Is there a Competitive Electricity market in New Zealand?

As the electricity companies continue to reap massive profits for either the Government or shareholders consumers face continuing rises in their power costs putting the most vulnerable of the population, many of these are GreyPower members, at financial risk.

The following is a quote from a submission by the Consumer Coalition 93 (CC93) to the Electricity Commission July 2007. CC93 is a coalition of consumer groups formed in 1993 to provide a voice for consumers in the changes during the restructuring of the electricity market. Strangely the GreyPower National Federation did not see fit to join with this coalition.

"One issue that continues to be raised by consumers is whether the very large reported profits of electricity suppliers are reasonable. To put this into context, the aggregate operating revenue of the five largest suppliers for the last complete financial year (apart from Trustpower which was 30 March 2006, all the rest are for 30 June 2006) was $8.2 billion. Some of this revenue was also for gas sales and other business activities. The aggregate Operating Surplus before interest and tax for the five largest suppliers was $1.4 billion. The latter excludes one-off profits from non-recurring activities such as the wind fall gain by Meridian Energy for sale of assets in Australia.

These are capital intensive businesses and CC93 acknowledge profits sufficient to cover investments need to be reasonable. Innovation in meeting the needs of consumers and efficiency gains can also lead to short term super profits. Equally companies that fail to meet the needs of consumers and are inefficient should struggle to make a reasonable return.

Occasionally reported electricity supplier profits have dipped but overall the trend has been for increasing profits and increased revaluations of assets for all five large suppliers. In commodities markets, and electricity is a commodity, a more pronounced cycle of high and low profits might have been expected. It's the perception of almost continuous year on year rises in profits and asset revaluations since the market commenced in 1996 that undermines confidence by consumers that the market is truly competitive."

What more needs to be said - perhaps, are we the consumers being taken for a ride?