30 Jun 2010

Firms warned over price hikes ahead of ETS change

3:14 pm on 30 June 2010

A day before fuel and electricity is brought into the Emissions Trading Scheme, the Commerce Commission is telling businesses to make sure they don't mislead people about the reasons for price increases.

The commission says businesses are not required by law to give reasons when they raise prices, but when a firm decides to justify an increase to its customers, its reasons must be accurate.

Businesses should not overstate the cost of the Emissions Trading Scheme (ETS), it says, or they might breach the Fair Trading Act.

The commission says there is the potential for consumers to be misled about the impact of the ETS on electricity and petrol prices.

Its warning also applies to the increase in GST from 12.5% to 15% in October.

Price rise tricky to calculate

Power company Mercury Energy says it's hard to know how much cost it should pass on to consumers as a result of the Emissions Trading Scheme.

Contact Energy and Mercury Energy have both blamed the ETS for electricity price increases of about 3%.

Mercury Energy general manager James Munro says it's impossible to calculate the cost of the scheme and while there is a possibilty of over-charging or under-charging customers, it will balance out in the long term.

"Nobody can point to a fixed ETS amount," he says. "What they can tell you is the what the effect of carbon is on the whole market, and that's what we measure our input costs by."

On its website, Mercury Energy says it will be increasing its retail energy prices as a result of the ETS, which will add, on average, $5 a month to residential customers' electricity bills and $1.75 per month to residential gas bills.

It says this is based on an average household usage of 7,585 kWh pa, includes GST and reflects the prompt payment discount.

Contact Energy has said that for an average residential customer using 8,000 kilowatt hours of electricity per year and 8,000 kilowatt hours of natural gas per year, the monthly increase will be $5.20 for electricity and $1.82 for gas, also including GST and after a prompt payment discount.

Genesis Energy and Trustpower have not yet signalled ETS-linked price rises, saying it's too early to tell what the flow-on effect will be for consumers.

Commissioner welcomes ETS extension

Parliamentary Commissioner for the Environment Jan Wright welcomes the extension of the ETS. But she adds it does have its faults, including the slow phase-out of emissions by large companies, which incur taxpayer subsidies in the process.

The gradual phase-out has been defended as a way of deterring companies from moving overseas if the New Zealand regime gets too tough.