17 Jun 2016

Power prices down... but not for long

8:13 am on 17 June 2016

A wet year and a competitive market helped push down power prices for the first time in 15 years, but it might not last.

power pylon

Photo: RNZ / Diego Opatowski

Figures released by the Ministry of Business, Innovation and Employment have revealed a fall of 1.4 percent in the year to March.

It is the first such fall for 15 years.

The chief executive of the Electricity Authority Carl Hansen attributed this to a competitive market.

"We put it down to quite a significant increase in discounting activity and credits," he said.

"They are being offered to consumers, retailers are working harder than ever before to attract and retain customers and this is having an impact on the prices that consumers are actually paying."

The electricity market is very crowded, with 15 companies trying to sell electricity in Auckland and Wellington, 14 in Hamilton, 13 in Canterbury, and eight even in smaller areas like the West Coast.

All of them faced stiff costs when customers switched to other companies, so they offered inducements to customers to join with them or stay with them, and good discounts for prompt payment.

Carl Hansen said this was a very good development.

Some people spoken to on the streets of Wellington were sceptical of this but others agreed the prices had in fact fallen.

Bryan Leyland, an electrical engineer and long-standing analyst, said the fall in electricity prices should not have come as a surprise.

"We had a reasonably wet year," he said. "Hydro generation went up, thermal generation went down, there was a little bit of load growth which was picked by up by geothermal, so one would expect a lower price."

For now, the price fall will be a one-off. A recent rise in lines charges are expected to push it back up again by 1.5 percent.

But Mr Leyland was optimistic that after 12 years of price rises, costs should level off for a while, mainly because the cost of upgrading transmission systems was over and done with.

But the cost of the electricity itself could still rise if poor conditions caused a winter shortage.

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