Faith in Electricity Authority at ‘new low’, says Electric Kiwi

Saturday, 13 May 2023

Power retailer Electric Kiwi says its faith in the Electricity Authority to protect consumers is at a “new all-time low” after the regulator issued what Electric Kiwi viewed as weak recommendations to improve competition in the electricity market.

Chief executive Luke Blincoe said the authority “can’t seem to find its own feet” after it chose not recommend structural reforms to the power market, despite earlier admitting it could not explain high wholesale prices.

The EA report comes in the wake of a further increase in the underlying profitability of the country’s three majority state-owned power generators-come-retailers, Meridian, Mercury and Genesis, and a forecast that households’ average spend on electricity would need to double within the next five years.

Electricity Authority chief executive Sarah Gillies said while the electricity market “may not be perfect”, it had served consumers well.

It found earlier that generators might have been taking advantage of market power between January 2019 and mid-2021.

But it said in its new report on Friday that since then changes in electricity spot market prices had been explained mostly by “underlying demand and supply factors”.

It also previously noted that forward wholesale prices for electricity through to 2026 were higher than the cost of generating electricity from new power plants, but said on Friday it was satisfied that was due to “lags” and by uncertainties caused by a number of government policies.

“The authority considers that currently the best approach to constrain the exercise of market power … is through trading-conduct monitoring and enforcement, facilitating more and faster investment in generation, and enabling more responsive demand,” it said.

It recommended a variety of measures that mostly revolved around more closely monitoring aspects of the power market and promoting more information-sharing.

Blincoe said the authority should instead as a first step have followed the UK by requiring the gentailers to offer electricity to independent retailers on the same terms that they supplied their own retail arms.

“That's an easy step. They can do it tomorrow. I just don't understand why they don't want to,” he said.

“They say there's no conclusive evidence of market power being exercised. There's no conclusive evidence of anything because fundamentally, they haven't done the work to identify it,” he said.

“It’s time we had a far more effective regulator.”

An Electricity Authority spokesperson would not say why it would not introduce that regulation, but said the cost breakdowns of gentailers and retailers without a generation portfolio were similar, suggesting a competitive market.

“Gentailers reported their costs of electricity to be between $99/MWh and $111/MWh, while retailers without a generation portfolio reported electricity costs between $92/MWh and $111/MWh indicating costs of electricity were similar for gentailers and retailers who do not own generation,” he said.

Blincoe said it did not accept those figures. In practice, Electric Kiwi could not buy at an average of those prices, he said.

“If the Electricity Authority thinks we can, show us how.”

Blincoe said there was not much Electric Kiwi could do other than to lobby Energy Minister Megan Woods to intervene.

He noted Woods would soon become the country’s longest-serving energy minister, being in the role nearly five years and eight months.

“What is her legacy going to be? At the height of the cost-of-living costs, she’s got a bunch of her officials seemingly completely out of touch with the reality of the suffering that Kiwi families are going through,” he said.