More power price hikes to come as Energy Minister ‘watching closely’

Thursday, 27 February 2025

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The big power companies are raising prices while increasing their combined payout to shareholders and reporting lower collective capital investment.

Meridian Energy chief financial officer Mike Roan said it had begun writing to customers to advise them of price rises and would send out more communications next week.

Some details had yet to be decided, but Meridian’s increases would be lower than the average 9.7% price rise announced by Mercury on Tuesday, he said.

About 80% of Meridian’s higher charges would be attributed to regulated increases in lines charges and transmission fees, which were also affecting other power retailers, he said.

Contact Energy kicked off the round of steep price hikes in October, when it announced it was upping its prices for an initial tranche of 280,000 customers by about 10%, or $5 a week.

A Genesis spokesperson said no decisions had yet been made on its pricing.

The price rises come amid growing fears of another winter energy crunch, and in the wake of a warning from NZ First deputy leader Shane Jones that the party could distance itself from the Government by making a major overhaul of the industry its top priority come the next election.

Financial results posted by Contact, Genesis, Mercury and Meridian Energy over the past two weeks showed their combined profit crashed to only about $24 million in the six months to the end of December, from $244m in the same period in 2023.

But they nevertheless increased their combined interim dividend pay-out to shareholders by 3% to a total of $500m, while reducing their combined capital expenditure — which includes spending on new power plants — by 8% to $618m.

Energy Minister Simon Watts said the Government had a range of work under way to deliver on its vision for the energy market and was playing its part in getting the settings right.

“We’re listening to the OECD which highlighted New Zealand's electricity market as a problem for productivity,” he said.

“Last winter highlighted the very real impacts that the lack of competition in the energy market and failure to deliver electricity at internationally competitive prices can have on New Zealanders, with price spikes, some industrials closing down, and record low trust in the energy system.”

Commenting on the price rises, Watts said people could expect retail prices to reflect the new revenue caps the Commerce Commission decided on for transmission and local lines networks.

“Each retailer can decide whether and how to pass on these charges. I will be watching closely,” he said

Labour energy spokesperson Megan Woods said a drop in investment wasn’t a surprise given the Government had cancelled “demand side” initiatives that were designed to support the greater electrification of the economy.

That included the Government reducing its support for EVs and axing the Gidi fund, which provided assistance for businesses to switch from fossil fuels to lower-emission alternatives, she said.

Roan, who will become Meridian’s chief executive in July, indicated its spending needed to be judged over a longer time frame.

He expected Meridian would commit this year to $1 billion worth of investments, with that actual spending occurring over the following “two to three years”.

Meridian’s outgoing chief executive, Neal Barclay, yesterday suggested the company should be allowed to lower hydro lakes below levels allowed in resource consents, saying that would reduce energy costs and emissions for “little or no additional environmental cost”.

Roan said Meridian was dusting off ideas for hydro investments that hadn’t been reviewed since about 2010.

A third of the investment being made in new generation was now coming from new entrants such as independent solar power developers, rather than the major ‘gentailers’, so Meridian would be “nuts” not to invest, he said.

A Government plan to facilitate the importation of liquefied natural gas to help keep a lid on energy costs looked unlikely to proceed as investments in hydro storage or coal-fired generation looked more affordable, he said.

Watts separately confirmed the Government would ease restrictions on electricity lines companies investing in power generation, as it had previously signalled.

Restrictions have been in place because of concerns lines companies could unfairly leverage their position as regional network monopolies.

But Watts said the new policy would increase generation, and safeguards in the Electricity Authority’s code and the Commerce Act provided protections for competition.

“It is very difficult to grow the economy when energy security is at risk.

“This change is among a number of measures the Government is taking to ensure businesses and ordinary Kiwis have access to a reliable and secure energy supply,” he said.

Watts did not make clear whether the current restrictions on lines companies would be eased or removed completely.

A spokesperson for the minister said the details would be laid out in a bill which is expected to introduced by the end of June.

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