei, Whanganui, Taranaki, Tararua, Wairarapa, Coromandel, Eastern and Southern Waikato and Western Bay of Plenty.

Powerco estimates its current plan would increase lines charges by 79 cents a week for the average household. Price increases would vary across regions.

The Electricity Authority is also reviewing transmission prices to provide what it says is a fairer way of paying for the national grid. That would mean price rises in some parts of the country.