Photo: AFP
Independent electricity retailers and large energy users say they're facing higher fixed prices from the wholesale electricity market, and expect prices to keep rising over the coming years.
Over winter wholesale electricity prices soared, putting independent retailers and large energy users under pressure.
In July, Electric Kiwi paused taking on new customers for a period saying it could not afford to take them on.
In September, Winstone Pulp International and Oji Fibre Solutions cited high energy pricing as part of their reason to close their mills.
Meanwhile, from April next year the average resident's power bill will cost an extra $15 a month after the Commerce Commission agreed to let national grid operator Transpower and local lines companies increase power transmission charges.
Electric Kiwi said it was raising its electricity prices from next year telling consumers "while the spot market has now eased as we approach summer, the futures market [where electricity companies buy electricity] has not, and there are ongoing concerns about supply next winter and into the future".
It's chief executive Huia Burt said the way electricity companies purchased electricity was similar to how mortgage holders refixed their mortgages.
"We have to manage the risk of how the rates for electricity will change in the future and so to manage that risk, what we do is we actually fix the price that we pay for out the electricity that we supply to our customers in advance," she said.
But she said the costs they were facing were very high.
Major Electricity Users' Group chair John Harbord said they were expecting ongoing pressure on the affordability of electricity to continue.
He said for large electricity users renewing their wholesale electricity contracts, some of the prices they were being offered were "certainly a step up" from what they were able to get not very long ago.
"The futures market is certainly showing that, for the next several years, electricity prices are going to continue to rise and pretty significantly."
He expected the large manufacturing companies would also be more exposed to the significant increases in transmission and distribution pricing than households.
Chief operating officer at Octopus Energy Margaret Cooney said the current electricity market was not working for consumers or businesses.
"Since 2018 wholesale electricity contracts have risen significantly, which is coinciding in big increases in lines costs following the Commerce Commission's reset," she said.
"We're on track for a big increase in electricity costs for households and businesses over the next two years, time is ticking to make the changes needed to course correct the market. Without them the dysfunctional electricity market has the potential to tip the economy."
Electricity Authority admits more needs to be done
The Electricity Authority said that the purpose of forward contract buying was to protect against volatile spot prices by fixing the electricity price for a specified period.
"We need a wholesale electricity market that adapts to the rapidly changing needs of all those involved in the system," an Electricity Authority spokesperson said.
It conceded more needed to be done.
"The Authority, and the market, needs to work harder and faster for consumers," the spokesperson said.
It said it had a range of work was underway to ensure the market kept pace with the rate of change.
"We are delivering improvements to the wholesale electricity market and have accelerated that work as a result of the increasing pace of change we saw this winter.
"Part of this response is the Energy Competition Task Force with the Commerce Commission; together we are looking at ways to strengthen the market, boost competition, encourage more investment in new generation, and put downward pressure on prices."
Independent retailers sceptical about competition
Electric Kiwi said it was encouraged by the development of the task force and hoped "that they are brave enough to make the changes needed to unlock a fair market that delivers for New Zealand".
"Until change is actually made, it is our expectation that electricity prices for Kiwis will continue to rise."
Cooney said the task force had a limited scope and has relegated substantive reform to "backstop measures".
Transport Minister Simeon Brown during a transport announcement in Auckland on 3 December 2024. Photo: RNZ / Marika Khabazi
However, she said, Energy Minister Simeon Brown has initiated a sector review that had the ability to undertake substantive reform.
"It's critical that Brown's review translates into action to reform the electricity market. The OECD highlights that previous iterative and limited actions have been ineffective," she said.
"As the costs of a poorly performing market add to the bills of struggling households and businesses that can't be kicked down the road again."
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