The Reforms Are Delivering Lower Prices For Most New Zealanders:study

A comparison of electricity prices proves the power reforms are delivering lower prices to the majority of New Zealand
households, Enterprise and Commerce Minister Max Bradford announced today.

Mr Bradford released the Ministry of Commerce comparison, which showed more than half or almost one million New
Zealand households now have the opportunity to enjoy lower electricity prices.

"The reforms have delivered greater choice and lower prices. The majority of New Zealand households are already seeing
the benefits, which will be more widely spread as power supplier competition increases.

"In every area where there is competition and consumers have choice, power prices are lower than they were before the
reforms were announced," Mr Bradford said.

The comparison found: 

• Some 917,000 or 55% of New Zealand households now pay (or can choose to pay if they switch retailer) an electricity price that is lower than the price they faced as at 1 April 1998. The comparison is based on the average consumer's demand for electricity of 8,000 kWh per annum. 
• For those areas where there has been active retail competition, the price reductions translate into annual savings for consumers of up to $141. In other areas, the price reductions produce annual savings of up to $98. 
• The most significant price reductions have occurred in Auckland (reduction of up to 12.7%), Bay of Plenty (up to 11.9%), Wellington (up to 13.1%), and Christchurch (7.4%). These are the areas where there has been active retail competition. 
• There have also been price reductions in other areas - Wairoa (reduction of 4.2%), Horowhenua (4.2%), Tasman (9.1%), North Canterbury (0.7%), and Otago Power (1.4%) - even though actual competition has not yet occurred in those regions. 
• Of the 45% of households which do not yet have access to lower power prices, 20% are paying the same price as they were before the reforms were announced more than a year ago. The remaining 25% live in areas where they do not have a choice of power retailer. 
• In other words, 75% per cent of households are better off, no worse off, or will be better off if consumers excercise the choice they now have. 
• The retail business that appears exclusively to offer the lowest prices, where there is a choice of retailer in a region, is First Electric. The First Electric prices used in the comparison are those that will apply from 5 July.

Mr Bradford said it was clear that consumers had not had easy access to good quality information about the choices they
had.

"That is why the Government announced yesterday that it will fund a consumer information service during the early stage of
the reforms. This service will allow consumers to establish for themselves what choices they have in their areas and allow
them to make an estimate of the savings they can make if they change electrical suppliers," he said.

The potential for competition exists where only one retailing company is supplying electricity into a line business' area.

For example in Northland, Meridian, a retail energy company, is the only supplier to the 43,300 customers' in Northpower's
lines business area. Meridian is the South Island electricity generator formed from the three-way split of ECNZ.

An example of where competition is occurring is in Christchurch where three companies are supplying power to 157,000
customers.

Mr Bradford said there had already been a significant drop in wholesale electricity prices following the split of ECNZ into
three competing generators.

"Wholesale prices have halved since April 1 and in time these savings will translate into lower retail prices for housholds
and business consumers.

"My expectation is that with the new pricing measures announced yesterday, which will ensure that electricity lines
businesses face greater pressure to become more efficient, further gains will occur.

"I also expect that, progressively, retail competition will become even more widespread," Mr Bradford said.

"Claims by opposition parties, who have always opposed greater consumer choice and lower prices, are shown up for what
they are by these figures.

"The claims of the Labour party and the Alliance have been grossly misleading, distortionary and nothing more than political
rhetoric. The facts speak for themselves," Mr Bradford said. Media contact: Jeremy Kirk, Press Secretary, (04) 471 9836
025-424-565

Technical Notes

The attached table provides details of electricity prices for domestic consumers as at 1 April 1998 compared with prices as
at 25 May 1999. Note that the 1999 prices for First Electric are those that are scheduled to come into effect on 5 July 1999.

The table also shows the lowest available price in each region and how this price compares with the price a year ago.

The data is organised by geographic region, showing the relevant retail business (or businesses where there is competition)
and the corresponding electricity lines business. The customer numbers are for lines businesses.

The table lists the charges for each retailer for a domestic customer consuming 8,000 kWh per annum, with 60% consumed
on the uncontrolled rate and 40% on the controlled (hot water) rate. The charges are GST inclusive and based on a 30 day
month. Discounts, such as those for prompt payment, have been included in the calculations. Direct debit discounts and
rebates have not been included. Where different rates apply to summer and winter loads, weighted averages are used.

Prices are split into their "line" and "energy" components. These components are designed to show the source of costs:

The line component shows the costs of distributing or conveying electricity through the national transmission grid and then through the local electricity lines which are connected to households.
The energy component shows the costs of generating electricity and of retailing electricity to end consumers.

This split between the line and energy components does not bear any necessary relation to the split that often appears on a
customer's electricity bill showing a fixed and a variable charge. Fixed and variable charges highlight the method of
cost-recovery that the business is using. For example, a retailer's fixed charge to consumers does not necessarily correspond
to the charge that the retailer must pay to a lines business. Lines businesses in turn levy both fixed (daily rate) and variable
(c/kWh) charges for line services.

The table shows whether each lines business has sold its metering equipment. Where meters have been sold, the resulting
reduction in costs to a lines business should be reflected in its charges to retail businesses.

The information has been collected and compiled by the Ministry of Commerce and every effort has been made to ensure its
accuracy. The information has been subject to a checking process with the lines and retail businesses concerned.