If you’ve been on our spot price product, Freestyle, these past few weeks, you will have felt the brunt of some higher than normal spot prices thanks to these unprecedented market conditions. As top energy market consultant Greg Sise surmised this week, there are three key factors impacting current conditions - low hydro storage, restricted fuel supply and plant outages. But he also notes that the current conditions “appear to be unprecedented in the history of the electricity spot market”. Though it’s been over 20 years since an event of this nature, he noted that “the prices we’re seeing at present are not just the result of low inflows and falling hydro storage, there are other factors at play which are (not only) almost impossible for us to predict”.
Put simply, the current spot prices are way out of step with the costs of making electricity, and that just isn’t right. To draw a comparison, we would all find it completely unacceptable for Fonterra to charge $100 per bottle of milk, with no explanation about the market conditions that created such high prices. Similarly, it’s necessary for generators and the Electricity Authority to ensure that Kiwis aren’t paying the price of market power (held by a very small number of companies) and opportunism.
Someone is making money right now - it’s not us, and it’s not our customers.
We don’t object to generators making money on the electricity they produce. What we do object to is a system that enables circumstances to be taken advantage of in order to profiteer.
We’re elevating this issue with the regulators on behalf of our customers and all New Zealanders who deserve a properly functioning market that enables product innovation and consumer choice.
A badly managed market stifles innovation and removes customer choice. It puts all independent retailers under pressure (those with fixed price offerings are absorbing huge generation costs at the moment); and it’s those independent retailers who have proven, over consecutive years of Consumer NZ surveys, to provide the best outcomes for consumers through customer service and product innovation.
The current conditions will serve only to benefit the shareholders of the gentailers. Not only are they winning on the generation side now, but in time they will pass on these higher costs on the retail side when they next review their prices. Our Freestyle customers may be experiencing what’s happening in real-time, but all power consumers will ultimately pay the price.
So, what needs to happen? The Electricity Authority (EA) needs to step up and do the job that it’s mandated to do. As we’ve noted in our submission to the Electricity Price Review panel, the EA has done an effective job of supporting new retailers to enter the market. However, they have failed to follow through to ensure that the regulatory settings allow growth, and support effective competition.
What’s happening now is a clear example of this - generators are exploiting a captive market. There has been very limited (and delayed) information disclosed to the market about the gas and thermal plant outages, and hard questions have to be asked as to why the Electricity Authority has not done more to clarify what’s happening, and to hold parties to account on their disclosure obligations.
Customer care is our top priority. Our small but mighty team are working round the clock to support our customers to pay their current bills and understand their options, like switching onto our fixed price plan FIXIE, to manage their costs moving forward. All our empathy is with anyone struggling to pay their bill - our staff are customers too! - and we’ve made options available for payment plans for any customer who needs it.
We’re also taking a stand against the anti-competitive behaviour we see going on in the industry right now. We’re built on the bones of fairness, honesty and transparency, and we know something’s broke. So we’ll keep fighting the good fight on behalf of our customers and all New Zealanders. Because we all deserve better.