11 Mar 2014

Wellington power price freeze warning

1:24 pm on 11 March 2014

Wellington residents are being warned to be wary of an offer to dodge a sharp rise in electricity prices by freezing their power bill.

Contact Energy will raise power bills in Wellington by 6.8 percent on average at the start of April and other retailers are forecasting similar rises.

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Photo: RNZ / Diego Opatowski

But one Wellington resident told Radio New Zealand that Contact Energy has offered to freeze his power prices and dodge next month's price hike, so long as he sticks with that frozen price for two years.

However economics professor and energy industry commentator Geoff Bertram warns fixing bills may mean consumers miss out on future price drops.

Dr Bertram says the industry is currently under pressure from falling demand for electricity which could push prices down.

He says a new regulatory regime under a Labour-Green government could also reduce power bills and suspects power companies are offering to freeze bills to provide a buffer if those changes go ahead.

Last April, Labour and the Greens announced that if elected this year they would establish a state-owned company, NZ Power, to buy electricity with the aim of making it cheaper for consumers.

"I think the companies are trying to hedge their bets a bit on the possibility of a change of government," Dr Bertram says. " So that if they lock you in for two years now, Labour and Greens come to power and implement their policies, then possibly there's a year's further protection for the company's revenues against those policy changes."

Another commentator, Molly Melhuish, says it's very difficult for consumers to judge whether an offer like Contact's is right for them.

Ms Melhuish says even experts in the field struggle to make accurate predictions about whether electricity prices will rise or fall, partly because of a lack of information about how power retailers set their prices.

The Electricity Authority says it hopes to remedy that problem. It currently has a project underway to make it easier for consumers to understand how power companies set their prices.

The authority also plans to give consumers more information about their own patterns of power usage so they can make sure the deal they pick is the best one for them.

It says the project should be completed by the middle of 2015.

Genesis Energy has confirmed it's not allowing customers to freeze their prices at the moment.

The other major retailers could not be reached for comment.